Hermetica FI
What is Hermetica?
Hermetica is the creator of USDh, the first Bitcoin-backed, yield-bearing synthetic dollar on both Bitcoin layer 1 and 2; earn up to 25% on your dollars without leaving Bitcoin.
How does Hermetica maintain the USDh peg?
The protocol couples spot BTC holdings with a short perpetual futures position. This position is considered delta-neutral because it is fully hedged – as a result, the underlying position is stable in dollar terms.
Where does the yield come from?
The yield is generated through funding rate payments from short perpetual futures positions, which are used to stabilize the dollar value of USDh.
In derivatives markets, funding rates refer to periodic payments made from one side of the market to the other to help balance out the price of the derivative vs. the underlying asset.
Whenever the funding rate is positive (longs are paying shorts), the position held by Hermetica earns interest. Hermetica passes the yield to those who stake USDh.
As long as there is strong demand for leveraged long positions (a common characteristic of high-beta assets with significant volatility), the futures market tends to trade above spot prices. This results in higher funding rates, which pay our short positions and generate yield for USDh stakers.
What if the Bitcoin price moves up or down – will my USDh value change?
No, the delta-neutral position used to maintain the peg removes all exposure to Bitcoin’s price movement.
You can think of it this way: 1 USDh always equals $1.00 of Bitcoin.
Why would I hold USDh over Bitcoin?
USDh isn’t a competitor to Bitcoin; USDh is an alternative to dollars in a bank account.
Maybe you want to earn a dollar yield of up to 25%. Maybe you want to hold dollars completely outside the fiat system. Maybe you want to transact dollars in Bitcoin DeFi. Whatever the case, USDh is the product for you.
Where can I buy USDh?
You can buy USDh on the open market via common crypto marketplaces. Click here to get started.
How does Hermetica mitigate risk?
Hermetica’s products are built on trust-minimized infrastructure that allows us to bridge CeFi liquidity into DeFi with minimum counterparty risk and maximum security.
We use institution-grade custodians like Copper with off-exchange settlement (OES) offerings so we can trade on exchanges. However, our users’ collateral is never held by a single party and is never held directly on an exchange. We engage in frequent settlement of PnL so collateral can still be recovered by Hermetica and the custodian in the case of an exchange outage, hack, or other failure.
Hermetica also operates the Hermetica Reserve Fund, which acts as a buffer in negative funding rate environments. The Hermetica Reserve Fund enables users who hold USDh to receive only positive or neutral interest.
Learn more about the Hermetica Reserve Fund and how we mitigate risk in our docs.
data statistics
Relevant Navigation
Cosmos is an ambitious project that aims to solve some of the fundamental challenges facing blockchain technology, namely scalability, interoperability, and usability. It envisions a network of interconnected blockchains, each with its own unique purpose and governance, but all able to seamlessly communicate and exchange value with each other.
