Interest-Bearing Stablecoin

Real Yield Stablecoins

Stablecoins usually vary in aspects such as the assets they're backed by, their collateral ratios, their issuance procedures, and their price stabilization strategies. Although different stablecoins may be appropriate for different use cases, they all exhibit one shared limitation: the absence of earning interest or real yield.

However, since most stablecoins do not generate interest, their holders have no choice but to bear the continuous depreciation of USD, caused by inflation.

Due to their issuance processes and underlying assets, most of today's stablecoins are not equipped to ever provide interest.

Most Fiat-Collateralized stablecoins are issued by centralized or decentralized organizations. Although these stablecoins usually maintain a stable value and a high collateral ratio, their total issuance tends to be relatively small. Consequently, this leads to lower yields and makes it challenging to provide high returns comparable to bank deposits.

Cryptocurrency-Collateralized stablecoins are typically issued when holders pledge a certain amount of cryptocurrency as collateral. Since the collateralized cryptocurrencies cannot generate interest income, stablecoin issuers are unable to provide a secure and stable income to their holders.

In conclusion, the current absence of interest in stablecoins primarily stems from their issuance mechanisms and underlying assets. This whitepaper will explore an interest-bearing stablecoin collateralized by ETH, stETH and other LSTs, addressing the need for stablecoin holders to generate interest income while maintaining the key features of stablecoins.

Following the Ethereum Shanghai upgrade, decentralized interest-generating stablecoins now have a viable solution. eUSD is one such solution. It capitalizes on the high-yields provided by the Liquid Staking Token revenue flywheel to deliver a secure, price-stable, and interest-stable stablecoin.

The introduction of eUSD as an interest-bearing stablecoin collateralized by ETH and stETH will offer stablecoin holders the opportunity to earn interest income while preserving the key attributes of stablecoins. This innovation will bridge the gap between traditional stablecoins and the need for interest generation, creating a more attractive and functional stablecoin alternative.