Welcome back to Building the Future! In Monday’s issue, we gave a wide overview of the most impactful ways that the world of money is flattening. This massive shift is possible due to blockchains’ permissionlessness, composability, and programmability. 

Today, we’re going to zoom in on how these traits can actually turn onchain investing and trading strategies into money itself.

Onchain markets support both the permissionless creation of stablecoins and the composability required to aggregate yield sources from multiple networks/applications. Basically, anyone can “plug in” an underlying strategy to generate yield for a custom-built stablecoin.

While stablecoins like Tether’s USDT, Circle’s USDC, and MakerDAO’s DAI were transformative in bringing stable assets onchain, a new cohort of stablecoins is emerging. Unlike USDT and USDC, their underlying yield is directly distributed to holders or stakers rather than a centralized company. 

Essentially, this emerging group of stablecoins is redefining how yield is structured and distributed. Traditional yield products like debt (via interest) and equities (via dividends) experience volatility in both yields as well as the underlying asset. However, this group of yield-bearing stablecoins pay out fluctuating yields while the underlying asset remains stable. 

As stablecoins continue to receive (positive) attention from regulators around the world, innovation within this Web3 sector is thriving. This presents a win-win-win scenario for developers, projects (or other entities issuing a stablecoin), and users alike.

Developers can have more certainty with their business operations with a more friendly geopolitical backdrop, which drives innovation. 

Stablecoin issuers are discovering that stablecoins themselves are a new revenue generator; by wrapping investment strategies or passive holding of yield-bearing assets like US Treasuries into a fiat-pegged product, they can simultaneously achieve balance sheet stability, income generation, and even distribute a portion of the yield as incentives to attract users/customers. 

Users can participate in income strategies which have historically been inaccessible and/or infeasible for retail participation due to fees and minimum deposits.

Stablecoin infrastructure providers such as M0, Zoth, and Ethena are harnessing blockchains’ programmability to allow organizations to design and launch their own stablecoins while adhering to relevant compliance standards. Reflect takes this a step further with their stablecoin deployment platform, where anyone can launch their own stablecoin with just 4 lines of code and integrate customized yield-generating strategies – tapping into the permissionlessness of blockchains.

This emerging group of stablecoins primarily derive their underlying yield from onchain basis trades. The basis trade is one of the most popular and reliable generators of passive yield in institutional finance, exceeding $1T worth of exposure in the Treasury market alone.

An increasing number of projects are experimenting with bringing this relatively low-risk strategy onchain as a way to hedge stablecoin collateral while also providing yield. Let’s take a look at a few examples!

The first project to achieve this strategy on a large scale is Ethena via their USDe stablecoin, which was launched in February 2024. 

USDe is fully collateralized by stablecoins such as USDC and USDT, as well as volatile assets including BTC, ETH, and SOL. New USDe tokens are minted 1:1 when collateral is deposited.

This collateral is put to work in various ways to earn passive income, which is continuously transferred to sUSDe, the staked version of USDe.

As the protocol earns yield, its accrual is directly reflected in the price of sUSDe; so, instead of earning a dividend or interest payment, stakers’ capital appreciates in real-time within the token itself. 

When Ethena’s protocol receives collateral to mint new USDe, it’s sent to an off-exchange custodian such as Ceffu, Copper, or Fireblocks – this ensures that assets are safe while also allowing Ethena to maintain custody and immediate access to funds if necessary. 

Additionally, Ethena keeps a separate reserve fund with fully transparent holdings that can be accessed to accommodate excess redemptions if necessary. Currently, the reserve fund has roughly $42M worth of assets, almost all of which is held in the USDtb stablecoin, which is 98% backed by BlackRock’s BUIDL token and 2% backed by USD.

For volatile collateral such as ETH, the protocol automatically opens a corresponding short perpetual futures position on a highly-liquid exchange such as Binance or Bybit, which is actively managed to maintain delta-neutrality. 

This hedges the price of the collateral, allowing USDe to maintain its stable value. It also provides the primary source of yield for sUSDe – staked USDe – in the form of funding rate income, which is essentially the interest paid by long perpetual futures positions.

sUSDe generates yield from 3 sources:

So far, USDe has been successful in paving the road for more innovative yield-producing digital assets. Some current stats for the token include:

On the heels of USDe’s success, several other yield-bearing stablecoins have entered the picture.

Neutrl

Despite being a newer project (launched in October 2025), Neutrl has achieved early success over the past few months.

Neutrl’s NUSD stablecoin is backed by stablecoins (USDT, USDC, USDe), as well as OTC-acquired assets. New NUSD tokens are minted when new collateral is deposited; the Neutrl protocol uses a portion of the received collateral to purchase discounted assets via OTC markets, and simultaneously opens a short perpetual futures trade to hedge price volatility. Stakers receive sNUSD, which continuously accrues yield. 

Overall, Neutrl uses a similar process to Ethena, but the main difference is that Neutrl relies on OTC markets to acquire its non-stablecoin collateral. This creates potential for additional yield distribution from associated strategic sales or staking rewards. 

Resolv

Launched shortly after Ethena’s USDe, Resolv’s USR stablecoin is currently backed by over $482M worth of collateral, including BTC, ETH, USDT, and USDC, and it can be staked to receive the yield-bearing stUSR token. 

stUSR primarily accrues yield from basis trades, but the stablecoin collateral is also actively managed across several DeFi apps to generate extra yield. Its accrual mechanism is different from sUSDe and sNUSD; instead of adding the yield distributions to the token price, it distributes yield in the form of new tokens via a process known as rebasing.

Resolv also features a tokenized insurance pool, RLP, which is the first line of defense for USR holders. If there’s a significant event that causes USR to depeg, the funds within the RLP pool are distributed to USR holders to compensate for their losses. In return for taking on additional risk, RLP holders receive a larger yield. Currently, the annualized 30-day yield for RLP is almost double that of stUSR: 8.92% and 4.51%, respectively.

Cap

Backed by over $480M of stablecoin collateral, Cap’s cUSD has quickly become one of the largest yield-bearing stablecoins in crypto. 

Their stablecoin has a similar structure to Ethena and Neutral; cUSD can be staked to receive the yield-bearing stcUSD. But unlike Ethena and Neutrl, Cap outsources their yield generation to “operators,” or professional money managers with scalable yield-generating strategies. That means instead of relying on the basis trade, stcUSD earns yield from a diverse range of strategies such as market making, MEV capture, and more.

In order for operators to manage funds for Cap, they must first receive “delegated” assets from delegators, which limits how much cUSD collateral they can manage. The more assets they receive from delegators, the more USDC/USDT they can use to generate yield. 

To protect cUSD holders, operators’ delegated assets can be taken by the protocol and used to recover losses generated by mismanaged funds. This keeps delegators and operators aligned with cUSD holders’ interests. If an operator doesn’t adhere to their strategy or does anything malicious, they lose their rights to manage funds, and delegators lose the “delegated” assets that they funded the operators with.

Since their launch in August 2025, Cap has assembled an impressive list of partnerships with “TradFi” organizations. Their operator list includes Susquehanna Crypto and Flow Traders, and cUSD is backed by assets such as Franklin Templeton’s BENJI and (soon) WisdomTree’s WTGXX money market fund.

Solomon

With just ~$3M of collateral backing their stablecoin, Solomon is by far the smallest project in this list. Their flagship product is the USDv token, which is backed by USDT, USDC, and SOL, and can be staked to receive basis trade yield via sUSDv. Ultimately, their goal is to become the leading Solana-native yield-bearing stablecoin.

A unique offering by Solomon is Yield-as-a-Service (YaaS), where yield can directly accrue to the USDv token. This cuts out the staking process as well as the 7-day cooldown period for unstaking, and is also permissioned (with KYC/AML requirements). Initially, YaaS is targeted towards DAOs, market makers, fintechs, and other large/formal entities. 

To ensure that USDv stays at $1, the protocol uses a peg arbitrage mechanism. If the price of USDv floats far enough away from $1, whitelisted parties can mint or burn USDv tokens to generate an arbitrage profit.

While USDv is smaller than the other stablecoins in this list, its competitive double-digit APY, YaaS offering, and potential appeal to the large Solana community serve as potential tailwinds for growth.

Ultimately, yield-bearing stablecoins are converging the massive worlds of money and yield-generating strategies. Once again, this showcases the benefits that blockchains have over legacy systems. In other words, this innovation of capital distribution is only possible on blockchains – and it’s due to the typical reasons:

The expansion of yield-bearing stablecoins is happening at an interesting time, and external forces such as continued global rate cutting could thrust them further into the spotlight in the near future.

In the US, the Fed Funds Rate ended 2025 at ~3.64%, down from its peak of ~5.33%, and the cutting trend is expected to continue in 2026. If this trajectory is realized, there could potentially be a hunt for organic and reliable sources of yield. With stablecoins rapidly gaining attention and credibility, it could potentially serve as a destination for capital in search of yield at the margin. 

As noted earlier, yield-bearing stablecoins offer very attractive yields relative to traditional sources, even exceeding double-digits at times, while maintaining collateral stability. Over time, the amount of yield distributed to users adds up; in fact, sUSDe holders received an aggregate $253.6M in yield in 2025 alone – almost triple the amount accrued by BlackRock’s BUIDL (essentially an onchain money market fund). This clearly shows the premium over “risk-free” returns that can be realized by relatively conservative strategies such as the basis trade.

While DeFi was still in its infancy in 2021, the industry has evolved significantly since then, attracting participation from many traditional financial firms in the process. If traditional yields continue to move lower, we expect that yield-bearing stablecoins such as USDe will begin to be seen as legitimate sources of attractive yields. 

Overall, yield-bearing stablecoins are a prime example of how traditional asset management is being “upgraded” by Web3. For the first time, anyone can be the beneficiary of professionally-managed income strategies, and issuers can compose their own unique strategies while sharing the underlying collateral balances/makeup, yield distribution, and more with complete transparency. 

But it doesn’t stop there! Next week, we’ll explore how the surge in activity around yield-bearing stablecoins is coinciding with a similar surge in crypto option volume, and how this combination can have a major impact on DeFi yields.