Breaking Down Blast’s USDB: How Does 15% Native Yield Work? Is It Sustainable?
Stablecoins are a fiercely competitive market. We have decentralized versions like DAI, and ones with no decentralization like USDC. They all perform the same function: represent a dollar bill onchain. Beyond centralization concerns, what’s the difference? Why own one over another?
What would an improvement on the current stablecoin model look like?
It looks like Blast’s USDB. You get 15% just for holding it. Ponzi? No. Here’s how it works.
When you bridge your ETH and stablecoins to blast, you get automatically rebasing versions of each. That means all ETH you hold is earning staking yield in your wallet. The USD stablecoin you receive (USDB) is also earning what’s effectively a staked yield. Let’s break these down.
ETH on Blast achieves it’s yield the same way Lido’s stETH does: by staking it with Ethereum validators. Blast ETH automatically rebases while holding it. This is a known and trusted concept in DeFi, also known as Liquid Staking Tokens (LST).
The USDB yield is achieved with a similar concept. However instead of staking it in Ethereum, it’s being staked in US Treasurys.
What’s a Money Market Fund (MMF)?
When you deposit dollars into an MMF, you receive shares that are typically worth $1 each. The MMF then takes those deposits and invests them in short-term US Treasurys and other high-grade debt that pays a yield.
Short-term debt trades essentially the same as cash, and because it’s invested in the US government it’s the lowest-risk investment you can make.
With an MMF, you receive an asset that’s pegged to $1 and gets real yield, because the debt backing it is guaranteed by the US government and is paying out that yield.
USDB: The Onchain Money Market Fund
When you bridge your USDC or DAI to Blast, you get USDB. The stablecoin you bridged is invested in US Treasurys. The USDB you receive is pegged to $1. You’re probably seeing the MMF similarities by now 🙂
The yield from USDB is very real, and not a ponzi. Unless you consider the US government a ponzi, which we’re not going to disagree with you on. But that’s the best we have right now, and from a DeFi standpoint, it’s real and pays you just for holding it.
TradFi MMF’s aren’t readily used as collateral for trading and other activities, but bringing them onchain with USDB unlocks a whole host of use cases. Blast has raised the game of what people should expect from their stablecoins, by making the MMF onchain and composable with an entire ecosystem of DeFi projects.
Prediction: within one year, all stablecoins will have to do this to remain competitive. Blast’s USDB is a first mover.