Earn While You Hold: Solayer USD Brings Yield and Stability to DeFi
Stablecoins have promised financial stability within the volatile world of crypto, yet many are tethered to centralized assets, lack transparency, or fail to deliver sustainable yields.
With these increasing concerns over regulatory oversight and limited access for the unbanked, the demand for a new type of stablecoin has never been clearer.
Before we talk about the incredible features of sUSD, let’s take a moment to understand a few key aspects of stablecoins.
Stablecoins
What are Stablecoins?
Stablecoins are a type of cryptocurrency designed to have a stable value, typically pegged to a reserve of assets like fiat currencies (USD, EUR) or commodities like gold. The goal is to minimize the volatility that is common with traditional cryptocurrencies like Bitcoin or Ethereum, whose prices can fluctuate wildly within short periods.
One of the most popular stablecoins is Tether (USDT), which is pegged 1:1 to the US dollar. This means that 1 USDT is always intended to be worth approximately 1 USD. USDT is widely used in the crypto market for trading, transferring value, and as a safe haven during times of high volatility.
I want to compare the current monetary system to when the US was on the gold standard. The gold standard is a monetary system where the value of a country’s currency is directly linked to a specified amount of gold. This means that for every dollar in circulation, there was an equal amount of gold stored in government vaults and central banks. This system acted as a way to limit inflation by restricting the amount of money that could be printed. However, the downside was that it limited the flexibility of monetary policy, especially during economic downturns.
Stablecoins are a modern image of this monetary system, addressing the issues present in both traditional cryptocurrencies and fiat currencies. A major concern with holding assets in cryptocurrencies is their high volatility, which is a valid issue. On the other hand, traditional fiat currencies are very centralized; your dollars, for better or worse, are held in custody by a bank.
Stablecoins effectively combine the best of both worlds. They mitigate volatility by being pegged to real-world assets (RWAs) and provide a decentralized nature through blockchain technology, allowing for self-custody via smart wallets.
Interesting Stats about Stablecoins
- In 2024, stablecoins have seen substantial growth, with over 27.5 million active users and a 50% year-over-year increase in transaction volume.
- Stablecoins now make up over 80% of daily crypto trade volume and account for 65% of crypto payroll transactions. The use of stablecoins in e-commerce and DeFi is also increasing, with 15% of e-commerce and over 75% of DeFi transactions conducted using stablecoins.
- In global remittances, stablecoins facilitate around 30% of transactions, while 25% of businesses now accept them for payments.
- Stablecoin liquidity in decentralized exchanges grew by 40%, and lending in this sector reached a value of $52 billion, up 36% from 2023.
- Furthermore, 80% of stablecoins meet regulatory compliance, and institutional investors hold 30% of the supply.
Learn more about the statistics here and discover how stablecoins are created from here.
Why the US Dollar?
So far, the most successful stablecoins have all pegged themselves to the US dollar. This is easy to see why as USD has the status of being the world’s reserve currency and therefore enjoys the main privilege of being the most widely traded currency. Moreover, this is irrespective of the significant devaluation that the USD has experienced since its decoupling from the gold standard, with inflation recently surpassing 9% year-on-year.
The need for innovation in stablecoins
75% of Stablecoin Volume is Dominated by Centralized Coins.
USDT and USDC collectively account for over 75% of the stablecoin market by volume, both of which are issued and controlled by centralized entities. This centralization makes them susceptible to regulatory actions that can freeze funds or restrict access.
According to the World Bank, 1.7 billion people globally are unbanked, lacking access to traditional financial services. Permissionless stablecoins could help bridge this gap by enabling anyone with internet access to participate in a digital economy, but centralized stablecoins often lack this accessibility due to regulatory constraints.
Yields for stablecoin holdings have dropped significantly due to market fluctuations and regulatory pressure. In contrast, a yield-bearing stablecoin like sUSD provides a more sustainable and competitive alternative for passive income, especially for users outside the traditional banking system.
Why Stablecoins Matter in Crypto?
1. Hedge Against Volatility
The cryptocurrency market is known for its extreme price swings. While this volatility can create profit opportunities, it also comes with significant risk. Stablecoins offer a way to hedge against these risks by providing a stable store of value during times of market instability.
For instance, converting volatile assets like Bitcoin into USDT during a major market downturn can help preserve your portfolio’s value.
2. Facilitate Faster and Cheaper Transactions
Stablecoins like USDT are widely used for fast, low-cost transactions on blockchain networks. Unlike traditional bank transfers, which can take days and charge hefty fees, stablecoin transactions are typically completed within minutes, making them ideal for international transfers, online payments, and crypto trading.
3. Simplify Crypto Trading
On platforms like Waterfall, stablecoins are an essential tool for crypto traders. By holding a portion of your portfolio in USDT, you can quickly move in and out of trades without having to worry about the volatility of fiat-to-crypto conversions.
USDT also provides a way to “pause” your trading strategy while you wait for the right market conditions, all without leaving the crypto ecosystem.
4. Earn Interest or Yield
Some platforms allow you to earn interest or yield on stablecoins, turning your holdings into income-generating assets.
This article highlights the unique aspects of sUSD, detailing its innovative structure and the advantages of its real-world asset backing. By showcasing how sUSD merges stable value with decentralization, it aims to illustrate its potential to transform digital finance and set a new standard for reliable internet-based currency.
Introducing Solayer USD
Solayer USD (sUSD) is a synthetic stablecoin designed to hold a 1:1 value with the U.S. dollar, but unlike most stablecoins, it’s backed by real-world assets such as U.S. Treasury bills.
This unique structure allows sUSD to generate an annual yield of around 4–5%, providing an additional revenue stream for holders. Built on the Solana, sUSD is decentralized and yield-bearing, aiming to enhance stability within DeFi and serve as a bridge to a “bankless” digital economy.
Through an RFQ marketplace, users can access dollar-backed yields, making stablecoin access more inclusive and resilient. sUSD’s decentralized approach aligns with crypto’s foundational principles, opening the way for a more open and accessible Internet economy.
Do not be afraid of these complex words, we will discuss them later in the article.
What Sets sUSD Apart from Traditional Stablecoins?
Comparison to Popular Stablecoins
Unlike USDC, Tether, or DAI, which are backed by cash reserves or crypto collateral, sUSD is pegged to low-risk assets that produce real yield, providing users with interest without requiring them to stake or lend it out.
This yield-bearing structure directly benefits holders and aligns with DeFi’s goals of creating decentralized, user-owned finance.
RWA Backing
Real-world asset backing involves using tangible assets, such as U.S. Treasury bills, to secure the value of a stablecoin.
This approach reduces volatility and provides intrinsic value, as these assets are government-backed and have predictable yields.
For sUSD, RWA backing means that it doesn’t just maintain a stable value but also offers reliable returns, making it a low-risk, interest-bearing alternative to other stablecoins.
Permissionless Design
The permissionless nature of sUSD means that anyone, anywhere, can use it without needing authorization from a central authority.
This openness is essential for decentralization, as it allows sUSD to be truly accessible and censorship-resistant, symbolizing the ethos of blockchain technology.
As a result, sUSD promotes financial inclusion by making secure, yield-generating assets available to users globally, all while preserving user autonomy and privacy.
The Yield-Bearing Mechanism
The Request for Quote (RFQ) Protocol plays a central role in managing and streamlining the interactions between users and liquidity providers in the sUSD pool, particularly regarding how users mint and redeem sUSD (yield-bearing stablecoins) based on real-world assets like T-Bills.
Yield Generation Process
- User Locks USDC
The user locks USDC to initiate a transaction. This action creates a quote that specifies the amount of USDC, the expiry time, and the commission rate for the trade.
2. Fulfillment by Qualified Liquidity Provider (Buy Order)
The qualified liquidity provider fulfills the buy order by transferring the USDC out and sending back a wrapped T-Bill (tokenized representation of a T-Bill) as proof.
3. Forwarding Wrapped T-Bill
The decentralized T-Bill RFQ (Request for Quote) protocol forwards it to the sUSD minting program, locking it there in the process.
4. Minting sUSD
The Solayer sUSD Program mints sUSD based on the value of the wrapped T-Bill, maintaining a 1:1 price peg with USDC.
5. Delegate sUSD to Secure Exogenous AVS (Coming Soon)
The user can delegate sUSD to secure our exogenous AVSs (exoAVSs) when it goes live.
This yield generation is unique because, instead of manually adding yield to each wallet, sUSD uses an “interest-bearing extension” that automatically adjusts the “multiplier” of the holding amount based on the accumulated interest.
This approach, made possible through Solana’s Token 2022 standard, allows for yield-bearing without frequent updates to token balances. Each holder’s balance grows naturally, much like interest compounding in a bank account, giving users the benefit of automated yield accumulation simply by holding sUSD.
Yield Distribution Process
- User Sends Back sUSD to Kickoff Withdrawal
The user sends back sUSD to the Solayer sUSD Program to initiate the withdrawal process. This action signals the start of the withdrawal procedure.
2. Protocol Calculates and Sends Wrapped T-Bill
The Solayer sUSD Program calculates the corresponding amount of wrapped T-Bill that needs to be redeemed based on the user’s withdrawal request. The wrapped T-Bill is then forwarded to the Decentralized T-Bill RFQ Protocol.
3. Qualified Liquidity Provider Fulfills the Withdrawal Order
The Qualified Liquidity Provider receives the wrapped T-Bill and fulfills the withdrawal order. This involves transferring out the wrapped T-Bill and sending the equivalent amount of USDC back to the protocol.
4. USDC Returned to the User
After the liquidity provider fulfills the withdrawal order, the decentralized protocol returns the corresponding amount of USDC to the user, completing the withdrawal process.
Users holding sUSD automatically accumulate yield. Unlike other stablecoins, where users may need to engage in additional activities like staking to earn returns, sUSD increases passively in value by simply remaining in a user’s wallet.
RFQ & RWA Backing
The Solayer RFQ (Request for Quote) mechanism is key to supporting sUSD’s real-world asset (RWA) backing by enabling an efficient, transparent way for users to gain yield from U.S. Treasury Bills (T-bills) through a decentralized platform.
- User Transaction Initiation
When a user wants to mint sUSD, they lock an equivalent amount of USDC (a stablecoin pegged to the U.S. dollar) and specify a commission rate they are willing to pay to facilitate the transaction. For example, if a user sets a 0.01% commission, this will determine how competitive their order appears to liquidity providers. - Order Broadcast and Competition
The RFQ system then broadcasts this order to a pool of market makers who manage T-bills. These providers review the commission rate and compete to fulfill the user’s request. Through this competitive, decentralized marketplace, the system ensures that users receive the best available yield rates on their T-bills, as market makers vie for orders that meet their criteria. - Simplified Access and Risk Distribution
Instead of needing to juggle multiple platforms or compare providers individually, users can simply access a range of T-bill providers in one place, streamlining the yield-earning process. This setup is non-custodial, meaning users retain control over their assets without handing them over to a third party, thus reducing counterparty risk. - Yield Optimization and Security
By having multiple providers compete for orders, the RFQ system not only maximizes yield but also distributes risk across providers. This structure is essential for maintaining sUSD’s 1:1 peg with the U.S. dollar, as it ensures the stable backing of sUSD is secure and accessible. Every transaction and T-bill holding is recorded on Solana’s blockchain, providing a transparent, immutable ledger of all activities.
Through this well-coordinated process, sUSD combines the stability of traditional assets with the flexibility of DeFi, offering an innovative, yield-bearing stablecoin that makes traditional asset-backed yield available to everyday users with transparency and simplicity.
Security and Accessibility
sUSD strengthens economic security for exoAVS (external systems) by providing a reliable, low-volatility asset with real-world asset (RWA) backing. Here’s how sUSD achieves this:
- RWA Backing for Stability
Unlike traditional stablecoins backed by cash reserves or other volatile crypto assets, sUSD is supported by U.S. Treasury Bills — government-backed, highly liquid assets widely regarded as safe. This RWA foundation ensures sUSD retains a stable value even in turbulent markets, providing a robust store of value that can act as a steady anchor for decentralized finance (DeFi) systems operating outside Solana (exoAVS), such as oracles, network extensions, and data bridges. - Restaking for Enhanced Security and Rewards
By “restaking” sUSD to support exoAVS, users can contribute to the economic security of these systems while earning additional rewards. As users delegate their sUSD to exoAVS, they reinforce the underlying economic structure of these decentralized systems, reducing risks tied to volatility. The RWA-backed stability of sUSD, combined with its decentralized architecture, minimizes the chances of abrupt value fluctuations, making it a dependable asset to bolster DeFi protocols. - Transparency and Trust Through Blockchain
Built on the transparent Solana blockchain and supported by Solayer’s RFQ mechanism, every transaction involving sUSD is recorded immutably. This transparency reassures participants and DeFi protocols that sUSD’s value and stability are trustable, which is especially crucial for exoAVS that rely on stable assets to maintain operational integrity.
By combining the reliability of RWAs with the flexibility of decentralized finance, sUSD enables exoAVS to operate with greater security, making it a pivotal asset for scaling DeFi systems in a secure, low-risk environment.
Decentralized Accessibility
sUSD’s decentralized and permissionless design makes it accessible to anyone without needing approval from central authorities.
This open-access model aligns with the principles of DeFi by giving users control over their assets and data. The lack of intermediaries in managing sUSD means transactions can be faster, more cost-effective, and free from central control, making it ideal for an open internet.
By allowing all participants to freely interact with sUSD, this permissionless setup also helps lower entry barriers, attracting a broader user base and encouraging innovation within the ecosystem.
Imagine Aisha, a small business owner in Kenya, who wants a secure place to store her savings and earn some passive income. Banking services are limited in her area, and local currency stability is a concern. Aisha learns about sUSD and decides to exchange her local currency for USDC, which she then uses to purchase sUSD. By holding sUSD in her wallet, Aisha can earn a steady 4–5% yield, providing her with a safe, dollar-pegged savings option. With no need for a bank account, she benefits from a secure, reliable income stream in a currency that maintains its value, protecting her finances and supporting her business growth.
Use Cases of sUSD
Savings Account on Solana
An sUSD Savings Account on Solana offers a compelling alternative to traditional bank accounts, especially for those looking to escape low interest rates. Unlike traditional banks, where the APY rarely exceeds 3.75% and can be as low as 0.01%, sUSD offers the potential for much higher yields within Solana’s DeFi ecosystem.
U.S. Bank Savings Account Interest Rates November 2024:
If you lock $10,000 in a traditional bank savings account, you might end up with just $10,037.50 by the end of the year (assuming a 0.375% APY). However, if you buy sUSD, it could grow to approximately $10,500.
While crypto markets are known for volatility, sUSD provides stability combined with the potential for returns through yield generation from U.S. Treasury bills, one of the safest investments globally.
As a decentralized, on-chain savings solution, sUSD eliminates the risks of bank fees, accessibility issues, or restrictions often found in conventional savings accounts. This combination of steady returns and stable value makes sUSD an attractive option for users seeking better growth opportunities in the digital economy without sacrificing the security of a USD-backed asset.
Securing Decentralized Systems
sUSD holders can enhance decentralized network security through “restaking” by delegating sUSD to external decentralized services (AVSs) like oracles, bridges, and rollups.
This support helps maintain critical blockchain functions and allows sUSD holders to earn additional rewards.
Moreover, by delegating to exogenous AVSs (exoAVSs) restakers can earn intrinsic yield backed by real-world assets (RWA) and further returns for securing various infrastructure components.
Exogenous AVSs (Actively Validated Services) are modular systems that run in parallel to Solana, such as oracles, bridges, and rollups. Users can delegate sUSD to help secure these systems and provide them with crypto-economic security.
Collateral for Trading
In DeFi trading, sUSD offers a secure option for collateral. Its stability, backed by real-world assets, means it is less likely to suffer extreme price drops compared to crypto-based assets.
This makes sUSD a low-risk choice as collateral in DeFi, reducing the likelihood of liquidation.
For example, by using sUSD as collateral in a loan or margin position, traders benefit from a stable, interest-bearing asset, allowing them to manage risks more effectively and potentially access more favorable lending rates.
Payments and Transfers
sUSD can be used as a frictionless means of payment, both on Solana and across the broader decentralized economy. Its stability against the U.S. dollar makes it practical for transactions, while its yield-bearing nature adds an extra layer of value.
Whether users are making cross-border payments, purchasing goods and services, or transferring funds between wallets, sUSD provides a fast, low-cost, and reliable payment solution.
If you’re interested in experiencing the benefits of a yield-bearing, RWA-backed stablecoin, now’s the time to explore sUSD! Visit Solayer’s website to learn more, or dive into the sUSD dApp to see how it works firsthand.
Interested in earning with sUSD? Now’s your chance! sUSD is listed on @RaydiumProtocol. Swap USDC for sUSD at a low 0.01% fee, and deposit into the USDC-sUSD pool to start earning. With $12,000 in rewards now available for all depositors, it’s a great time to experience sUSD’s benefits firsthand!
We’d love to hear from you! Join Solayer’s Discord to share feedback, ask questions, and connect with others who are exploring the future of decentralized finance. Your insights and questions help us improve and grow together!
Conclusion
sUSD is redefining what stablecoins can offer by combining stability, accessibility, and financial empowerment through real-world asset backing and passive yield generation. It’s setting a new standard in the stablecoin market, aiming to provide reliable value and income potential for all users, no matter their location or financial background.
As sUSD continues to evolve, look out for new developments, from deeper DeFi integrations to expanded security features, all aimed at enhancing its stability, utility, and impact on the decentralized economy.
Disclaimer: I am not a financial advisor, and this is not financial advice. My content is for educational purposes only. Please do your own research before investing.
