Hermetica integrates USDh with Zest Protocol to boost stablecoin liquidity

Hermetica, a leading Bitcoin (BTC) stablecoin issuer, has expanded its partnership with Bitcoin Layer 2 (L2) network Stacks (STX), according to information shared with Finbold on Thursday, April 17.

The partnership dates back to September of 2024, when the issuer first brought its synthetic dollar, USDh, onto the network. Hermetica then went on to raise $1.7 million in a seed funding round. USDh is entirely Bitcoin-backed and pegged to the dollar, allowing holders to earn a 25% yield.

How Hermetica and USDh will bolster the Zest Protocol’s functionality

This latest development will see the USDh mint process used for liquidations on Stacks’ lending protocol, Zest. In doing so, Zest hopes to scale sBTC-backed loans, which stand to benefit from Hermetica’s smart contract infrastructure, which can act as a bridge for centralized exchange liquidity toward decentralized finance (DeFi) spaces and, in turn, jumpstart the BTCfi flywheel.

Hermetica’s Chief Executive Officer (CEO), Jakob Schillinger, reflected on the goals and benefits of the integration, stating that:

“USDh is the first and only stablecoin designed to provide liquidity to Bitcoin-native DeFi. By powering Zest’s liquidations with USDh, we’re enabling scalable growth of sBTC-backed loans and establishing USDh as the core liquidity layer for Bitcoin-native finance. No other stablecoin has the infrastructure to deliver liquidity with this level of security and native Bitcoin backing.”

Tycho Onnasch, the CEO of Zest Protocol, further elucidated the mechanics by which the network will benefit, having stated:

“With native sBTC-to-USDh minting, we can now handle liquidations more easily and scale our sBTC loan offering. Hermetica has delivered a key primitive for real DeFi on Bitcoin, plugging directly into what we’re building at Zest: Stacks DeFi on the Bitcoin standard.”

With the partnership in place, the borrowing cap on the Zest Protocol has expanded to over $1 million USDh, triple the previous amount.

Featured image via Shutterstock

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