Ted Hisokawa
Jul 24, 2024 16:28
Injective (INJ)has integrated with Mountain Protocol to launch USDM, a yield-bearing stablecoin, enhancing the DeFi ecosystem with tokenized treasury bills.
Injective (INJ)has announced its integration with Mountain Protocol, introducing the first native yield-bearing stablecoin, USDM, into its ecosystem. This collaboration aims to enhance the decentralized finance (DeFi) landscape by offering users the ability to leverage USDM in various decentralized applications (dApps) while earning yield from treasury bills, according to the Injective Blog.
What is Mountain Protocol?
Mountain Protocol, the issuer of USDM, is supported by prominent investors such as Multicoin Capital, Coinbase Ventures, and Castle Island Ventures. Launched in 2023, Mountain Protocol aims to enable stablecoin holders to benefit from a secure, regulated, enterprise-grade product that provides the “risk-free rate” to users.
Historical Context
Stablecoins are typically designed to maintain a stable value relative to a specific asset, often backed by reserves of fiat currency or other low-risk, liquid assets such as treasury bills. Traditionally, the yield from these assets is retained by the stablecoin issuer. However, Mountain Protocol’s USDM turns this model on its head by offering the yield back to the users. Currently, USDM provides a 5% yield on the principal.
What is USDM?
USDM is a stablecoin backed by treasury bills, allowing users to earn and retain daily interest on their holdings. Users holding USDM in their wallets receive a 5% yield through a process called rebasing.
How does USDM work on Injective?
USDM will be introduced into the Injective ecosystem as wUSDM, a wrapped version that reflects the current USDM price and includes the yield. This approach ensures a seamless experience for end users, with wUSDM’s value incrementally increasing by 5% annually, providing the same consistent yield as USDM.
Users on Injective can also unwrap their wUSDM to convert it back to USDM, receiving the stablecoin along with the accrued yield.
Powering New Tokenized Use Cases on Injective
The integration of Mountain Protocol with Injective unlocks several innovative use cases. For instance, USDM can be used as margin for trading derivatives on decentralized exchanges (DEXs) built on Injective, allowing traders to earn yield while trading. This is the first time USDM can be used as margin for derivatives trading.
Such use cases enhance capital efficiency and passive yield generation for users. Utilizing USDM on Injective can potentially reduce opportunity costs, improve risk management by offsetting potential losses with yield, and boost market liquidity and stability.
RWAs on Injective
The integration marks a significant milestone in the evolution of asset tokenization on Injective. This collaboration bridges the gap between traditional and on-chain finance, creating a seamless pathway for users to interact with both models. The availability of a regulated, yield-bearing stablecoin like USDM within the Injective ecosystem enhances tokenized offerings on Injective, solidifying its position as a blockchain built for finance.
The integration of Mountain Protocol and Injective, along with the introduction of USDM, heralds a new era of innovation and convergence in the financial world. As traditional finance (TradFi) and decentralized finance (DeFi) continue to merge, Injective will play a crucial role in shaping the future of finance.
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