NEAR Protocol will launch its own native algorithmic stablecoin, called USN. Crypto VC Zoran Kole says USN will launch with staking yields around 20%.
NEAR Protocol (NEAR) ($11.2B market cap) is a Proof of Stake layer-1 blockchain that can process around 3,000 transactions per second with sub-2 second finality. Among Ethereum competitors, NEAR Protocol is similar to Solana. NEAR Protocol is also a VC darling, having raised $500M in VC funding since January 2022, with more raises expected to be announced over the next few weeks.
Stablecoin adoption has exploded over the last couple years. Decentralized finance (DeFi) relies heavily on stablecoins, and investors now stake and farm stablecoins to earn yields. Last year, the Terra ecosystem and its UST algo stablecoin rose to prominence, due in large part to Anchor Protocol offering ~20% yields on UST. This year, Terra has the second highest total value locked (TVL) among all DeFi blockchains, at $19B. Anchor represents 78% of Terra's total TVL.
Rumors of 20% yields for NEAR Protocol's new stablecoin are no coincidence. Anchor's ~20% yields are abnormally high for an established DeFi project on a top blockchain, and there's no doubt that last year's sideways market made high-yield stablecoins attractive to investors. Unfortunately for UST holders, Anchor has admitted it can't sustain such high yields for UST, and the protocol announced it will decrease its yields soon.
This small decrease in Anchor yields opens the door for NEAR Protocol's USN stablecoin. Kole believes USN yields around 20% will draw significant capital into the NEAR DeFi ecosystem, possibly at the expense of competing L1s. It's easy to see how he reaches that conclusion, as NEAR appears to be following Terra's growth playbook. Today, NEAR has an $11.2B market cap but only $345M TVL, which suggests its DeFi ecosystem has a lot of room to grow.
Terra's CEO, Do Kwon, believes that stablecoin investors will migrate to pools and protocols offering the highest yields, as he demonstrated by starting a Curve war with Maker DAO. It's unclear at the moment if Terra will prop up Anchor for a while to prevent its UST holders from migrating to NEAR Protocol's USN stablecoin.