Bitcoin developers have launched a BTC-backed stablecoin like Rune Token.

Crypto developers have been able to launch a completely new stable derivative of the Bitcoin blockchain using the newly introduced Runes token standard.

But there's a twist: the developers told Decrypt that the token is backed and redeemed by BTC instead of actual cash, USDh. In fact, the stable coin offers yields to holders who say it could rise as much as 25 percent annually.

Jacob Schillinger, founder and CEO of Hermetica, said of the Stalkcoin protocol behind USDh: “USDh is Bitcoin down to the ground, which means the protocol doesn't rely on fiat rails and can function completely outside of the traditional banking system.”

Runes is a new token standard for Bitcoin that was launched in April by Ordinals creator Casey Rordamor, and is now used more frequently than the Ordinals and BRC-20 standards that preceded it. Runes is known to be more efficient and effective than its predecessors and more capable of unlocking Bitcoin-based assets beyond meme coins.

Hermetica's model differs from widely used stablecoins such as Tether (USDT) and Circle USD (USDC), which rely on central financial institutions to protect the assets backing their tokens. Those firms control more than $145 billion in both tokens today, including cash and cash equivalents—primarily U.S. Treasury bills.

Tether and Circle get a yield from the T-Bills they hold and keep all profits from that debt for themselves. They have the authority to seize or freeze any tokens held by their users, as they have repeatedly done in response to sanctions requirements set by the US Treasury Department.

In contrast, Hermetica's design pays the token holder for the output generated by the protocol. Those holders are exempt from the pecking order that can affect traditional Storicon holders in the event of a bank failure, as was the case with the USDC during the Silicon Valley bank failure last year.

“The protocol does this by combining a BTC position with a short-duration futures position,” Schillinger explained. The protocol design mimics Athena, the pioneers of Ethereum-based stablecoin USDe, which generates $3.4 billion in yield on the short positions the token regularly holds for investors.

Given that Bitcoin's DeFi ecosystem is still nascent, he believes the protocol could tap into an estimated $360 billion of “idle” capital from people looking to generate output. “For the past 4.5 years, the annualized yield of the fund has been 12%,” Schillinger said.

In a press release, Hemetica said it plans to scale Bitcoin's native DeFi using Bitcoin's layer-2 blockchain stack, which is designed to be compatible with smart contracts. Stack was recently cleared of wrongdoing by regulators following a three-year investigation into possible securities fraud.

The Stax protocol already has an integration with Liquidium for borrowing and lending Bitcoin-based assets.

“A trusted native stablecoin is critical to every blockchain ecosystem,” said Robin Obermeier, CEO of Liquidium, on the issue. “Enabling users to use stablecoins in Bitcoin DeFi applications is the next major milestone for Bitcoin.”

Edited by Ryan Ozawa.