Ted Hisokawa
24 July 2024 16:28
Injective (INJ) has launched USDM, a yield-generating stablecoin integrated with Mountain Protocol, and is strengthening the DeFi ecosystem with tokenized treasury bonds.
Injective (INJ) announced an integration with Mountain Protocol, bringing the first native yield-generating stablecoin USDM to the ecosystem. According to the Injective blog, the collaboration aims to improve the decentralized finance (DeFi) landscape by giving users the ability to utilize USDM in a variety of decentralized applications (dApps) and earn yields on Treasury bonds.
What is Mountain Protocol?
Mountain Protocol, the issuer of USDM, is backed 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 users with “risk-free rates.”
Historical context
Stablecoins are typically designed to maintain a stable value relative to a specific asset, and are often backed by other low-risk liquid assets such as fiat currency reserves or Treasury bonds. Traditionally, the yield on these assets is held by the stablecoin issuer. However, Mountain Protocol’s USDM reverses this model by returning the yield to users. Currently, USDM offers a 5% yield on the principal.
What is USDM?
USDM is a stablecoin backed by government bonds that allows users to earn and maintain daily interest on their holdings. Users who hold USDM in their wallets receive a 5% yield through a process called rebasing.
How does USDM work in Injective?
USDM is introduced into the Injective ecosystem as a wrapped version, wUSDM, that reflects the current USDM price and includes yields. This approach ensures a seamless experience for end users, and the value of wUSDM will increase gradually by 5% each year, providing the same consistent yields as USDM.
Injective users can also unstake wUSDM and convert it back to USDM to receive stablecoins along with accrued profits.
Powering New Tokenized Use Cases in Injective
The integration of Mountain Protocol and Injective offers several innovative use cases. For example, USDM can be used as margin for derivatives trading on a decentralized exchange (DEX) built on Injective, allowing traders to earn profits while trading. This is the first time that USDM can be used as margin for derivatives trading.
These use cases improve capital efficiency and passive yield generation for users. Utilizing USDM in Injective can reduce opportunity costs, improve risk management by offsetting potential losses with profits, and increase market liquidity and stability.
RWA of Injective
This 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 path for users to interact with both models. With regulated and yield-generating stablecoins like USDM available within the Injective ecosystem, tokenized offerings on Injective are enhanced and its position as a blockchain built for finance is solidified.
The integration of Mountain Protocol and Injective and 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 converge, Injective will play a key role in shaping the future of finance.
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