How Yield-Bearing Stablecoins Earn You Interest in Crypto

1. What is a Yield-Bearing Stablecoin?

A yield-bearing stablecoin is a type of stablecoin that generates interest when held by users. Unlike traditional stablecoins, which maintain value stability, this type of stablecoin also integrates mechanisms to earn profits automatically, primarily through lending protocols or staking.

2. Difference Between Traditional Stablecoins and Yield-Bearing Stablecoins

• Traditional Stablecoins: You simply hold stablecoins to maintain value without earning any profits.

• Yield-Bearing Stablecoins: In addition to maintaining value stability, this type of stablecoin automatically generates income for you, similar to a savings account.

3. How Yield-Bearing Stablecoins Work

• Price Stability Mechanism: The core feature of yield-bearing stablecoins is their ability to maintain stable value, typically pegged to a fiat currency like USD. This is achieved through collateralized assets or algorithms that adjust supply and demand.

• Classified by Profit Mechanism: They can be divided into:

  • Rebase Token: Adjusts the wallet balance automatically to distribute rewards in the form of additional tokens.

  • Non-Rebase Token: Does not automatically adjust the wallet balance. Instead, profits are distributed through other mechanisms such as staking or DeFi protocols.

4. Sources of Profit for Yield-Bearing Stablecoins

Profits come from decentralized financial activities, such as providing liquidity, lending, staking, and automatic reinvestment. These protocols optimize profit and distribute interest to stablecoin holders.

5. Examples of Popular Yield-Bearing Stablecoins

Some examples of yield-bearing stablecoins include:

• BUIDL, USDY, USDM: Backed by real assets, with interest paid out daily or monthly.

• eUSD (Lybra): Uses staking assets as collateral and distributes interest in the form of eUSD.

• DAI (MakerDAO): Can be converted into sDAI to earn interest, suitable for long-term users.