Top Earning Stablecoins in DeFi 2025

1. What Are Yield-Bearing Stablecoins?

Yield-bearing stablecoins are crypto assets that maintain a stable value, typically pegged to fiat currencies like the USD, but also generate passive income for holders through decentralized finance (DeFi) mechanisms. Unlike traditional stablecoins used only for value storage, yield-bearing stablecoins allow users to earn returns without taking additional action.

2. How They Work

Yield-bearing stablecoins operate by integrating several mechanisms, including:

-Lending and Borrowing: Using DeFi protocols like Aave or Compound to lend stablecoins and earn interest.

-Liquidity Provision: Participating in liquidity pools to earn transaction fees.

-Staking: Locking stablecoins into protocols to receive rewards.

-Auto-Compounding: Automatically reinvesting earned returns to optimize yield.

3. Types of Yield-Bearing Stablecoins

There are two main types:

-Rebase Tokens: The token balance in users’ wallets automatically adjusts based on accumulated interest. Examples: USDY (Ondo), BUIDL (BlackRock), USDM (Mountain Protocol).

-Non-Rebase Tokens: The token balance remains unchanged, but users earn yield through mechanisms like staking or derivative products. Example: eUSD (Lybra).

4. Benefits of Using Yield-Bearing Stablecoins

-Capital Efficiency: Combines price stability with passive income generation.

-Time-Saving: No need for users to actively manage their funds to earn interest.

-Income Diversification: Enables multiple DeFi strategies to maximize returns.

5. Popular Yield-Bearing Stablecoins

-USDY (Ondo): Pegged 1:1 to USD, pays daily yield.

-BUIDL (BlackRock): Monthly yield, backed by real-world assets.

-USDM (Mountain Protocol): Daily yield, collateralized by real assets.

-eUSD (Lybra): Collateralized with staked assets, pays daily interest.