MilkyWay (MILK) offers liquid staking and restaking for modular chains, letting users earn triple yields while supporting AVS services like oracles and bridges.

Modular blockchain architectures are growing more popular in the industry as an alternative to monolithic designs. For instance, chains like 

 (TIA) eloquently separate their consensus layers from other infrastructural components for more flexible and accessible validation services. At the same time, validator ecosystems on Celestia and similar modular networks can benefit immensely from attracting additional staking funds to provide more reliable services.

MilkyWay (MILK) is a decentralized protocol that aims to do just that — provide 

 services in order to support modular blockchains, as well as various Actively Validated Services (AVS). Having started as one of the first liquid staking providers for the Celestia blockchain back in December 2023, MilkyWay added the restaking functionality to its service line in late 2024. As of May 2025, it’s emerged as one of the few 

 (DeFi) protocols to support both liquid staking and restaking, allowing you to earn yields on the same funds from up to three sources — native staking on the original chain, liquid staking, and restaking that supports a variety of bridges, oracles, rollups and other AVS-based platforms.

MilkyWay currently provides liquid staking services for three blockchains — Celestia, Initia (INIT) and Babylon (BABY). The platform’s restaking service is also flexible, allowing you to choose between three different modes — platform-managed, operator-specific or AVS-specific.

 (MILK) is a decentralized platform that offers liquid staking and restaking services, focusing on three Cosmos-based blockchains: Celestia, Initia and Babylon. 

It’s one of the rare platforms that supports both liquid staking and restaking, allowing you to utilize your crypto funds to derive income simultaneously from up to three sources — native staking, liquid staking and restaking to support AVS.

Similar to the networks it supports, MilkyWay was built using the Cosmos SDK and is part of the wider 

 ecosystem. It positions itself as a Layer 1 chain, though some critical functions on the protocol — for example, Celestia liquid staking — are carried out by leveraging 

MilkyWay’s inception dates back to December 2023, when it was launched to support liquid staking on the Celestia chain. In late 2024, the platform added support for restaking, emerging as probably the leading solution within the Cosmos ecosystem supporting both of these yield-generating activities.

MilkyWay aims to provide support to modular blockchains, and all three chains it focuses on are based on architectural modularity. Celestia’s network offers outsourced data availability (DA) and 

 (INIT) specializes in the integration between 

 technologies to help address the problem of multi-chain fragmentation. These two networks operate essentially as infrastructure providers. In turn, 

 focuses on DeFi — specifically, supporting 

 (BTC) staking. It operates as a modular plug-in solution to enable Bitcoin funds to secure various 

In order to support cross-chain communications and the transfer of liquid staking and restaking assets across different native environments, MilkyWay has implemented support for two bridging solutions: Hyperlane and IBC Eureka.

The MilkyWay liquid staking protocol allows stakers of Celestia’s TIA, Initia’s INIT and Babylon’s BABY tokens to reuse their funds for additional yield throughout the DeFi ecosystem. For Celestia liquid staking, when you deposit your TIA funds on MilkyWay, you’re issued a liquid representation of your staked position in the form of the milkTIA 

, which can then be used on DeFi protocols for lending, borrowing, collateral and more.

When you stake TIA via MilkyWay, your funds are delegated to established validators on the Celestia network. In the future, this delegation process will be governed by the MilkyWay 

 (DAO). Your staked TIA is first transferred from Celestia to the Osmosis chain, where MilkyWay maintains smart contracts governing the process. The smart contracts are used to calculate the proper amount of milkTIA, which is then minted and sent to your Osmosis wallet.

The original TIA funds are then sent from Osmosis to the Celestia chain. These transfers are executed using the IBC bridge, a major bridging protocol within the Cosmos ecosystem. A MilkyWay coordinator node is then responsible for allocating the TIA to validators used by the platform. As your staked tokens accumulate rewards on Celestia, you’re free to use your milkTIA on other platforms for additional yield.

Similar processes, though with some technical differences, are used for INIT and BABY liquid staking. For INIT, when you deposit your funds on MilkyWay, they’re sent from the Initia Layer 1 chain to an Initia-linked Layer 2, where the protocol maintains another set of smart contracts. These smart contracts calculate the requisite amount of milkINIT (the liquid staking representation of the original INIT) and send it to your wallet, at which point you’re free to use your milkINIT LST in DeFi protocols. The original INIT is transferred back to the Initia mainnet and allocated to select validators to earn staking rewards.

BABY liquid staking works quite similarly — your BABY staked assets will be allocated to MilkyWay’s validators on the Babylon chain to earn native staking rewards, and you’ll also be issued 

 as an LST to use for additional yield on DeFi solutions.

MilkyWay’s restaking service allows you to further reuse your staked funds to secure a variety of decentralized platforms and services. Major blockchain networks typically have no shortage of validators to secure their consensus layers. However, there are additional services and applications that service the blockchain networks, but experience a lack of necessary validator ecosystems of their own. These may include blockchain price 

 or rollup sequencers — services collectively known as AVS.

To help provide network security and support the operations of these AVS-based solutions, MilkyWay offers you the ability to use your original staked funds for restaking. The key difference between liquid staking and restaking is that the former only lets you reuse your staked funds on DeFi protocols, while the latter is designed for supporting validation mechanisms of various AVS solutions.

In essence, restaking provides a third way to utilize your original crypto funds by securing AVS via liquid restaking tokens (LRTs).

To get issued a liquid restaking token on MilkyWay, you can deposit Layer 1 native tokens — TIA, INIT and BABY — or LSTs — milkTIA, milkINIT and milkBABY. Additionally, MilkyWay also accepts the 

After depositing an accepted crypto token, you’ll be issued your LRT and can choose from various AVS services on which to restake. MilkyWay offers three options for restakers: 

The operator and service restaking modes are optimal for experienced stakers and restakers, who can objectively evaluate the reward potential of each validator or AVS they pick.

Developers, validators and AVS operators also benefit from MilkyWay's services. An infrastructure provider — such as an institutional validator node or AVS operator — may partner with the platform to have MilkyWay user funds directed to them for staking or restaking. This can serve as a significant income stream for these individuals or entities.

As of May 2025, the MilkyWay network uses the services of 11 validator nodes. MilkyWay validators enjoy numerous benefits, the most obvious one being the ability to attract staking funds from users. They may also participate in restaking by reusing their stakes to secure the various AVS available through the platform.

MilkyWay's cross-chain communications are supported by two key bridging solutions: IBC Eureka and Hyperlane. These platforms allow users to transfer tokens across different blockchain environments in order to access a variety of DeFi protocols, networks and AVS.

MilkyWay’s programmable rules are logic conditions that control how, where and under what conditions restaked assets are used (e.g., only restake to certain services or limit the slashing risk). There are two types of rules: 

A key difference between MilkyWay and other restaking providers is its hybrid opt-in model that allows you to choose exactly how your restaked funds are used — through a pooled allocation by the platform itself, or by your delegation to a specific operator or service. In contrast, many other restaking platforms simply handle your funds on your behalf, giving you only limited control over the selection of the restaking target.

MilkyWay also protects your overall funds by allowing you to apportion your restaked funds over multiple operators or AVS. In this way, if one operator or AVS fails or gets slashed, your total investment isn’t entirely impacted.

What is the MilkyWay crypto token (MILK)?

MilkyWay’s native token, MILK, is used for governance, gas fee payments, transaction processing and the provision of on-chain liquidity. Although MilkyWay was launched in 2023, MILK wasn’t launched until late April 2025. With a total supply of 1 billion, the MILK token’s supply allocation shares are per the chart below:

The MilkyWay project has announced an airdrop campaign, the Massdrop, the first phase of which began along with MILK's token generation event (TGE) on Apr 29, 2025. During phase 1 of the airdrop, you can 

 until May 29, 2025, or through participating crypto exchanges.

Where to buy the MilkyWay crypto token (MILK)

You can buy the MILK token on Bybit's Spot market as a swap pair with USDT (

MilkyWay has challenged traditional staking models by offering an extremely versatile set of liquid staking and restaking services. With MilkyWay, savvy DeFi users can simultaneously earn yield on the same funds from up to three sources. In addition to featuring an unparalleled variety of avenues for yield, MilkyWay lets you do the noble thing — provide support to various modular blockchains and AVS operations with your crypto staking and restaking.

Intermediate

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MilkyWay (MILK): Liquid staking and restaking for the modular era

The US is shifting toward lighter, innovation-friendly crypto regulation, with moves like the FIT21 Act, a repeal of SAB 121 and a more lenient SEC approach.

, but the rules governing it remain a tangled web of state laws, federal agency guidelines and developing court rulings. With the US moving toward clearer policies, crypto investors and innovators are left navigating a fragmented regulatory space. This article discusses current US crypto regulations, explores major regulatory challenges and the country’s stance on crypto, and examines the relevance of current US rules to traders and the larger industry.

Crypto regulations are legal frameworks set by governments to manage the creation, trading, taxation and use of digital assets. These regulations aim to protect consumers, prevent illegal activities and maintain market integrity.

The US regulatory stance on cryptocurrency in 2025 is moving toward greater clarity and support for innovation, though a unified federal framework is still in the works. 

, passed by the House of Representatives in 2024, aims to establish comprehensive rules for digital assets but has yet to be fully implemented. Signaling a more crypto-friendly direction, the Trump administration issued an 

 in January 2025 to create the President’s Working Group on Digital Asset Markets, with the goal of “providing regulatory clarity and certainty.” Chaired by David Sacks, the group is tasked with reviewing current laws and recommending reforms to encourage responsible innovation.

Federal agencies are gradually shifting their approach. The Securities and Exchange Commission (SEC), traditionally strict with crypto enforcement, has formed a dedicated 

. This group is working to simplify registration processes, outline disclosure expectations and provide clarity as to which tokens qualify as securities. Notably, the SEC has softened its stance on certain categories of cryptocurrencies, such as 

, indicating they may no longer be treated as securities.

Banking regulators have also relaxed their oversight. The Federal Reserve 

 prior guidance requiring banks to notify regulators before engaging in crypto-related activities, opting instead for standard supervisory oversight. Likewise, the Federal Deposit Insurance Corporation (FDIC) has 

 that banks can participate in permissible crypto activities without prior approval as long as they manage risks appropriately.

State-level regulations, however, remain highly fragmented. 

 with crypto-friendly policies, offering clear licensing and legal protections that attract 

 businesses. In contrast, some states still maintain stricter or underdeveloped frameworks, resulting in a regulatory patchwork that complicates compliance for companies operating across state lines.

In other developments, the federal government has launched the 

, an unprecedented move that integrates digital assets into national infrastructure planning. While this initiative signals strong institutional interest, it also introduces new compliance challenges for both government agencies and market participants.

What regulatory issues exist for cryptocurrency?

Cryptocurrency regulation in the US in 2025 continues to grapple with several persistent challenges, despite efforts to establish clearer frameworks. 

Why this matters for crypto traders and the industry

As crypto matures from the fringes of finance into the mainstream, clear rules and oversight are needed to protect individuals and to nurture a stable, trustworthy ecosystem that benefits everyone involved.

The US is transitioning toward a pro-innovation crypto regime, with emphasis on deregulation, legislative clarity and strategic asset management. Its nascent administration has signaled a significant departure from the previous enforcement-heavy approach, prioritizing regulatory clarity and industry growth. Key actions include the January 2025 executive order establishing an interagency task force to review and potentially rescind restrictive regulations, alongside the SEC’s dismissal of high-profile cases against Coinbase, Robinhood Crypto and OpenSea. 

Meanwhile, the SEC’s Crypto Task Force, led by Hester M. Peirce, aims to streamline registration paths for tokens and clarify jurisdictional boundaries, particularly for meme coins, which the SEC no longer classifies as securities. In addition, the 

 removes barriers for banks offering crypto custody services, thus encouraging institutional participation.

Bipartisan efforts are gaining momentum in the push to formalize crypto oversight, with stablecoin regulation leading the charge. Key proposals like the 

 are pushing for requirements such as 1:1 reserves, regular audits and greater transparency from issuers, bringing stablecoins more in line with traditional financial standards. 

 and SEC are working out jurisdictional boundaries, and Congress is expected to pass market structure legislation that will determine whether crypto assets are classified as securities or commodities. These moves are designed to reduce the regulatory landscape’s current fragmentation, as stablecoins now face a patchwork of state-level regulations that drive up compliance costs.

The US federal government is moving toward a clearer and more innovative crypto regulatory regime, making efforts to streamline oversight, push institutional adoption and integrate digital assets into economic strategy. However, until federal policies fully align and state differences are reconciled, the regulatory environment for crypto in the US remains complex and dynamic. Traders and industry players need to understand this complex but maturing environment in order to navigate risks and grab emerging opportunities.

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Crypto regulations in the US: Navigating a complex landscape

Reports following Ether's landmark surge on May 7, 2025 largely attribute this rally to the completion of the Pectra upgrade.

Ether has recently regained its status as the crypto golden boy, leading a rally since May 7, 2025 that’s outpaced both Bitcoin and most altcoins. This unusual performance has prompted market observers to speculate on the reasons behind it, and whether this impressive trend will continue.

The ETH/BTC ratio has been declining since January 2024, when the SEC 

In Q1 2025, disappointment in Ether's performance reached its peak, driven by market drawdowns and concerns about Ethereum Foundation leadership, leading to a significant exit of investors from the world’s second-largest cryptocurrency. However, on May 7, 2025, the market narrative changed abruptly as Ether surged over 20% in just one day.

Reports following Ether's landmark surge on May 7, 2025 largely attribute this rally to the completion of the 

 upgrade. While the timing of the upgrade coincides perfectly with Ether's rebound, however, this view doesn't capture the full story.

Historically, the ETH/BTC ratio began to rebound two months before the official completion of 

. Similarly, the Pectra upgrade had been anticipated for some time. Despite its smooth execution, the market had low expectations regarding challenges in Q1 2025.

Moreover, Ether's resurgence coincided with BTC surpassing $100,000, as broader risk assets rallied due to positive developments in US tariff negotiations with the UK and China.

In summary, the overall asset rally triggered Ether's rise, while the Pectra upgrade enhanced its performance against Bitcoin. Additionally, Ether's strong outperformance over other altcoins likely resulted from significant short liquidations.

In the days following Ether's record rally, ETH experienced over $500 million in short liquidations. This phenomenon significantly contributed to the unusual surge of more than 20% in a single day for a leading token such as Ether.

The most common criticism of Ethereum is that it loses revenue to 

 (DEXs) for Ether has consistently declined, partly due to competition from other 

 blockchains such as Solana, as well as Ethereum's own L2 networks. Since most L2 solutions have their own utility tokens, the activities conducted on these platforms don’t directly generate fees for L1, since they bundle transactions and post them to the Ethereum Mainnet.

This dilemma doesn’t appear to have a quick fix. In the medium term, Ethereum’s key value proposition may need to shift from that of a profit-generating blockchain with a 

 asset to one that functions as a financial instrument that’s akin to a bond.

Ethereum’s staking feature has yet to face direct competition, and the amount staked within the ecosystem continues to grow. As of Q1 2025, approximately 34 million ETH are staked, yielding an annual return of 2.9%.

Ongoing developments in Hong Kong and Canada may allow ETH Spot ETFs to incorporate staking features. Notably, the Pectra upgrade increases the staking limit for each node from 32 ETH to 2048 ETH, which could incentivize ETF issuers to operate their own nodes in the future. Adding staking rewards to ETH Spot ETFs could enhance their attractiveness, especially as the Fed eventually returns interest rates to more typical levels.

With a 2.9% return on Ether staking, Ether is increasingly positioned as a bond-like investment.

Ethereum’s leadership change and future outlook

Vitalik Buterin’s recent proposals for Ethereum

Ethereum co-founder Vitalik Buterin recently 

 his vision for simplifying Ethereum's Layer 1 in a post titled 

, emphasizing that scalability alone is insufficient: Ethereum must also be understandable, maintainable and secure in order to reliably serve as a platform for civilization’s assets. Buterin proposes a significant reduction in complexity, aiming for an Ethereum that will be as simple (within five years) as Bitcoin is now. He believes that a simpler protocol will enhance security, attract more developers and facilitate easier upgrades.

To achieve this, Buterin introduces a beam chain proposal that aims to streamline consensus by reducing technical complexity, eliminating epochs and sync committees, simplifying fork choice rules and enhancing the validator lifecycle for easier onboarding and recovery. He advocates replacing the current Ethereum virtual machine (EVM) with RISC-V, a more efficient, general-purpose virtual machine. This transition promises a clearer specification that will reduce bugs and maintenance challenges; more flexibility for developers to use various programming languages; and the potential to increase throughput by 100 times.

To address existing applications, Buterin suggests a phased transition that introduces RISC-V precompiles and allows dual deployment options during the shift, gradually moving legacy features out of the core protocol to keep it lean. He also calls for standardizing tools within the network to reduce redundancy and complexity, proposing a unified encoding system, shared data splitting methods and a simpler state structure. Ultimately, Buterin believes that regaining simplicity is essential in order for Ethereum to maintain its flexibility and durability as it scales.

With a new road map for Ethereum and proposed leadership 

 to the Ethereum Foundation to make the Ethereum guardian more accessible, we believe Ethereum has more upside coming.

Advanced

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Bybit Crypto Insights Report: Is Ether regaining favor? How far will it go?

Unichain, Uniswap’s L2 network, now handles over 76% of Uniswap v4 volume, driven by UNI incentives and its new Rollup-Boost feature. 

The S&P 500 jumped 3.26% as US-China tariff easing lifted market sentiment. Investors now await CPI and retail data for signs of inflation trends under the new trade regime. Gold fell near $3,208 as easing US-China trade tensions reduced safe-haven demand. With CPI data ahead, further downside is likely. Technicals suggest bearish momentum, with key support at $3,202. The Coindesk Indices, which tracks the broader crypto market, fell 1.97%, with Bitcoin and Ether down 2.53% and 0.95%, in the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today's top performer is RUNE, which surged by 4.4% following the completion of Halborn's security audit for Rujira Network's omnichain DeFi layer on THORChain.

THORChain (RUNE), created in 2018, is a decentralized protocol enabling native asset swaps across blockchains without wrapping. Built on Cosmos SDK and Tendermint, it uses Proof-of-Stake and Byzantine Fault Tolerance for secure cross-chain transactions. Halborn has 

 a smart contract security audit for Rujira Network, which is building an omnichain DeFi app layer on THORChain. Rujira enables seamless access to DeFi apps using native assets across connected chains.

Check out the latest prices, charts, and data of 

Unichain, Uniswap’s L2 network, now handles over 76% of Uniswap v4 volume, driven by UNI incentives and its new Rollup-Boost feature. This upgrade enhances MEV handling, cuts failed transaction gas costs, and sets the stage for Flashblocks—an upcoming 200ms block time system. Despite v4’s growth, Uniswap v3 still leads in total volume. The aim of Unichain is to solve Ethereum mainnet and L2 liquidity fragmentation while improving speed and decentralization.

Yesterday, BTC spot ETFs saw total outflows of $64.2 million, with $32.9 million from GBTC and $31.3 million from all other ETFs combined.

Multipli’s Season 1 has ended with 359.2M ORBs distributed (50% of supply). 

, allocating 30% of ORBs. Users can continue earning by keeping funds on mainnet or testnet—no action required. New users can join via testnet (free) or deposit stablecoins on BSC/Ethereum.

Beginner

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Unichain leads Uniswap v4 activity with rollup-boost upgrade and upcoming flashblocks feature

Bybit Learn

Stablecoin

Yield-bearing stablecoins offer price stability plus passive income, transforming DeFi with returns from tokenized assets, yield strategies and more.

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 are among the most popular cryptocurrency types in the market. Their rate stability and inherent link to traditional fiat currencies have drawn millions of crypto natives to use them for storing value and moving funds between blockchain and 

 (TradFi) sources. However, one of the most significant drawbacks of traditional stablecoins is their lack of yield: these assets are designed to be pegged to a major fiat currency, often the US dollar, but don't generate any interest on the principal amount.

This scenario starkly contrasts with fiat money held in deposit accounts at banks, as cash parked at a traditional banking institution earns you yield in the form of interest. Cash investments aren't known for stellar returns, but they can still protect your funds from value erosion due to inflation. Although stablecoins were envisioned as digital equivalents of fiat currencies, they don't earn interest when simply held in a crypto wallet.

Yield-bearing stablecoins are a relatively new trend in the crypto market, and are specifically designed to address this issue. As their name suggests, yield-bearing stablecoins allow you to earn yield, making them ideal for any investor who wants both rate stability and return potential.

The yield-bearing stablecoin niche has been growing quickly, as evidenced by a 583% increase in the category's market cap in 2024. Their surge in popularity has continued into 2025 as well. In February 2025, the US Securities and Exchange Commission (SEC) 

 — a yield-bearing stablecoin offered by digital asset firm Figure Markets — as a security. This pivotal event is widely expected to further boost the already impressive growth of this segment. As of mid-April 2025, YLDS remains the only stablecoin of this kind to receive regulatory approval. 

In this article, we’ll examine yield-bearing stablecoins and their benefits and risks, and consider the leading assets of this type currently dominating the rankings.

Yield-bearing stablecoins are cryptocurrencies that maintain a peg to an established fiat asset — similarly to traditional stablecoins — while also generating yield on the principal amount via various decentralized protocols or tokenized traditional finance instruments.

Traditional stablecoins have long been used to maintain the value of crypto funds tied to fiat national currencies. These cryptos, the first of which appeared over a decade ago, are tightly pegged to an asset or basket of assets. The most popular traditional stablecoins are typically pegged to the US dollar, and backed by cash and cash-equivalent reserves held by their issuers or authorized custodians.

Another type of stablecoin maintains its peg through 

Regardless of how the peg is maintained, traditional stablecoins aren’t yield-generating assets. When you buy such a stablecoin, your funds retain their nominal value in the pegged fiat currency — but you earn no interest on the principal.

This lack of yield has long been seen as a core drawback of traditional stablecoins. This contrasts with fiat currencies held in bank accounts, which typically generate yield through accrued interest. While cash deposits don’t typically offer high returns as compared to more risky financial instruments, they can at least help offset inflation-driven erosion of the principal value.

This erosion has become a bigger issue in recent years. In June 2021, US monthly inflation rose above 5% for the first time since mid-2008. The rest of 2021 and the following two years saw inflation levels not experienced in decades. As of April 2025, inflation is down, compared to the 2022 and 2023 peaks — but it’s still historically high.

Multiple years of elevated inflation rates have shone the spotlight on a key problem of traditional stablecoins: their lack of yield-generating capacity. While fiat deposits may soften the blow of inflation through interest, stablecoin holdings pegged to those same currencies are slowly losing their real value.

Major stablecoin issuers like Circle, the issuer of 

, and Tether, the company behind USDT, use the fiat reserves backing their coins in yield-generating instruments. But instead of sharing those yields with holders, they keep the earnings. The result is that USDC, USDT and most other stablecoins offer no yield to users, while issuers pocket the income from the cash reserves backing the coins.

Yield-bearing stablecoins have emerged as a key answer to this issue — and it’s no surprise they’re now gaining traction as investors wake up to the limitations of holding traditional stablecoins in a high-inflation world.

Yield-bearing stablecoins generate returns for their holders primarily from: 

Some stablecoins generate yield via DeFi protocols' native solutions. Typically, you submit your funds to a protocol that uses them in various interest-generating activities, such as 

. As the protocol earns income through these activities, a portion of it is shared with the stablecoin holders via regular distributions. DeFi protocols may earn such income from charging protocol fees, position and vault liquidations, interest charged on borrowed funds and more.

Another primary yield source for stablecoins is through crypto derivatives based on 

. Such tokens represent an underlying crypto asset, such as 

 (BTC). When the original underlying asset earns interest 

 (for example, via staking), the yield accrues to its liquid representation.

In turn, yield accumulated by the LST or LRT is then shared with holders of the yield-bearing stablecoin that tracks these liquid tokens.

This is how it typically works: let's say a protocol issues an LST in the form of 

 (stETH) to anyone staking Ether. Additionally, there's a yield-bearing stablecoin based on that LST. Users with ETH funds deposit into the protocol, and are issued stETH, the LST that accrues their staking rewards. As staking rewards are added to stETH, a portion is also shared with your stablecoin. In essence, you earn yields by holding the stablecoin as a derivative asset without needing to stake crypto yourself.

Some yield-bearing stablecoins are tokenized, on-chain representations of RWAs and traditional financial instruments. For instance, a stablecoin may represent your investment in a tokenized fund that generates yield by investing in Treasury bills, corporate bonds, equities and other traditional assets. As the fund earns yield through these financial instruments, it’s shared with stablecoin holders.

One key benefit of yield-bearing stablecoins is the ability to 

 while enjoying the stability provided by these assets. The crypto market is well known for 

, and stablecoins generally offer unmatched stability as compared to any other type of cryptocurrency. Thanks to their peg to the US dollar or other established fiat currencies, your funds are well-protected from losing their real-world value — even if Bitcoin and other cryptos decline markedly — giving you peace of mind combined with steady, even if modest, income from these coins.

Returns from yield-bearing stablecoins are typically 

. This is particularly the case for stablecoins representing tokenized TradFi instruments. At the same time, you can enjoy these low-risk returns regardless of your location because these assets reside on-chain.

Most traditional low-risk investments in the US (e.g., Treasury bills and other cash equivalents) are highly regulated by the country’s securities laws. Foreigners residing in the US may need an international brokerage account, and to meet additional qualification requirements in order to invest in these assets. In contrast, purchasing, holding and trading yield-bearing stablecoins is open to anyone with a crypto wallet. These stablecoins provide ready access to steady, low-risk returns for both US residents and foreigners.

Investing in traditional stablecoins preserves the nominal value of your funds at the time of investment, but generates no yield. Therefore, these assets lose their real value over time due to inflation. In contrast, yield-bearing stablecoins provide additional income that grows on top of the principal. As such, investing in these stablecoins provides a better deal than parking your funds in their traditional counterparts.

In general, any investment in low-risk and low-return assets carries opportunity cost. By holding your funds in these kinds of investments, you forego the earnings potential offered by higher-risk asset types. However, this opportunity cost is lower with yield-bearing stablecoins as compared to traditional ones for the reason above: the former accrue yield on top of the principal, while the latter do not.

Like most other cryptocurrencies, many yield-bearing stablecoins may be used in various DeFi protocols for further yield. This may vary by each specific coin, as some issuers impose certain limitations on such 

The utilization of yield-bearing stablecoins in DeFi protocols is something that the traditional assets they represent (such as cash and cash equivalents) lack. You can’t simply lock Treasury bills in a growth-focused DeFi lending protocol, but you may well be able to do so using a yield-bearing stablecoin that acts as a tokenized representation of the bills.

Earning interest from yield-bearing stablecoins isn’t rocket science — even for crypto beginners. Many protocols automatically distribute yield in the form of additional tokens of the same kind, a process known as rebasing. Other issuers may pay yields in some other token, specifically used as a reward cryptocurrency. 

Regardless of the method used, the stablecoin holders usually receive their yields directly into their wallets without having to worry about performing any additional crypto operations. In most cases, you earn yield from these assets simply by holding on to them, ensuring a smooth and simplified UX.

Yields earned via yield-bearing stablecoins aren’t fixed, and may fluctuate. Market volatility may affect the returns these assets generate. Some yield-bearing stablecoins, especially those that generate yields through DeFi protocols, may be affected by the typically high volatility of the crypto world. In addition, incomes earned by DeFi protocols and shared with holders of the stablecoins can vary widely, depending upon transaction activity within a given protocol.

Even stablecoins tied to low-risk RWAs such as government bonds are affected by interest rates set by the Federal Reserve. These rates may change based on factors like underlying inflation in the economy, unemployment figures, business spending levels, credit market conditions and geopolitical risks.

Sudden and drastic devaluation of collateral is also a risk for yield-bearing stablecoins. Although they’re pegged to established fiat currencies, the reserves backing them may consist of much more volatile assets, such as BTC or ETH. Any significant declines in the value of these collateral assets can potentially lead to instability and 

The risk of collateral devaluation isn't limited to stablecoins backed by cryptocurrencies, and such risk is also present for RWA-backed, yield-bearing coins. For instance, if a stablecoin is backed by tokenized real estate investment trusts (REITs) and a severe downturn occurs in the property market, it could act as a catalyst for the stablecoin’s collateral devaluation.

Sufficient liquidity may also be an issue for yield-bearing stablecoins. Limited trading volumes and inflexible redemption mechanisms are typical characteristics of some of these assets. These factors may exacerbate liquidity crunches during sudden surges in trading activity for them. For instance, if many investors try to redeem their stablecoins at the same time, the issuer may struggle to accommodate the requests. Any delays in redemption beyond normally agreed-upon times may lead to a panic among investors, who could rush to redeem their funds, causing a liquidity crisis for the issuer.

Since yield-bearing stablecoins are based on blockchains, there are always technological risks. The operational mechanism of these stablecoins is typically managed via on-chain 

, which could be compromised during hacking attempts.

Network outages unrelated to hacking exploits also occur on blockchains, which can affect a stablecoin’s flow of operations. Although the largest smart contract chain in the industry, Ethereum, is well known to have never experienced a major outage, several other popular chains, including 

 (ARB), have had at least one significant network disruption event in the past few years.

Regulatory risks also exist for yield-bearing stablecoins. As of April 2025, the US still doesn’t have a comprehensive, federal-level law regulating stablecoin assets. In early 2025, the 

 were introduced to the Senate and the House of Representatives, respectively. These acts specifically deal with stablecoin cryptocurrencies. Both bills are still being considered by US lawmakers.

If and when these bills are passed into law, some yield-bearing stablecoins — depending upon their operational mechanisms, collateral types, issuer standing and other key factors — might find themselves struggling to satisfy new regulatory requirements.

 (SKY), formerly known as MakerDAO (MKR). It represents a rebranded version of the protocol’s original 

 (DAI) stablecoin. Users can mint USDS via Sky Protocol by depositing collateral in various eligible assets, such as ETH, USDC and certain tokenized RWAs.

After minting USDS, you can use it throughout the DeFi ecosystem, as with other major stablecoins. USDS maintains an algorithmic peg to the US dollar, with overcollateralized reserves backing the coin.

You can also generate yield from Sky Protocol by depositing your USDS into a savings smart contract. Upon depositing your funds, you’re issued the sUSDS coin (SUSDS), which represents the yield-accruing version of USDS.

 (ENA) DeFi protocol offers a synthetic stablecoin, 

, whose value is maintained via advanced trading strategies. Pegged to the US dollar, USDe is minted by depositing BTC, ETH, stETH or USDT. USDe’s peg and its collateral stability are ensured via the use of 

 trading strategies, which attempt to balance the risks for the traded asset by taking directionally opposite positions through related financial instruments such as 

 contracts. For instance, to hedge against the risk of the decline in ETH’s collateral value, Ethena may purchase an Ether-based short futures contract.

As the delta-hedging strategies (hopefully) deliver positive returns (e.g., via positive funding rates for the futures held by Ethena), your USDe investment accumulates yield. You may also earn yields with USDe via the Ethena protocol by 

. Ethena uses your funds to stake on the underlying Ethereum blockchain, delivering regular staking rewards distributed via sUSDe, the staked version of USDe.

BlackRock USD Institutional Digital Liquidity Fund (BUIDL)

 (BUIDL) provides a stablecoin that represents ownership in a tokenized money market fund managed by BlackRock, the world's largest asset management firm. This fund invests in various cash and cash-equivalent instruments, such as Treasury bills and repurchase agreements.

As the fund's investments earn interest, this interest is distributed to the holders of the BUIDL stablecoin. BUIDL is an Ethereum-based cryptocurrency, but under the fund's rules, it's not tradable on the crypto market. As such — unlike most other stablecoins — BUIDL's rate will theoretically stay fixed at exactly $1, although the issuer doesn’t guarantee this rate.

The fund's yield is calculated daily, and is distributed to BUIDL holders once a month.

The Ondo US Dollar Yield (USDY) token is another stablecoin that generates yield via traditional RWA instruments. Offered by 

 (ONDO), which specializes in institutional-grade DeFi solutions, USDY is backed by US Treasury bills and bank demand deposits.

Before you can mint USDY via the protocol, you’ll need to go through a formal onboarding process, during which you’ll be asked to submit your identity documents and the crypto wallet address to receive the stablecoin, as well as any necessary tax documents. If all documentation is in order, you can then acquire USDY by depositing either US dollars (for amounts of $100,000 or more) or a minimum of 500 USDC.

USDY is somewhat different from the other stablecoins we’ve mentioned above, since yields generated for token holders aren’t distributed separately as new USDY tokens using the rebasing system. Instead, the yields are added to each unit of USDY held. Due to this mechanism, the price of the USDY stablecoin is normally higher than $1 because it includes the accumulated yield in addition to the principal.

Ondo also offers a rebasing variation of the USDY stablecoin, rUSDY, for which yields are sent to holders as new tokens of the same kind by increasing the supply of the cryptocurrency.

Usual USD (USD0) is a yield-bearing stablecoin offered by 

 (USUAL). USD0 is pegged to the greenback, and is fully backed by RWAs, such as Treasury bills. You can mint USD0 by providing collateral in eligible RWA assets. Alternatively, you can also obtain the stablecoin by depositing USDC collateral.

Yield-bearing stablecoins: What are they — and how are they reshaping DeFi?

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