Unchained: Bits + Bips — Hyperliquid’s USDH Bidding War & Why the DAT Model Is Broken

Host: Laura Shin (guest host: Steve Ehrlich)
Guests: Sam Kazemian (FRAX Finance), Kavita Gupta (Delta Blockchain Fund), Alex Thorne (Galaxy Digital)
Date: September 10, 2025
Episode: #900

Main Theme

This episode explores two major frontiers in crypto:

1. The high-stakes, high-profile competition among stablecoin issuers to win the coveted “USDH” ticker for Hyperliquid’s ecosystem.
2. The troubled evolution of Digital Asset Treasuries (DATs), why the original model is breaking down, and what might come next.

The guests dive deep into how branded stablecoins and DAO governance are shaping the future of crypto, and they offer unvarnished perspectives on trust, fragmentation, and market power—along the way, surfacing the risks and realities behind the latest mythologies in decentralized finance.

Key Discussion Points & Insights

1. Hyperliquid’s USDH Stablecoin Bidding War

[04:47-08:10, 12:21-15:17, 19:24-23:30]

• Background: Hyperliquid, a major upstart L1 ecosystem, surprised the community by announcing a competition/bidding war for issuing its “USDH” native stablecoin.
• FRAX’s Position: FRAX (Sam Kazemian’s team) is bidding alongside Paxos and Agora; FRAX was first to offer 100% yield pass-through, setting a competitive precedent.
• Branding vs. Distribution: The true prize isn't just yield—it's capturing distribution, being at the “in and outflows” of a rapidly growing chain with high user loyalty.
• DAO Governance “Bake-Off”: The process is a test of on-chain governance. Hyperliquid’s foundation has delegated much of its token voting power to validator nodes, avoiding direct interference:

  “I think everyone, Kavita and Sam, have it spot on. I just, I think it's a story about like the power that Hyperliquid commands now... and it’s a new sort of DAO governance bake-off as well, which is quite interesting.” — Alex Thorne [19:24]

• Centralization Concerns: Even as voting is delegated, doubts persist; “DAO theater” versus real decentralization is scrutinized.
• Race to 100% Yield: After FRAX, most bidders scrambled to match “full yield” handovers. Yet as Sam notes, “Yield is table stakes. The important thing is: who is stewarding these flows?”

Memorable Moments

• Kavita, on the proliferation of branded stables:

  “For me, it's like a meme coin—funny. Like, you know, let's put in a lot of money to have that ticker.” [08:31]

• Alex, on what’s really at stake:

  “This is really a distribution question... So much of the adoption of a stablecoin comes down to distribution.” [10:22–12:21]

Ticker War Mechanics

• Proposals close in 48 hours, with a winner chosen by next week via validator voting.
• Process transparency and decentralization are major concerns given the outsized influence and pre-announced proposals. [28:30]

2. Stablecoin Fragmentation and the Coming “Brand Wars”

[08:31-12:21, 17:27-19:20, 53:22-55:22]

• Explosion of Branded Stablecoins:
  The race isn’t just for Hyperliquid: Kavita predicts a future where every company—Instagram, PayPal, Robinhood—issues its own stablecoin.

• Risks: Major increase in liquidity fragmentation, user confusion, and risk of “tokenized gift card” economies where stables only have value within their own apps.

• Five Will Dominate:
  Sam’s contrarian take:

  “There will be hundreds of stablecoins, but only a short list of five that are actually accepted everywhere... The rest are basically tokenized gift cards.” [53:22]

• Institutional Entrants:
  The real threats to Circle/USDC aren’t just Wall Street banks, but big techs/platforms (PayPal, Instagram) leveraging captive audiences and sticky flows. [17:27]

3. Digital Asset Treasuries: Bubbles, Premiums, and Problems

[29:14–51:32]

• The “DAT” Model:
  DATs are public companies whose equity trades as a claim on underlying digital assets (BTC, ETH, etc.). Inspired by MicroStrategy’s success, many companies launched DATs—hoping book value premiums would let them buy more crypto and drive prices up.

Why The Model Is Breaking

• Investors Bailing:
  Kavita: “Digital asset treasuries’ bubble is somewhere getting poked, if not completely broken.” [29:52]
• Broken Promises:
  Fundraising often not accompanied by timely asset purchases; governance is weak.
• Speculative Churn:
  Most investors are “in and out in four to six months”—once shares become tradable, they’re sold, collapsing premiums and undermining stability.
• SEC scrutiny:
  Regulators are starting to demand shareholder agreements and real governance—slowing new launches and dampening investor interest.

Differentiation and Danger

• Alex:

  “Very few DATs can do what Saylor is doing, which is just stack the coin... I think it's going to turn into a game of differentiation and value add. Using them in DeFi, earning yield, being careful—but there are real risks.” [32:37, 44:45]

• Risk Spectrum:
  The drive for yield may push DATs into riskier DeFi strategies: staking, liquid staking, rehypothecation, etc.—with potential for disaster if risk controls fail.

  “Some of these digital asset treasury companies are going to stretch the risk and try to go far out on the risk spectrum… we will almost certainly see something like that emerge.” — Alex Thorne [44:45]

Are DATs Just Banks?

• David: “DATs are basically banks, but without the regulation.”
• Sam:

  “Isn't a bank just a DAT with the token being USD?” [51:32]

• Alex:

  “Hal Finney… wrote that there would be very good reason for bitcoin banks to exist that would hold bitcoin and issue their own cash… this is that rhyming history thing.” [52:12]

4. Tokenized Stocks: Why Not Ethereum L2s?

[55:36-63:29]

• Galaxy’s Tokenized Stock Launch on Solana:
  After Galaxy tokenized its shares, Alex addresses why L1s, not Ethereum L2s, are currently necessary for tokenized company shares.

  “A single sequenced roll up… can reorder your transactions, charge arbitrary fees, can delay settlement… That looks a lot like NASDAQ to me—and NASDAQ is heavily regulated to ensure it doesn’t negatively impact shareholders.” [55:36]

• Ethereum L2s "Not Ready":
  Until rollup sequencer centralization is solved (“pragmatically, rollups are all single sequenced”), L2s are not appropriate for stocks.

  “We’re in this elbowing around and debate design phase as an industry and with the SEC about what the nature of on chain stock markets looks like, and I just don’t think it looks like unregulated single sequenced optimistic rollups today.” [61:00]

Notable Quotes & Memorable Moments

• Kavita, on stablecoin bubble rhetoric:

  “Digital asset treasuries’ bubble is somewhere getting poked, if not completely broken.” [29:52]

• Alex, comparing DAO governance and legacy power:

  “It’s a new sort of DAO governance bake off… I’d like to see… Ultimately the Hyperliquid validators vote. The foundation controls a super majority… Have they said what they’ll do?” [19:24]

• Sam, on the value of distribution over yield:

  “Yield is table stakes… The real question is who is going to be the best stewards of these flows and be able to create the most value for the Hyperliquid community.” [12:21]

• Sam, on stablecoins as branded gift cards:

  “The stables that are branded are more like tokenized gift cards… only a short list are actually accepted everywhere. Those are the trillion dollar opportunities.” [53:22]

• Steve Ehrlich, closing lesson:

  “There’s a lot of things purporting to be decentralized that very much are not and that just kind of takes away… Crypto was meant so that things like this [centralized token freezes] could not be able to happen.” [63:29]

Timestamps for Key Segments

• 00:00–02:13 — Introductions & episode setup
• 04:47–08:10 — Hyperliquid’s USDH competition explained
• 08:31–12:21 — Stablecoin fragmentation and risks
• 12:21–15:17 — Yield handovers and "why everyone is scrambling"
• 19:24–23:30 — DAO governance bake-off, centralization vs. theatrics
• 29:14–32:26 — The broken DAT model & investor disillusionment
• 32:37–35:11 — How DATs must evolve to survive
• 44:45–48:45 — Risks: rehypothecation, going “far out on the risk spectrum”
• 51:32–52:50 — DATs as unregulated banks, Hal Finney's vision
• 55:36–63:29 — Tokenizing stocks: why Solana, not Ethereum L2; risks of centralized rollups
• 63:29–63:53 — Pseudo-decentralization, the Justin Sun/WLF example

Conclusion & Contrarian Takes

• Sam Kazemian’s take:
  Despite stablecoin “brand wars,” only a handful will achieve “money-ness”; distribution breadth (not just single platforms) is what matters:

  “You need deep multi-distribution integration—not one—because if you have multi-distribution integration, you are money.” [53:22]

• Alex Thorne’s take:
  L2 rollups simply aren’t ready for tokenized stocks—regulatory and technical centralization are real bottlenecks; L1s are the pragmatic route for now.

• Steve Ehrlich’s final reflection:
  Many projects are only “decentralized” in name; power, vetoes, and freezes remain routine—it’s crucial to keep crypto’s fundamental ethos in mind.

For listeners:
This episode is rich with insider commentary on crypto’s evolving battles over market power, distribution—and how both legacy and blockchain-native institutions are learning, and sometimes repeating, old lessons in new forms. If you care about where the next billion-dollar battles will be fought, this is a must-listen.