Yield generating stablecoins offer a unique way for investors to earn passive income while maintaining the stability of their investments. Unlike other digital assets, stablecoins maintain a stable value, often pegged to a fiat currency like the US dollar.
But how do stablecoins work when it comes to yield generation? Stablecoins take advantage of different strategies to generate returns for holders. Decentralized finance (DeFi) protocols offer a wealth of opportunities for such investors. For example, DeFi protocols allow stablecoin holders to lend or provide liquidity to various platforms in exchange for interest or rewards. These novel financial services unlock a wealth of opportunity for stablecoin investors.
If you want to jump straight to the answer: Origin Dollar (OUSD) generates yield as the protocol deploys underlying stablecoins to DeFi platforms like Morpho and MakerDAO. The yield generated from interest and protocol rewards is pooled and converted to stablecoins to produce OUSD-denominated yield.
Let’s dive into why yield generating stablecoins are uniquely positioned to offer attractive returns while minimizing the volatility typically associated with cryptocurrencies. We’ll start by explaining how they work in the first place.
Picture this: you have a regular piggy bank at home. Every time you drop a coin into it, that coin magically grows into more coins overnight—without you doing anything at all. That’s basically how yield generating stablecoins like OUSD can feel. You put in your stablecoins, and then, quietly in the background, they earn interest for you. It’s kind of like a savings account at a bank, except you don’t have to deal with account managers, opening hours, or locking up your funds.
Now, you might be thinking, “This sounds too good to be true.” And sure, there can be risks, just like there are risks when you keep money at a bank or invest in the stock market. Smart contract exploits, sudden drops in the crypto market, and other unexpected issues can pop up.
But the reason people love stablecoins that earn yield is they offer you a chance to grow your money without having to chain yourself to more unpredictable assets like regular cryptocurrencies. Because stablecoins are meant to keep a steady value, you’re not playing the guessing game of when prices might swing up or down. Instead, you get the benefit of a stable value combined with the potential to earn extra.
One of the coolest things is how these stablecoins do all the work behind the scenes. Once you’ve got them in your digital wallet, many protocols like OUSD will automatically generate yield from different lending and liquidity opportunities. As borrowers pay interest or DeFi users pay trading fees, that money flows back into your wallet, boosting your balance over time. It’s a bit like planting seeds in a garden—you water them, let the sun do its thing, and watch them grow.
Of course, nothing in crypto is 100% guaranteed. But if you’re looking for a way to dip your toes into earning yield without the wild ups and downs of more volatile tokens, yield generating stablecoins can be a solid choice. They’re simple, they’re stable, and they can help your money work harder for you. Best of all, you can pull your funds out anytime you need, which is a nice perk compared to many traditional savings vehicles.
With Origin Dollar (OUSD), users are empowered to earn outsized stablecoin yield with unparalleled flexibility.
OUSD is fully collateralized by crypto’s most widely used stables – Tether (USDT), USDC, and Sky USD (USDS, formerly DAI). As these crypto assets do not accrue interest on their own, OUSD provides an ideal platform for holders to put their idle funds to work.
Since launching in late 2020, OUSD has delivered the highest risk-adjusted stablecoin yields in the stablecoin market. The protocol allocates reserves to blue-chip DeFi protocols in order to generate this yield.
OUSD’s unique appeal lies in its seamless usability. Earning yield in DeFi generally requires lock-ups, forcing users to manually stake and un-stake their holdings to earn rewards.
With OUSD, however, users don’t need to surrender their capital or pay gas fees to compound their yield.
Users can mint OUSD by depositing USDT, USDC, or USDS via the Origin dapp. Once minted, holders are free to use OUSD as they would any other stablecoin. At the same time, yield generated by underlying reserves is distributed automatically to holders’ wallets.
This means that users can benefit from some of the best stablecoin yields in the space while retaining full control and price stability over their capital.
Now here’s the more technical answers to how stablecoins work. Yield bearing stablecoins earn yield by depositing underlying reserves to DeFi platforms via automated strategies.
Lending protocols are commonly used for yield generation. A stablecoin holder can deposit their funds into a lending platform, where borrowers can borrow these stablecoins by providing collateral. The interest paid by borrowers is then distributed among the stablecoin holders, allowing them to earn a yield on their investment.
Liquidity mining is another popular route for passive returns. In this approach, stablecoin holders can provide liquidity to decentralized exchanges (DEXs) by depositing their stablecoins and another cryptocurrency into a liquidity pool. By doing so, they earn a portion of the trading fees generated by the DEX.
Stablecoin yield farming denotes the use of multiple DeFi mechanisms or revenue streams to generate yield.
OUSD utilizes established protocols in order to generate yield for holders. The platform’s strategies and smart contracts have been rigorously audited to ensure their security.
Part of the way Origin Dollar earns its yield is by allocating underlying collateral to premier lending protocols Morpho and Sky. These funds are lent out to borrowers in order to earn interest.
Additionally, the protocol earns trading fees via Curve and Convex. OUSD achieves this by supplying liquidity to the Curve OUSD-3CRV pool. This pool pairs OUSD with USDT, USDC, and DAI, allowing users to swap between OUSD and underlying reserves. By providing liquidity in the form of all four tokens, Origin is able to earn additional yield for holders.
OUSD affirms a strong commitment to full transparency. All protocol allocations, interest rates, and capital flows can be tracked via the platform’s dedicated analytics page.
Farming with stablecoins in DeFi arguably offers one of the safest ways to earn passive returns in crypto for both retail and institutional investors.
With a current trailing 30-day APY of 3.91%, OUSD offers some of the highest risk-adjusted stablecoin interest on-chain.
While centralized exchanges (CEXs) also offer stablecoin staking with high yield, using such services can be incredibly inefficient. Users need to surrender control of their funds with hard lockups, making it difficult to stay agile in a volatile space. Further, users have no say or line of light into how their funds are being managed while staked on a centralized platform.
In contrast, using a DeFi protocol like Origin Dollar allows users to maximize their yield while retaining control of their funds. Given that users provide stablecoin liquidity in DeFi, anyone can participate in market making activities to earn rewards.
Origin has also launched Origin Ether to generate yield on Ethereum via liquid staking. OETH builds on OUSD’s battle-tested codebase, offering another secure and transparent platform for yield generation.
Like OUSD, OETH delivers outsized yield with no lockups required. OETH maintains a peg to ETH, allowing users to retain full control of their capital. It’s important to note that ETH is a volatile asset and sees regular price fluctuations. However, OETH’s broad utility means that users can liquidate their capital whenever necessary.
Both protocols illustrate the vast opportunities for passive returns in DeFi.
As with any investment, using yield generating stablecoins carries risks. It's crucial for investors to conduct thorough research and due diligence before participating in DeFi activities.
That being said, OUSD’s remarkable design and unparalleled usability offer users a seamless platform to earn returns on idle stablecoins.
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How Do Yield Generating Stablecoins Like OUSD Earn Interest?
Yield generating stablecoins like OUSD earn interest by deploying underlying fiat collateral into DeFi protocols that pay returns through lending and liquidity provision. Unlike algorithmic stablecoins, OUSD is backed by a reserve asset and earns passive yield without needing to move funds into a traditional bank account.
What Makes Origin Dollar (OUSD) Different From Other Stablecoins?
OUSD stands out from other types of stablecoins because it auto-compounds yield directly to holders without lockups or staking, while remaining fully backed by stablecoins issued by trusted stablecoin issuers. It’s designed to generate real yield while maintaining price stability—something many stablecoins aim for but few achieve efficiently.
Is Earning Yield on Stablecoins Through DeFi Safer Than Using Centralized Exchanges?
Earning yield on stablecoins through DeFi offers better transparency and control compared to centralized platforms, which often lack visibility into how your funds are managed and rely on central banks for trust. While DeFi isn't risk-free, it reduces reliance on third parties and helps mitigate issues like de-pegging and poor asset custody.
What Are the Risks and Benefits of Using Yield Bearing Stablecoins in DeFi?
The main benefit is earning competitive yield without sacrificing control, especially in protocols like OUSD that track every market cap fluctuation and allocation. However, risks include smart contract vulnerabilities and exposure to unstable stablecoin issuers, so it's essential to understand the backing and mechanics behind the stablecoin you choose.
