Hubble Native Yield

What is the Hubble Native Yield?

The Hubble Native Yield, or HNY is a variable % yield that will be paid to USDH Stakers. In addition to earning liquidation rewards, USDH Vault depositors will earn yield that will be funded directly from the protocol's Stability Fees.

What is the purpose of HNY?

The purpose of HNY is two-fold. HNY is a means of incentivizing users to stake USDH, which is necessary to liquidate positions in the Main Vault.

The HNY can also allow the protocol to adjust USDH demand, which plays an important part in the USDH peg stability. Alongside the Peg Stability Module and Stability Fees, the HNY is a way of ensuring that USDH remains pegged to the US Dollar.

How can HNY impact USDH demand and peg?

HNY follows the same economic principal as interest rates. Whereas Hubble's Stability Fees reflect the accrual of debt caused by interest, the HNY reflects the upside of interest rates.

Increasing the HNY

When the HNY is increased, the demand for USDH should theoretically rise, as users are incentivized to acquire USDH and stake it in the USDH vault to earn HNY. This increase in USDH demand should cause the USDH peg to rise.

When interest rates are increased, the US Dollar should strengthen (increase in price) due to the appeal of earning higher interest. Similarly, an increase in the HNY should see the USDH price increase.

Typically, the HNY will only be raised when USDH is below peg (i.e. when USDH supply outstrips USDH demand).

Decreasing the HNY

When the HNY is decreased, the demand for USDH should theoretically decrease, as users currently staking USDH in the USDH Vault will withdraw their USDH and exchange it for a different token, in search of earning opportunities elsewhere. This will cause the USDH peg to decrease.

As in the previous example, a decrease in US interest rates should lower the appeal of the US Dollar and, similarly, a decrease in the HNY will lower the appeal of USDH Staking.

Typically, the HNY will only be lowered when USDH rises above peg.

Is HNY the only pegging mechanism for USDH?

No. USDH has three mechanism for mainting USDH peg

How do I earn HNY?

Once Stability Fees are active, USDH Vault stakers will automatically start earning HNY.

Can I earn HNY without staking?

No, to earn HNY, you have to stake your USDH in the USDH Vault.