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Case Study: Bringing Utility to Payments with USDY

Case Study: Bringing Utility to Payments with USDY

In December of 2023, Ondo launched USDY on the Solana blockchain, offering users access to native USDY through a growing array of dApps in the Solana ecosystem. Since then, crypto payment platforms in the ecosystem have enabled merchants to accept payments in crypto assets, with real-time conversions settling payments in Ondo USDY, offering new utility to merchants and their users.

The Evolution of Payments on Solana

Low fees and rapid settlement are two essential features to any payments network. Solana has emerged as a leading blockchain in the crypto payments landscape due to its attributes of near-instant speed, high transaction throughput, and scalability at low cost. Established payment processors like Visa have recognized Solana as a blockchain of choice for stablecoin settlement. Per Artemis, stablecoin usage volumes on Solana have grown over 100x, from $13.9 billion in September 2023 to a peak of $2.7 trillion in May 2024.

Historically, the cryptocurrency ecosystem lacked a stable store of value solution until the introduction of stablecoins in 2017. Over the past seven years, stablecoins have grown from inception to a market size of over $160 billion, becoming the largest tokenization vertical. And once a stable store of value was established onchain, the use of stablecoins for payments naturally followed. Instead of sending 0.001667 BTC for a $100 USD transaction, onchain users could now send and receive $100 USD in stablecoins—a tokenized form of cash that was more familiar and user-friendly — for a fraction of the cost. This convenience contributed to the growing adoption of stablecoins as the standard for onchain payments.

The continued adoption of stablecoins, combined with the Solana blockchain’s fast transaction speeds and low fees, has led to record-breaking stablecoin transaction volumes. However, there is now an alternative to traditional stablecoins - yieldcoins - that are quickly gaining attention, and numerous payment and wallet service providers are building on this momentum.

The USDY Advantage: A Payment Option that Earns Yield 

While stablecoins have emerged as preferred assets for blockchain-based payments, a drawback of traditional stablecoins is their inability to offer yield to users or merchants that use them for payments or settlement. USDY, a yield-bearing token backed by US Treasuries, accrues yield to holders while maintaining the composability and utility of stablecoins. It offers a more capital-efficient way to store and grow value onchain than traditional stablecoins while still providing an equally effective payments solution.

For example, imagine a merchant accepting crypto payments from customers. If the merchant were to receive $100,000 worth of stablecoin a year in their wallet, this $100,000 stablecoin balance would not generate any return in their wallet. By contrast, if the merchant were able to receive the equivalent amount in USDY, the merchant will receive a return secured by the short-term US Treasury Bills. Assuming the merchant holds the $100,000 of USDY in a wallet for a year, at the current rate of 5.3%, the merchant would accrue over $5,000 in accrued yield by accepting and holding USDY as a settlement method. 

While yield is one of the most compelling benefits of USDY, it also offers capital structure seniority and is designed to be bankruptcy remote, as shown in the table below: 

Leading the Way on Crypto Payments: Helio and Sphere

The crypto payments sector is recognizing the benefits of using yieldcoins (i.e. yield-bearing cash equivalents like USDY) for storing value and making payments. The Solana ecosystem, which has pushed the boundaries of crypto payment innovations, is leading this movement. To date, multiple payment platforms on Solana have already integrated USDY into their product offerings:

  • Helio, a leading crypto payments platform on Solana with over 450,000 unique active wallets and 6,000 merchants, has integrated USDY as a native payment option. With its Solana Pay plugin, millions of Shopify merchants can now settle payments in cryptocurrencies, with real-time conversions to USDY and a select group of stablecoins, such as USDC, EURC and PYUSD.
  • Sphere, a payment technology provider on Solana, initially designed with stablecoins at its core, has integrated USDY to enable merchants in emerging markets to conduct secure, cost-effective, and near-instantaneous cross-border payments while having access to US Treasuries backed yield.

The Utility Play: The Case for USDY

For payment providers or wallets looking to attract new users and deepen retention, USDY offers three unique advantages:

  1. Automated Interest Accrual: Secured by short-term US Treasury Bills, USDY enables holders to accrue interest automatically.
  2. DeFi Utilities: USDY offers additional capital-efficient utilities and composability in decentralized finance, such as earning yield when using USDY as collateral when borrowing
  3. Safeguards and Transparency: An independent transfer agent provides enhanced security and clear visibility into transactions.

The Fast-Growing Opportunity

Asset tokenization is going mainstream. According to Coinbase’s The State of Crypto report, tokenized US Treasury products have seen a “1000% rise in value” since the start of 2023, growing by over $700 million in 2024 alone. Today, with over $3 billion in stablecoin TVL on Solana, there remains ample opportunity for such capital to leverage yieldcoins like Ondo USDY and accrue interest backed by short-term US Treasuries. 

Ondo has emerged as one of the leading participants in the yieldcoin landscape, with cumulative TVL surpassing a milestone of over $500m USD. Likewise, Helio and Sphere Pay, along with other payment and wallet partners in Ondo’s ecosystem, are spearheading the effort to leverage USDY’s advantages of yield and DeFi composability in providing users and merchants with the best store-of-value and payment product.

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⚠️ NOTE: USDY is not, and may not be, offered, sold, or otherwise made available in the US or to US persons. USDY has not been registered under the US Securities Act of 1933, a amended ("Act") or pursuant to securities laws of any other jurisdiction, and may not be offered, sold or otherwise transferred in the US or to US persons unless registered under the Act or an exemption or exclusion from the registration requirements thereof is available. Additional restrictions may apply. Ondo USDY LLC, the issuer of USDY, is not registered as an investment company under the US Investment Company Act of 1940, as amended. Nothing herein constitutes any offer to sell, or any solicitation of an offer to buy, USDY. Acquiring USDY involves risks. A USDY holder may incur losses, including total loss of their purchase price. Past performance is not an indication of future results. Ondo does not endorse, Ondo does not make any representation or warranty whatsoever (express or implied, including but not limited to any warranty of merchantability, fitness for a particular purpose or non-infringement) regarding, and ONDO SHALL NOT HAVE ANY LIABILITY WHATSOEVER WITH RESPECT TO ANYONE'S USE OF, any third-party products, services or technologies referenced herein. Additional terms apply. Visit http://ondo.finance/usdy for details.