Stablecoins and yield-bearing dollars
USDC, USDT, PYUSD and the newer dollars that pay yield. What backs each one and what can break the peg.
Stablecoins are tokens designed to stay worth one dollar. They're the cash of DeFi: what you trade into, lend out and park between positions. Solana holds more than $15 billion of them.
The big three types
Fiat-backed. USDC (Circle), USDT (Tether), PYUSD (PayPal/Paxos), USDG and others hold cash and short-term treasuries for every token. You redeem through the issuer or swap on DEXs. They're the most stable, but issuers can freeze addresses and they depend on banks and regulators.
Crypto-backed or synthetic. Dollars backed by crypto collateral or hedged positions. On Solana that includes hyUSD (Hylo, backed by LSTs) and basis-trade dollars like Solstice's, which hold crypto and short perps to stay neutral.
Yield-bearing dollars. Tokens that grow in value or pay out yield from underlying activity, such as Perena's USD* and Huma's PST. Jupiter's JupUSD, launched with Ethena in January 2026, is backed mainly by USDtb (itself backed by BlackRock's BUIDL fund) and earns yield when deposited on Jupiter Lend.
Where stablecoin yield comes from
| Source | Example | Main risk |
|---|---|---|
| Borrowers paying interest | Lending USDC on Kamino or Jupiter Lend | Smart contract, bad debt |
| Staking yield | sHYUSD | Peg stress in a crash |
| Funding rates | Delta-neutral vaults | Funding turning negative |
| Real-world credit | PST, ONyc | Off-chain borrowers defaulting |
| Token incentives | Points, reward tokens | Rewards ending |
KaminoSolana's largest lending market
HylohyUSD stablecoin and leveraged xSOL
PerenaUSD*, a yield-bearing dollar
Backyard FinanceBuild your own USDC yield strategy
What breaks a peg
- Reserve doubt. If people question the backing, they rush to redeem.
- Redemption limits. If you can only exit through a thin DEX pool, a large seller can push the price below a dollar. Perena, for example, notes instant-redemption liquidity is limited relative to supply.
- Collateral crashes. Crypto-backed dollars are stressed exactly when markets fall.
- Tranches. Junior or first-loss versions (like USD* Junior or Lulo Boost) pay more because they lose first.
A sensible approach
Keep most stablecoin savings in the largest fiat-backed coins and lend them on established markets. Use yield-bearing dollars as a smaller slice, sized to what you'd accept losing if the peg broke. And always ask: who is paying this yield, and why?
Key takeaways
- Solana carries over $15B in stablecoins; USDC and USDT are the largest.
- Fiat-backed stables hold cash and treasuries; issuers can freeze addresses.
- Yield-bearing dollars (USD*, hyUSD, PST, JupUSD-based tokens) earn from lending, staking or real-world activity.
- Higher yield always means more risk: know what backs the token and how you'd redeem it.
Check yourself
3 questions. Get them all right to mark this lesson complete.
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Facts checked Oct 19, 2026. Educational content, not financial advice.
