This analysis focuses on yield-bearing stablecoins whose value accrues over time via an increasing Net Asset Value (NAV).
For comparison, it also outlines the price discovery mechanisms of rebasing $1 stablecoins and different approaches to secondary market liquidity.
Non-rebasing yield-bearing stablecoins deliver yield through NAV appreciation rather than balance rebasing. Price stability is achieved by anchoring secondary market prices to NAV via redemption and arbitrage mechanisms, instead of relying on constant deep liquidity.
NAV-Based Value
Value accrues as underlying reserve assets generate yield (e.g. T-bills, money market funds, stablecoin lending, or hedged derivative strategies).
Low Liquidity Commitment
Protocols do not need large, permanently idle liquidity on secondary markets. Instead, they intervene when prices deviate beyond a predefined band.
LP Incentives
Liquidity providers earn trading fees within the band. Protocols may share part of the underlying yield to encourage durable liquidity participation.
Capital Efficiency
Reserves remain invested in yield-bearing assets and are only mobilized during redemption or arbitrage events.
Small price movements
Minor deviations are absorbed by LPs, who capture trading fees.
Large price movements
When deviations exceed a threshold, protocol-level minting or redemption restores price alignment with NAV.
Reserve utilization
Reserves stay productive most of the time and are only tapped when arbitrage is required.
Sustainable liquidity depth
Liquidity depth is maintained via incentives rather than idle capital.