cap - Stablecoin with On & Offchain Guarantees: What You Need to Know
cUSD, Offchain Stablecoin Guarantees, & More
Before we get into today’s edition: Join us on Thursday at 10AM EST for our 5th episode of Market Cap. We'll be going live with Defactor to focus on RWAs & discuss:
Current Macro Conditions
How evolving global trade could impact RWAs
Ongoing institutional adoption -
& more...
Now, back to today’s coverage: Stablecoins are one of the only bright spots in crypto right now. Stablecoins can sustain demand during all sorts of market conditions while also having arguably the most institutional interest of any sector within Web3. With this interest, we will likely see new projects spring up, as there may be more of an appetite from investors to back stablecoin ventures than other areas right now.
One of the newest entrants to the stablecoin space is cap, building on MegaETH. cap has just raised $8M in a seed round led by Franklin Templeton and Triton Capital, with additional participation from Selini Capital, Jupiter, GSR, and more. This brings total funding to $11M.
In today’s edition, we’ll discuss cap, which takes a different approach to guranteeing yield for depositors…
Stay informed in the markets ⬇
Background on cap
cap aims to introduce a new decentralized stablecoin model, iterating upon previous models that have sprung up over the years. The cap team also led QiDAO, the first crosschain overcollateralized stablecoin. This venture comes with years of experience, seeing what does and doesn’t work in the stablecoin space. The cap team outlines 2 key paths that most stablecoin protocols today take:
Type 1 stablecoins: stablecoin protocols that derive their yield from the team’s strategies and vault management, sort of like a hedge fund with a mandate to maximize stablecoin yield.
Type 2 stablecoins: stablecoin protocols which simply park deposits with large custodians e.g. Sky (formerly MakerDAO) using custodians like BlockTower to manage yield.
cap aims to build on both of these models and introduce a ‘type 3’ stablecoin to the market. This stablecoin, dubbed cUSD, will minimize human involvement and management of yield, as is prevalent with type 1 stablecoins. cUSD also aims to provide more assurances and risk management compared to type 2 stablecoins.
Institutional lending has dried up in crypto, and some protocols have been able to capitalize on this, crowd-sourcing deposits from a decentralized userbase and lending to reputable institutions willing to pay more for access to capital. One example is Wildcat Labs, which recently launched markets paying above-market yields with CMS Holdings, Wintermute, and Selini Capital.
cap is going after a similar demographic, leveraging limited access to capital for crypto institutions, as well as large TradFi firms that are looking to get involved with crypto. The cap team claims to already have strong interest from large TradFi firms. This is important, as a protocol limiting itself to only crypto-native institutions might not be able to scale as much.
Crypto-native firms are also less proven than their TradFi equivalents, and are charged a higher hurdle rate than TradFi firms would be subject to. These crypto-native firms are also more willing to take on these higher rates, as their crypto-tailored strategies and activities often yield more than TradFi competitors. cap can balance the interests of both of these groups, as well as the lenders on its platform.
The main differentiator with cap is that it goes beyond smart contracts, lending capital with real-life contract guarantees. This is made possible by the fact that the protocol is going after large entities who have a corporate footprint, instead of anon users who are operating strictly onchain. Developments like the Stable Act draft, and overall increasing recognition of crypto entities from a regulatory standpoint enable protocols like cap to become viable.
This means that users will have more guarantees over their returns and principal capital, as there are binding agreements beyond just the ‘code is law’ mantra. Users earn a base yield, the same as what could be earned on Aave, plus a premium based on utilization. The operators, which include the firms borrowing this capital, must pay out a minimum hurdle rate. These firms engage with this offer, knowing that they can ideally significantly exceed this hurdle rate with the capital given to them.
On the infrastructure side, cap is built on MegaETH. However, both EigenLayer and Symbiotic are leveraged to fit restaking into cap’s offerings. Operators can have funds, which consist or user deposits, slashed. Collateral types include stablecoins, $ETH and $ETH derivatives, and various forms of $BTC.
Shared security helps to add onchain guarantees, while real-life contracts are also signed to provide offchain guarantees. Overall, cap uses the current tech and regulatory options available in 2025 to craft a framework that maximizes the guarantee of capital for users.
Important Links
Become a Premium member to unlock all our research & reports including access to our members-only discord server.
Join thousands of sharp crypto investors & traders by becoming a Premium Member & gain an edge in the markets. For just $129/month, you can access our full suite of offerings:
Gain instant access to Deep Dives, Blueprints, and Perspectives.
Priority access to new features and exclusive content.
Ideal for investors who demand comprehensive insights.
Full access to historical research archive and analytics tools.