Making money in crypto is hard but protecting your dollars is even harder. Here’s how you put your stablecoins to work in fully on-chain crypto protocols:
AAVE
Many crypto natives consider AAVE as the safest and most battled-tested protocols in the industry. Originally known as ETHLend, AAVE has been around since 2017 providing borrowing and lending services to crypto users.
Since 2017, AAVE has never suffered a major hack and the AAVE team has proven that the protocol will continue to run even during extreme periods of market volatility. Today, AAVE has over 20 billion dollars in the protocol.
At its core, AAVE is a peer-to-peer lending platform with a variety of features only possible on the blockchain. Advanced users can use AAVE to execute flash loans, delegate their borrowing power to other users, provide liquidity, and more.
At the same time, AAVE provides a safe environment for casual users to earn yield on a variety of assets.

Supplying USDC in the AAVE borrow/lend market gets you around 9% APY. This yield comes from interest payments made by people with open loans on AAVE and fees generated from flash loans, liquidations, and other activity on AAVE.
AAVE is available on Ethereum, Avalanche, Arbitrum, BNB Smart Chain, and a few other blockchains. Regardless of which blockchain you use, you can enjoy the deep liquidity and secure environment associated with AAVE.
RISK LEVEL – LOW
A hack is always possible, however AAVE has been an industry leader for years and the protocol is subject to regular audits.
Kamino
Kamino offers borrowing and lending services on the Solana blockchain with $2.6 billion dollars in the protocol. Kamino is similar to AAVE in terms of the services they offer. Single sided staking with leverage and directional flash loans are some examples of features that unique to Kamino.
In Kamino’s borrow/lend market, you can get 5.5% APY for supplying USDC and 5.46% APY for supplying USDT. This yield fluctuates as it comes from people paying interest fees to borrow money on Kamino. Below is a graph of the USDC yield over the last 6 months on Kamino.

RISK LEVEL – LOW
Kamino is an established protocol in the Solana ecosystem. Smart contract failures or hacks are always a risk.
https://docs.kamino.finance/automated-liquidity/security-and-risks/risks-and-technical
Hyperliquid HLP
Hyperliquid is well known for their rapidly growing perptual exchange, but they also offer a less talked about product for earning on stablecoins.
Users can deposit USDC into the Hyperliquidity Provider (HLP) vault which earns yield generated from market making strategies on Hyperliquid.
Market making strategies include capturing profit from the bid-ask spread and price arbitrage with other exchanges. HLP also generates yield from liquidations on the platform and the fees generated from people trading. There are no fees associated with depositing or withdrawing from HLP.

The Hyperliquid team is the first to use this approach to share yield with their users. Since this is a fully on-chain protocol you run the risk of a hack or a smart contract failure. The unique market making strategy could also fail if the vault starts taking on losing trades.
Keeping these risks in mind, HLP has provided an average return of 3.75% per month since launching in May 2023.
RISK LEVEL – MEDIUM
Hyperliquid is attempting a new idea on a new blockchain. The same smart contract risks exist as well as the possibility of the strategy failing.
https://hyperliquid.gitbook.io/hyperliquid-docs/risks
Ethena
Stablecoins are one of the most powerful tools in the crypto ecosystem. A few benefits of stablecoins include the ability to act as a bridge between traditional finance and crypto, the ability to protect value during market downturns, and the ability to act as programmable money in smart contracts.
The biggest issue with stablecoins is the minting process is complelety centralized. The most popular stablecoins (USDC,USDT) rely on centralized custodians which means they have to follow the rules and regulations of existing bank infrastructure.

Because of this centralized setup, current stablecoin companies (Circle, Tether) earn yield from the assets that back the stablecoins they issue, while the regular everyday user bear the full risk of a possible depeg or hack. Because these issuers never have to hold stablecoins, they pocket the yield without having any skin in the game themselves.
Ethena is a protocol that aims to solve these problems by creating a financial ecosystem around a synthetic dollar, USDe. USDe is a synthetic stablecoin backed by Ethereum and other crypto assets.

Ethena’s goal is to create a censorship resistant stablecoin by separating the backing assets from the banking system and instead using a transparent, fully auditable option on the blockchain.

You can get USDe by exchanging stETH on the Ethena website. stETH is the staked version of Ethereum you get from staking with protocols like Lido. Once you have USDe, you can stake USDe in the Ethena protocols which gets you around 8% APY.
The yield in Ethena comes from the yield earned by stETH (staked Ethereum earns around 2.5 %/year), revenue generated by the Ethena protocol, and funding arbitrage activities executed by Ethena. The yield you receive fluctuates depending on how much the protocol is making.
RISK LEVEL – MEDIUM TO HIGH
Ethena is a new protocol attempting an untested idea. The Ethena protocol is subject to regular audits to keep the community updated on current security.
https://docs.ethena.fi/resources/audits
Pendle
Pendle is a DeFi protocol that specializes in allowing users to trade the yield they earn on their deposits. The Pendle protocol separates your yield (future earnings) from your initial deposit and then allows you to use the future yield to participate in other yield generation activities.
Your initial deposit is always safe on Pendle but you can lose your future yield by using it in risky ways or making bad trades. Because of the complex nature of Pendle, this protocol is ideal for advanced users.

To use Pendle, you need to deposit USDC in a protocol like Ethena, AAVE, or Compound. Using AAVE as an example, after you deposit, you’ll receive aUSDC which represents the USDC you deposited in AAVE.
You can now deposit this aUSDC token into Pendle by wrapping it into a SY-token. Now that you have SY-aUSDC you can mint the PT (Principal Token that represents your initial deposit) and the YT (Yield Token that represents yield earned by your deposit).
From here you can just hold the Yield Token which gives you around 5% on USDC.
To take it a step further, Pendle allows you to execute even more complex strategies by depositing your Yield Token into liquidity pools to earn additional fees.
Finally, staking the PENDLE token adds another layer to the protocol by granting you access to higher yields from fees earned by the protocol.
The main advantage of using Pendle is putting your future yield to work earning more yield in the moment.

RISK LEVEL – LOW TO MEDIUM
If you’re just holding yield tokens on Pendle, your risk is low. Once you start trading your future your yield, your risk grows moderately.
Check out the Pendle documents and do some research on yield trading and yield farming to prepare yourself for the advanced features of the Pendle protocol.
5 Low To Medium Risk Stablecoin Strategies