- Yield-bearing stablecoins investors, simply need to stake their stablecoin into the issuing protocol and the yield accrues to them.
2025 has been the year of stablecoins. Not only has their market cap soared but so has their number. And the latest crop of stablecoins aren’t just good at maintaining their value – they’re also equipped with yield-bearing properties that allow their holders to earn.
While most of the headlines concerning stablecoins this year have focused on institutional adoption, aided by the passage of the GENIUS Act, the real breakthroughs have been occurring onchain – not off. Blockchain developers have made significant headway in programming greater utility into stablecoins, making them multi-functional assets as suited to DeFi as TradFi.
But as the dust settles on 2025, which stablecoin sector should be crowned the winner: traditional stablecoins or their yield-bearing counterparts? Answering that question depends, in part, on which metrics you choose to measure. Let’s examine the case for each class topping the stablecoin charts.
Yield-Bearing vs Traditional: Opening Arguments
The first generation of reserve-backed stablecoins such as USDT and USDC were designed as safe harbors, not yield engines. And so far, they’ve fulfilled their mandate extremely well. $35 trillion in stablecoins was transacted last year, with fiat-backed stablecoins dominating.
So far this year, meanwhile, Tether’s market cap has increased by more than $40B and Circle’s for USDC by an impressive 68%, reaching $75B. In the process, they’ve helped drive the total stablecoin market cap to near the $400B mark. These numbers speak for themselves – but they don’t tell the full story. Because at the same time, yield-bearing stablecoins have grown into a $14.5B asset class – representing year-to-date growth of 250%.
They might not match the market cap of the leading reserve-backed stables – at least not yet – but make no mistake, yield-bearing stablecoins have had a bumper year. So much so that one of them, Ethena’s USDe, is now the largest stablecoin after USDT and USDC, while Falcon (USDf), and Sky (USDs) have also expanded rapidly.
But market cap, as any industry analyst will tell you, is a crude metric. To really understand the parallel paths taken by our two stablecoin classes this year, we need to drill down into how they’re being used – which in turn reveals the size of the addressable market they can reasonably be expected to one day serve.
The Same, But Different
On the surface, traditional stablecoins and yield-bearing stablecoins appear very similar: they’re both asset-backed (usually by bank deposits and crypto assets respectively), pegged to the USD, and capable of closely adhering to $1. Each asset class is also highly liquid and capable of being used for everything from payments to DeFi markets such as lending and liquidity provision.
But the similarities end there, because in addition to fulfilling these core functions, yield-bearing stables go further – much further. Because while both stablecoin types preserve value, only yield-bearing stables grow it. This marks a significant change in the way that stablecoin issuers make money – and the way that users make returns.
With traditional stablecoins, the yield generated by their reserves – such as through T-bills – does not flow to users. It accumulates to the issuer. In other words, traditional stablecoins capture yield but don’t distribute it. Users seeking returns must rely on third-party protocols such as Aave or Compound, layering risk on top of a non-yield-bearing base asset.
Yield-bearing stablecoins in comparison, do the work on behalf of users, who simply need to stake their stablecoin into the issuing protocol and the yield accrues to them. Which isn’t to say the process has to be entirely passive; stakers are issued with a liquid stablecoin token (e.g. sUSDs for staked USDs) that can then be used in other protocols to earn additional yield, or swapped for other tokens.
The beauty of this design is that yield-bearing stablecoin holders are free to do as much – or as little – as they like. Assuming they wish to earn yield, as opposed to simply using the stablecoin for trading purposes, they need only stake it to start earning high single-digit yield. But if they’d like to further boost their earnings, the opportunity for using liquid staking tokens elsewhere abounds.
What You Should Know About Yield-Bearing Stables
If yield-bearing stablecoins are so useful, you may be wondering, why aren’t they being used everywhere by everyone from institutions to retail? There are several reasons for this, with the most obvious being the unrivaled liquidity and global integration that the likes of USDT and USDC enjoy. They’re also more clearly regulated and integrated into mainstream financial pipelines, which is why institutions favor them.
Yield-bearing stablecoins are newer and thus less widely adopted. But the real reason why they may not be for everyone is that these assets are more complex in design. Because of the need to accrue yield to a secondary liquid token, there’s more functionality programmed in, which means that the risk of something going wrong is higher than it is with traditional stablecoins. That’s not to say that yield-bearing stables are risky – in fact quite the opposite – but compared to the likes of USDC, they’re perceived as being more novel instruments.
It’s also worth noting that not everyone wants to earn yield from stablecoins – at present such users represent a subset of the broader stablecoin market, whose dominant use cases include trading, lending, and payments. In each of these scenarios, a yield-bearing stablecoin could still be used, but it’s not the primary role it was designed to do. For such use cases, a “plain” stable is probably better.
Yield-Bearing vs Traditional: The Verdict
We’ve examined the performance of the leading stablecoin classes this year, charted the significant progress each sector has made in 2025, and highlighted the areas where they overlap as well as those where they diverge. Now all that’s left to do is dispense the verdict on which sector has performed best this year.
But before we do that, a few words on where each stablecoin category could be headed next. It’s time to talk TAM – Total Addressable Market. If traditional stablecoins become the preferred digital method for day-to-day transactions, their TAM is effectively the size of major global payment networks – plus the massive cross-border B2B and remittance markets. The success of traditional stables is thus measured by how much volume they can strip from Visa, Mastercard, and traditional banking rails.
Best estimates place that TAM at upwards of $50T – yes, trillion. It should be noted that this is not a prediction of the market that stablecoins will actually capture. However, it shows the size of the cake they’re trying to take a large slice out of.
In comparison, if yield-bearing stablecoins become the primary unit of account for onchain borrowing, lending, and yield farming, their TAM is the value locked and transacted across the entire programmable financial ecosystem. Which starts around the $500B mark, based on a combination of DeFi TVL plus the inclusion of other onchain activity that they’ve got the ability to capture.
In case you’re interested, for traditional stablecoins to reach a $50T cap, they’d have to pull something like a 178x. While for yield-bearing stables to reach $500B, they’d have to pull a 35x in market cap. There are two ways of looking at this: on the one hand, traditional stablecoins have more room to grow, whereas the market that yield-bearing stables can capture is comparatively smaller. But on the other hand, it won’t take much for yield-bearing stables to dominate DeFi – particularly given that their inherent properties are expressly designed for this purpose.
Looking back on 2025, the fairest assessment is this: traditional stablecoins were the top performers in terms of institutional adoption and total growth in dollar terms. But as a multiple of their respective market caps at the start of the year, yield-bearing stables are the clear winner.
They grew faster than traditional stables and became deeply integrated into DeFi protocols across the omnichain landscape. There are still scenarios where traditional stablecoins shine. But when it comes to adding value rather than simply storing it, yield-bearing stables are the best in class.
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