Hermetica, the company behind the Bitcoin-backed stablecoin USDh, has raised $1.7 million in seed funding. 

The funding will support the growth of USDh, a stablecoin designed to be backed by Bitcoin (BTC). A stablecoin is a type of cryptocurrency that aims to keep its value tied to a stable asset, like the U.S. dollar, instead of fluctuating like Bitcoin.

USDh allows Bitcoin holders to transact with a digital asset pegged to the value of the U.S. dollar without leaving the Bitcoin ecosystem. For example, 1 USDh equals 1 USD worth of Bitcoin.

According to a company press release, UTXO Management led the funding round, which included several major investors such as CMS Holdings, Ethos Fund, and Trust Machines SPV. Strategic backers like Tycho Onnasch of Zest Protocol and Robin Obermaier of Liquidium also contributed.

What is USDh? 

USDh is issued on Bitcoin’s main blockchain, Layer 1, and on Layer 2 networks, allowing faster and cheaper transactions. The stablecoin is available for purchase on decentralized exchanges

Last month, Hermetica launched USDh on the Stacks Layer 2 network. The move offered users the potential to earn yields of up to 25%.

As the stablecoin market grows, USDh targets a share of the estimated $1 trillion in untapped Bitcoin value that could be unlocked in DeFi. Its goal is to enable Bitcoin market participants to securely hold dollars without exiting the Bitcoin ecosystem or converting to fiat.