The rapidly growing stablecoin sector has welcomed a powerful new player. On February 20, YLDS, an interest-bearing stablecoin developed by Figure Markets, became the first SEC-approved compliant security. Pegged to the U.S. dollar, YLDS is classified as a financial product akin to stocks or bonds and currently offers users an annualized yield of approximately 3.79%.

As a wholly-owned subsidiary of blockchain lending company Figure, Figure Markets is building a decentralized custody marketplace that integrates various assets, including cryptocurrencies, stocks, bonds, and credit products. It aims to drive financial democratization. Beyond its stablecoin solution, Figure Markets and its parent company Figure offer a broad range of blockchain-based financial products and services, including tokenized assets, lending, trading, and private equity funds. All this positions themselves at the forefront of next-generation financial innovation.

This article looks at the Figure ecosystem in-depth, covering its team and funding background, the Provenance blockchain, the Figure Markets platform, its flagship YLDS stablecoin, ecosystem development, and its $Hash-based token economy. We will explore its growth potential and the challenges ahead.

What is Figure?

Figure is a U.S.-based financial services company that has built an innovative loan origination process on the Provenance blockchain to enhance lending market efficiency and reduce costs.

The company primarily offers Home Equity Line of Credit (HELOC) loans, which enable users to borrow against the equity in their homes at lower interest rates with faster approval and fund disbursement. According to Figure, it is the leading non-bank HELOC provider in the U.S. and has unlocked over $13 billion in home equity for more than 160,000 users across 49 states. The company has also partnered with over 100 brokerage firms. In addition to HELOC, Figure provides personal loans that allow users to borrow against BTC or ETH as collateral.

Source: @mcagney

Founded in 2018, Figure established Figure Markets as an independent entity in March 2024 to support its growing ecosystem. Currently, Figure Markets operates a crypto exchange and private equity fund platform on the Provenance blockchain. Its interest-bearing stablecoin, YLDS, received SEC approval in February 2024 after more than a year of regulatory review. This makes it the first-ever SEC-regulated yield-bearing stablecoin that provides users with a compliant, stable interest-generating solution.

Figure has also launched $Hash, the native token of its Provenance blockchain. With a total supply of 100 billion, $Hash utilizes a dynamic inflation and burn mechanism and serves key functions within the network, including staking, governance, and transaction processing.

Team Background & Funding

Figure was founded by a team of seasoned financial professionals, led by American entrepreneur Mike Cagney and his wife, June Ou. Mike Cagney serves as the CEO of Figure and its subsidiary, Figure Markets, overseeing the company’s strategic direction and growth.

Cagney is also a serial entrepreneur, having founded several companies, including the wealth management software firm Finaplex, the macro hedge fund Cabezon Investment Group, and the loan platform Social Finance (SoFi). For his contributions to financial innovation, he was also named one of Business Insider’s “100 People Transforming Business.”

Figure has demonstrated an impressive fundraising track record. To date, the company has secured approximately $618 million in funding from a wide range of investors, including Ribbit Capital, DCM Ventures, RPM Ventures, DST Global, DCG, Morgan Creek Digital, 10T Holdings, Blockchain.com, and Sixth Street.

Beyond Figure itself, its ecosystem projects have also attracted significant investment. In 2019, its Provenance Blockchain raised $20 million from Nordic Eye Venture Capital. More recently, in March 2024, Figure Markets secured a $60 million Series A round led by Pantera Capital, Lightspeed Venture, and Jump Crypto, with participation from CMT Digital, Distributed Global, and Ribbit Capital.

Flagship Products

Provenance Blockchain

According to Blockworks Research, private credit has become the second-largest sector in the real-world asset (RWA) tokenization space, totaling $12.1 billion, second only to stablecoins. Accounting for approximately 80% of this market, Figure issued these assets through the Provenance Blockchain.

Source: @blockworksres

Provenance is an open-source Layer 1 blockchain built on the Cosmos SDK and operates using a Proof-of-Stake (PoS) consensus mechanism. It is designed to drive financial innovation with key capabilities such as:

1) Tokenized Assets

Provenance enables users to efficiently and digitally manage the entire lifecycle of on-chain financial assets, including creation, financing, and trading. It supports a wide range of asset classes, such as real estate, bonds, equities, and derivatives. According to Figure, the Provenance blockchain has facilitated over $41 billion in RWA transactions to date.

2) Application Architecture

To lower development barriers, Provenance provides a clear and intuitive application architecture which is structured into three distinct layers:

• User-facing interfaces
• Middleware for application logic
• Infrastructure supporting complex operations

At its core, the Provenance Blockchain powers critical functionalities such as networking, consensus, value exchange, settlement, smart contracts, and node validation.

(Source: developer.provenance.io)

Within Provenance, modules serve as fundamental components that support diverse financial use cases, including insurance, DeFi, and lending. These modules include:

• KYC/AML verification
• Real-time settlement mechanisms
• Account, token, and banking modules

Additionally, Provenance offers a suite of SDK tools, including wallet integration, event streaming, and data connectivity. All this streamlines development for application builders. Built on the Cosmos SDK, Provenance is natively compatible with the Inter-Blockchain Communication (IBC) protocol. It enables seamless interoperability between blockchain networks and significantly enhances asset liquidity.

Recognizing the critical importance of data privacy and security in financial services, Provenance employs a metadata module and off-chain data repository called BlockVault to safeguard sensitive financial data. The metadata module stores and controls on-chain access permissions for financial records. BlockVault facilitates the management of large-scale asset data, leveraging object storage and hash-based ID for enhanced security.

Although Provenance is a public blockchain, it also supports private zones. This allows specific business operations to run in isolated blockchain environments for enhanced privacy while maintaining interoperability with the mainnet.

3) Validator Network

Provenance relies on a network of validators to maintain security and network integrity. Anyone can apply to become a validator, but selection is based on staking volume rankings. Active validators participate in governance and block validation to earn rewards in return. However, misconduct, such as network failures or double-signing, slashes staked assets.

Provenance Top 10 Validator Nodes (Source: explorer.provenance.io)

Provenance has 84 active validator nodes, including major financial institutions, fintech firms, and DeFi platforms such as Blockdaemon, ProvLabs, and MP Validator One.

Figure Markets

Figure Markets is a decentralized custody marketplace designed for seamless trading across various asset classes, including cryptocurrencies, stocks, and bonds. To access any of the platform’s services, users must complete KYC verification and register an account via its mobile portal. The platform supports both fiat and cryptocurrency deposits.

Source: figuremarkets.com

Currently, Figure Markets operates a crypto exchange and a private equity fund platform, with its exchange business as the core focus. Built on the Provenance Blockchain, the exchange offers several key features:

• MPC Wallet Custody: The exchange leverages multi-party computation (MPC) wallets for asset storage. It provides enhanced security and eliminates single points of failure. This ensures users retain full control over their assets and prevents unauthorized access.
• High Leverage Margin Trading: The platform offers crypto lending services and operates on a membership model. Eligible members can trade BTC and ETH with up to 4:1 leverage (80% loan-to-value ratio).
• FDIC-Insured Deposits: For U.S. customers, USD deposits are held in banks insured by the Federal Deposit Insurance Corporation (FDIC), providing additional security.
• Yield-Generating Products: Figure Markets offers high-liquidity investment products, including Forward Vault and P2Prime, allowing users to earn passive income.

Forward Vault provides yield on idle stablecoins such as USDC, offering up to 8% APY. Interest accrues hourly, with payouts distributed monthly, and funds can be withdrawn at any time. P2Prime allows users to lend their assets to short-term borrowers. It leverages a Dutch auction mechanism to match lenders with borrowers efficiently.

YLDS Interest-Bearing Stablecoin

YLDS stablecoin, launched by Figure Markets, is classified as a security and is the first regulatory-compliant stablecoin available to U.S. residents. YLDS offers stable and reliable interest payments. Interest accrues daily and is distributed monthly in YLDS. According to Figure’s founder, Mike Cagney, “YLDS will see broad applications in collateral swaps, cross-border remittances, and payment channels.”

The interest rate for YLDS is determined by the Secured Overnight Financing Rate (SOFR) minus 50 basis points, with the current YLDS APR at approximately 3.79%. For example, if SOFR is at 4.53%, the YLDS APR would be 4.03% (4.53% - 0.5%), which means that a $1,000 YLDS position would generate around $0.11041 per day ($1,000 * 4.03% / 365).

According to DeFiLlama, as of March 24, the global stablecoin market cap has surpassed $232 billion, with USDT leading the market at a dominant 62.17% share. Compared to other stablecoins, YLDS stands out due to:

• Regulatory Compliance: YLDS is the first SEC-approved interest-bearing stablecoin. It offers users greater security compared to unregulated options like USDT.
• Stable Returns: While other stablecoins, such as Circle’s USDC, Paxos’ PYUSD, and Gemini’s GUSD, operate under regulatory approval, they only offer a 1:1 USD conversion service and do not share yields with users. Paxos’ USDL is another yield-bearing stablecoin approved by Abu Dhabi Global Market’s (ADGM) Financial Services Regulatory Authority (FSRA), but its availability is restricted, excluding the U.S., EU, and Canada.
• Flexible Deposits and Withdrawals: KYC-verified users can purchase YLDS using USD or other stablecoins via Figure Markets and redeem for fiat during U.S. banking hours.

YLDS marks significant progress in regulatory-compliant stablecoins. Global regulators have increasingly scrutinized stablecoins, introducing legal frameworks such as the EU’s Markets in Crypto-Assets (MiCA) Regulation. However, U.S. federal stablecoin laws remain unresolved, and state regulations are inconsistent. The approval of YLDS may signal a shift in the SEC’s stance.

Token Economy Centered on $Hash

$Hash is the native token of the Provenance Blockchain, originally issued with a total supply of 100 billion. Following a recently approved community proposal, the supply has undergone a 1:100 reverse split, reducing it to 1 billion tokens. To maintain ecosystem equilibrium, $Hash features a dynamic inflation rate (1-52.5%) adjusted based on staking participation, along with a deflationary token market auction system enabling permanent token burns.

$Hash Distribution Breakdown:

The team has not disclosed an official unlock schedule. However, as of March 24, 66.99% of tokens remain locked, 11.87% are staked, and 21.11% are in circulation, according to the Provenance blockchain explorer.

$Hash serves multiple roles within the Provenance ecosystem, offering both utility and governance functions:

• Network Transactions: Used for gas fees.
• Staking Mechanism: Users must stake $Hash to become validators to secure and manage the network. Like $ATOM, $Hash has a 21-day unbonding period.
• Ecosystem Incentives: Validator network fees are distributed in $Hash to participants, including the community, block proposers, validators, and delegators.
• Governance: Stakers hold proposal and voting rights.
• Asset Purchases: Required for on-chain auctions.

Ecosystem Growth and Future Outlook

Figure’s ecosystem expansion is centred around the Provenance Blockchain, where a developer grant program provides funding, marketing, and technical support to help build core financial services products, thereby creating more use cases for $Hash. The Provenance ecosystem partners span wallets, compliance, custody, identity, security, staking, and tokenization, including AnChain.AI, Anchorage Digital, Axelar, BitGo, Osmosis, Range, Oasis Pro, and Wormhole.

Figure’s products function independently yet interconnect to enhance ecosystem synergy. Based on recent developments, several key strategic initiatives can be anticipated:

Provenance Blockchain: After the formal approval of the community proposal for the Provenance Blockchain, the team will update the total token supply and make further adjustments to ecosystem governance and deflationary mechanisms. Specific details will be shared in due course. Strategically, the team will focus on partner recruitment, community development, and governance enhancements. As a priority, the team plans to raise funds for the foundation through a private sale of $Hash tokens while actively working on interoperability protocols for cross-chain asset transfers.

Figure Markets: Platform optimizations and user experience upgrades are underway. The team aims to shift from institutional networks toward retail adoption, fostering more use cases for $Hash and YLDS to enhance liquidity. YLDS, in particular, is positioned for widespread adoption across payments, savings, cross-border trade settlements, supply chain finance, and government collaborations. It is expected to drive financial innovation and transactional efficiency.

Potential Risks

Figure has shown considerable strength in the private credit RWA (Real-World Asset) sector and currently possesses three key drivers for growth: the Provenance blockchain, Figure Markets, and YLDS. However, it is clear that Figure faces several challenges:

For instance, the $Hash token economy is in the adjustment process. The team has indicated that they plan to increase the foundation’s share to 43% to foster ecosystem growth and pursue a listing. To bolster user confidence in holding tokens, the team must provide clarity and implement additional use cases for the $Hash token.

Another challenge is that while YLDS has received SEC approval, this does not guarantee complete regulatory compliance. The team must secure regulatory approvals from additional countries and regions to reach a broader user base and adopt a flexible approach to future regulatory changes.

Moreover, although the Provenance blockchain powers Figure’s products, its ecosystem is relatively closed. The team must focus on expanding the ecosystem and strengthening community development through strategic collaborations with industry partners and external stakeholders. It must also create more financial use cases to enhance the market impact of both Figure and Provenance.

Lastly, although the Provenance blockchain may not be at the forefront of technical innovation in certain areas, it can overcome this by integrating more middleware and modules. Thus, developers will have enhanced tools and create tailored use cases that cater to diverse user needs. Additionally, the team needs to dedicate more resources to improving cross-chain interoperability.

Conclusion

Figure aims to create the first highly liquid private capital market. Starting with credit, it leverages Provenance Blockchain and Figure Markets to replace traditional lending infrastructure and loan origination processes. YLDS further bridges traditional finance and crypto, broadening adoption and use cases.

However, challenges remain across technology, tokenomics, community engagement, and governance. To maintain a competitive advantage, Figure must deepen its differentiation strategy and continue evolving to solidify its position in the industry.