TIP-20: An Interest-Bearing Stablecoin Token Standard

As stablecoins mature beyond trading tools and into everyday financial instruments, expectations are changing. Users increasingly want stablecoins that are easy to use, reliable for payments, and capable of earning a return without unnecessary complexity. TIP-20 is a new token standard designed with those expectations in mind.

Developed on Tempo, TIP-20 is purpose-built for stablecoins and payment-focused tokens. While it draws inspiration from Ethereum’s ERC-20 standard, TIP-20 narrows the focus to what matters most for digital money: efficient transfers, predictable costs, and the ability to support interest or rewards in a straightforward way.

What Is TIP-20?

TIP-20 is a fungible token standard optimized for stablecoins rather than general-purpose crypto assets. Unlike traditional ERC-20 tokens, which treat all fungible assets the same, TIP-20 is designed around how stablecoins are actually used—held as cash-like balances, sent frequently, and increasingly expected to generate yield.

At its core, TIP-20 introduces native support for reward distribution. This allows issuers to design stablecoins that can share value with holders directly at the token level, without relying on separate staking contracts or third-party yield platforms.

How TIP-20 Supports Interest and Rewards

TIP-20 does not promise fixed interest by default. Instead, it provides the infrastructure for stablecoin issuers to offer interest-like rewards in a cleaner and more transparent way.

Rather than moving funds into external lending or staking systems, holders of a TIP-20 stablecoin can opt in to receive rewards distributed directly by the issuer. These rewards may be funded by transaction fees, treasury yield, or other revenue sources defined by the stablecoin’s design.

From a user perspective, this can resemble holding an interest-bearing stablecoin balance. Funds remain liquid and usable for payments, while rewards are accrued or distributed according to clearly defined rules set by the issuer.

Why Native Yield Matters for Stablecoins

Most stablecoin yield today exists outside the token itself. Users are required to trust additional platforms, accept lockups, or navigate complex DeFi systems in order to earn a return. This introduces friction and additional risk, especially for users who simply want a low-volatility place to store value.

By making reward distribution a native feature, TIP-20 reduces that complexity. Yield does not need to be layered on through multiple contracts or intermediaries. This can improve transparency, simplify auditing, and make it easier for both users and institutions to understand how returns are generated.

Just as importantly, TIP-20 supports more sustainable yield models. Rather than depending on aggressive lending strategies, issuers can design rewards around real economic activity, aligning stablecoin incentives with long-term usage rather than short-term speculation.

Designed for Payments, Not Just Yield

While interest-bearing potential is a key feature, TIP-20 is equally focused on payments. Transactions are routed through payment-optimized infrastructure on the Tempo network, helping maintain consistent fees and reliable performance even as transaction volume grows.

Another practical benefit is that transaction fees can be paid directly in stablecoins. Users do not need to manage a separate gas token, which makes TIP-20-based stablecoins easier to use in consumer-facing applications and financial products.

This combination of payment efficiency and optional yield makes TIP-20 well-suited for use cases that resemble digital checking or savings accounts rather than purely speculative crypto assets.

What TIP-20 Signals for the Future of Stablecoin Yield

TIP-20 reflects a broader shift in the stablecoin market toward simpler, more financial-grade products. As regulation increases and mainstream adoption grows, stablecoins are expected to behave less like experimental DeFi primitives and more like dependable digital money.

By embedding reward distribution directly into the token standard, TIP-20 offers a foundation for stablecoins that can earn and share value without sacrificing usability. It does not replace lending platforms or advanced yield strategies, but it reduces the need for users to constantly move funds in search of returns.

Bottom Line

TIP-20 represents a more measured approach to interest-bearing stablecoins. Rather than chasing high yields, it focuses on clarity, simplicity, and real-world usability.