Stablecoin Landscape on Avalanche
Before we get into the Stablecoin Landscape on Avalanche, here’s an explanation of what a stablecoin is.
Stablecoins bridge the worlds of cryptocurrencies and daily fiat currency since their prices are fixed to a reserve asset like the U.S. dollar or gold. When compared to Bitcoin, this significantly minimizes volatility, resulting in a kind of digital money that is better suited to everything from day-to-day commerce to facilitating transfers across exchanges. The idea of combining traditional asset stability with digital asset flexibility has proven to be extremely appealing. Stablecoins like USD Coin (USDC) have seen billions of dollars of worth pour into them as they’ve become some of the most popular ways to store and transfer wealth in the crypto ecosystem.
Now that you know what a stablecoin is, here’s why a stablecoin is very important.
For example, the USDC stablecoin, is backed by dollar-denominated assets with at least equal fair value to the USDC in circulation in segregated accounts with US-regulated financial institutions. An independent accounting firm attests (i.e. publicly verifies) such accounts. USDC, like many other stablecoins, is currently based on the Ethereum blockchain. Stablecoins are free of the volatility of non-pegged cryptocurrencies while inheriting some of their most powerful properties: Stablecoins are open, global, and available to anyone who has access to the internet 24 hours a day, 7 days a week. They are quick, inexpensive, and safe to send. They are digitally native to the Internet and programmable.
With the addition of TerraUSD(UST), stablecoins in the Avalanche ecosystem is growing. Below are a list of all decentralized and centralized stablecoins available in the Avalanche platform.
· DECENTRALIZED STABLECOINS
· TerraUSD (UST)
TerraUSD (UST) is the Terra blockchain’s decentralized and algorithmic stablecoin. It is a scalable, yielding coin with a value pegged to the US dollar. TerraUSD was created to provide value to the Terra community while also providing a scalable solution for DeFi in the face of severe scalability issues faced by other stablecoin leaders such as Dai. As a result, TerraUSD promises users increased scalability, interest rate accuracy, and interchain usage. TerraUSD offers several advantages that have helped it to stand out among stablecoin competitors. Because of its minting mechanism, UST meets the requirements of the DeFi protocols it employs without sacrificing scalability. UST can also be easily added to cryptocurrency wallets by adding TerraUSD as a payment method. DApps are another area where TerraUSD has demonstrated its strength. Platforms that mint fungible synthetic assets and track real-world asset prices, for example, use UST as a pricing benchmark. TerraUSD (UST) was introduced in September 2020 (in collaboration with Bittrex Global) and has since established itself as the most scalable stablecoin. UST can be used alongside LUNA, Terra’s non-stablecoin cryptocurrency, or as a stand-alone token.
· DAI.e (DAI)
The Maker Protocol and the MakerDAO decentralized autonomous organization manage the issuance and development of DAI, an Ethereum-based stablecoin (stable-price cryptocurrency). DAI’s price is softly pegged to the US dollar and is collateralized by a mix of other cryptocurrencies that are deposited into smart-contract vaults each time new DAI is minted. It is critical to distinguish Multi-Collateral DAI from Single-Collateral DAI (SAI), an earlier version of the token that could only be collateralized by a single cryptocurrency; SAI also does not support the DAI Savings Rate, which allows users to earn savings by holding DAI tokens. In November 2019, the Multi-Collateral DAI was launched.
· Magic Internet Money (MIM)
The Abracadabra.money lending platform created Magic Internet Money, a stablecoin soft-pegged to the US dollar. MIM is a stablecoin that is soft-pegged to the US dollar and is issued by the decentralized lending platform Abracadabra.money. Abracadabra mints MIM using interest-bearing crypto assets as collateral, which can be exchanged for other stablecoins. Abracadabra loan liquidations differ from other stablecoin/lending protocols in that each collateralized debt position (CDP) is unique and has its own liquidation price. When the liquidation price for a single CDP is reached, a liquidator can purchase the position by paying off any outstanding MIM.
· Frax (FRAX)
The Frax Protocol is the first stablecoin system based on a fractional algorithm. Frax is an open-source, permissionless, and entirely on-chain protocol that is currently being implemented on Ethereum (with possible cross chain implementations in the future). The Frax protocol’s ultimate goal is to provide a highly scalable, decentralized, algorithmic money in place of fixed-supply digital assets such as BTC. The protocol includes the following ideas: Fractional-Algorithmic — Frax is a one-of-a-kind stablecoin with parts of its supply collateralized and parts of its supply algorithmic. The collateralized-to-algorithmic ratio is determined by the FRAX stablecoin’s market pricing. When FRAX trades above $1, the protocol reduces the collateral ratio. If FRAX falls below $1, the protocol raises the collateral ratio. Decentralized and governance-light — Community-governed, with an emphasis on a highly autonomous, algorithmic approach and no active management. Frax v1 uses Uniswap (ETH, USDT, and USDC time-weighted average prices) and Chainlink (USD price) oracles. Two Tokens — FRAX is a stablecoin with a price target of $1 per coin. The governance token, Frax Shares (FXS), earns fees, seigniorage revenue, and excess collateral value. Stablecoins were previously classified into three types: fiat collateralized, overcollateralized with cryptocurrency, and algorithmic with no collateral. Frax is the first decentralized stablecoin to be classified as fractional-algorithmic, ushering in the fourth and most distinct category.
· MAI (MIMATIC)
MAI is a stablecoin that is backed by collateral and can only be minted with this collateral. MAI is created when users deposit accepted tokens (currently MATIC) in vaults as collateral and receive a loan against that collateral. MAI can also be minted through Anchor in exchange for accepted stablecoins. MAI is soft pegged to the USD, which means that 1 MAI is roughly equal to 1 USD.
· Ampleforth (AMPL)
Ampleforth is an Ethereum-based cryptocurrency with a circulating supply that is algorithmically adjusted. It is intended to serve as the foundation of the new decentralized economy by providing an asset that cannot be diluted by supply inflation and remains unaffected by the price action of other cryptocurrencies, particularly Bitcoin (BTC). Token holders in Ampleforth own a fixed fraction of the total AMPL circulating supply, rather than a fixed number of tokens. When the protocol detects that the price of AMPL is too high, it increases the circulating supply, whereas if the price is too low, it decreases the supply. This change is reflected in the wallet balances of all Ampleforth wallets, which have been proportionally adjusted. Regardless of this change, AMPL holders will continue to hold the same percentage of the token supply. This automatic supply adjustment process is known as a “rebase,” and it occurs once per day, with a positive rebase occurring if the price rises above $1.06 and a negative rebase occurring if the price falls below $0.96. The system’s overall goal is to create incentives that drive the market price of AMPL back to $1.
· Alpaca USD (AUSD)
AUSD (Alpaca USD) is an Alpaca Finance auto-farming stablecoin that earns passive yields for you in the background. Instead of paying for loans, you can now obtain loans while earning interest on your collateral. AUSD is overcollateralized, decentralized, and reinforced with multi-layered pegging mechanisms to do what stablecoins are supposed to do: stay stable at $1. Lenders in Alpaca Finance can borrow AUSD by collateralizing their deposits (ibTokens), which they can use both inside and outside of Alpaca Finance to earn additional yields. Lenders can thus continue to earn Lending APR and Staking APR while also borrowing AUSD to use as they see fit, unlocking even greater profit potential and significantly increasing the flexibility and use cases of their capital.
· Orca AVAI (AVAI)
AVAI was chosen as our stablecoin token name as homage to ‘Avalanche’s DAI’, the MakerDAO token. AVAI is an asset that is pegged to the US Dollar; in other words, a coin intended to float as close to $1.00 USD as possible. It will be backed by locking tokens as collateral in a personal Vault in a Orca Bank as well as via other mechanisms described in the technical overview;. The entire process is decentralized and does not use a middleman such as a financial institution, meaning simply that the user is in full control of their funds at all times. An Orca Bank is the contract that allows a user to deposit a specific ERC20 as collateral, granting AVAI in return. Using the USDC token as an example, if a user deposits $150 USD worth of collateral funds into a Vault, they will have the ability to borrow up to 100 AVAI, worth $100 USD. This grants them the opportunity to invest a total of $250 USD, while owing a stable $100 USD. Each ERC20 token will have a dedicated Bank. When a Bank is made, a user can then create a personal Vault(s) within that bank. A Vault is a smart contract that stores a user’s collateral for that Bank type.
· Defrost Finance (H2O)
H2O is a stablecoin or a leveraging tool that can be minted by staking different LP tokens or pool tokens in a vault, which will always be over-collateralized. It is soft pegged 1:1 to the U.S. Dollar. Its stability is not mediated by any central party, nor does its solvency rely on any centralized counterparties. LP tokens or pool tokens with abundant liquidity and market values can be used as collateral to mint H2O. This means that all circulating H2O is generated from vaults in Defrost smart contracts. H2O is used in the same manner as any other cryptocurrency: It can be freely sent to others, used as payments for other assets and services, be held as a hedge against market volatility, and more.
· CENTRALIZED STABLECOINS
· Tether (USDT)
USDT is a stablecoin (stable-value cryptocurrency) issued by the Hong Kong-based company Tether that mirrors the price of the US dollar. The token’s peg to the USD is achieved by holding a sum of commercial paper, fiduciary deposits, cash, reserve repo notes, and treasury bills in reserves equal to the number of USDT in circulation in USD value. Originally known as Realcoin, a second-layer cryptocurrency token built on top of Bitcoin’s blockchain using the Omni platform, it was later renamed USTether and, finally, USDT. USDT was later updated to work on the Ethereum, EOS, Tron, Algorand, and OMG blockchains, in addition to Bitcoin’s. USDT’s stated goal is to combine the unrestricted nature of cryptocurrencies (which can be sent between users without the use of a trusted third-party intermediary) with the stable value of the US dollar.
· USD Coin (USDC)
USD Coin (abbreviated USDC) is a stablecoin that is pegged to the US dollar at a 1:1 ratio. Every unit of this cryptocurrency in circulation is backed up by $1 in reserve, which is a mix of cash and short-term US dollars. Treasury bills According to the Centre consortium, which created this asset, USDC is issued by regulated financial institutions. The stablecoin first became available in limited quantities in September 2018. Simply put, USD Coin’s slogan is “digital money for the digital age,” and the stablecoin is intended for a world where cashless transactions are becoming more common. Several use cases for the USD Coin have been revealed. In addition to providing a safe haven for crypto traders during times of volatility, those behind the stablecoin claim it can allow businesses to accept payments in digital assets, shaking up a variety of industries such as decentralized finance and gaming. The overall goal is to build an ecosystem in which USDC is accepted by as many wallets, exchanges, service providers, and dApps as possible.
· TrueUSD (TUSD)
TrueUSD is a stablecoin that is pegged to the US dollar at a 1:1 ratio. TrueUSD was first introduced to a small group of investors in January 2018, and it has since grown to include nearly $400 million in backed tokens as of October 2020. TrueUSD is one of several cryptocurrency stablecoins managed by TrustToken, a tokenization platform for real-world assets. TrueUSD, like other stablecoins, aims to increase liquidity and provide cryptocurrency traders and general users with a nonvolatile asset in comparison to free-floating tokens such as Bitcoin (BTC). TUSD is the 38th largest cryptocurrency by market cap as of october 2020.
· Bilira (TRYB)
The BiLira token is a full-reserve stable cryptocurrency that is I built on the blockchain network, (ii) issued and managed by the BiLira organization, (iii) backed by Turkish Lira and collateralized 1 : 1, and (iv) secure and compatible with ERC-20 token standards. The BiLira organization is a Turkish joint stock company that aims to improve Turkish citizens’ access to the decentralized and peer-to-peer (P2P) global financial network through the use of its price stable cryptographic token. BiLira tokens are created (minted) at the time of deposit, issued after identity verification, redeemed (burned) for fiat money, and transferred on the network via the BiLira platform.
· e-MONEY (NGM)
e-Money is a blockchain-based payment platform dedicated to financial inclusion and providing people all over the world with easy access to digital currencies. The e-Money protocol, which is based on Cosmos technology, is designed for the issuance of a variety of interest-bearing currency-backed stablecoins that reflect various world currencies. Each token is backed by an asset reserve denominated in the underlying currency. Currently, e-Money supports the eEUR, the eCHF, and tokens backed by Scandinavian currencies (eNOK, eDKK, and eSEK), with a slew of new currencies set to launch in 2021. The Next Generation Money (NGM) token is a staking and rewards token in the e-Money ecosystem; users can stake NGM to secure the e-Money network.Ernst & Young performs quarterly reserve audits as part of the project’s commitment to total transparency. Unlike most existing stablecoins, which aim to maintain a constant 1:1 peg to their underlying assets, the value of e-currency-backed Money’s tokens fluctuates in accordance with the interest earned on the reserve assets. This means that holders profit from the interest earned on their assets while they are safely stored in your wallet. The e-Money blockchain enables instant payments at scale and includes a DEX for simple currency conversion. In 2021, e-Money expects to integrate with Binance Smart Chain, Cosmos Hub, Avalanche, Polygon, and Elrond, in addition to Ethereum.
Avalanche is an open-source platform for launching decentralized applications and enterprise blockchain deployments in one interoperable, highly scalable ecosystem. Avalanche is the first decentralized smart contracts platform built for the scale of global finance, with near-instant transaction finality. Ethereum developers can quickly build on Avalanche as Solidity works out-of-the-box. A key difference between Avalanche and other decentralized networks is the consensus protocol. Over time, people have come to a false understanding that blockchains have to be slow and not scalable. The Avalanche protocol employs a novel approach to consensus to achieve its strong safety guarantees, quick finality, and high-throughput without compromising decentralization.
