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Etherscan Blog

Stablecoins Are Products

Framing complex financial instruments more clearly as products may help to spark rational patterns of consumer behavior


Definition + Some History

The “Second Bitcoin White Paper” (MasterCoin) by Willett, 2012
Source: CoinGecko

Main Stablecoin Categories

Screenshot of interface
From Tether’s assessment of reserves (spring 2022)
From USDC’s website (spring 2022)

Trilemma: Efficiency, Stability, Decentralization

Adapted from
Diagram from the author; data from Coin Metrics, CoinMarketCap (UST)
Explosion of LUNA supply, area of dot ~ supply; diagram by the author

Many Possible Products

Over 270,000 BTC locked into WBTC; source: Etherscan

Stablecoins as Financial Product

  1. Soundness of product benefits. If I get something from this (like interest) where does it come from? Is it from genuine, sustainable growth in a product offering of an ecosystem? Or is it an unsustainable feedback loop of recursive rehypothecation?
  2. System adaptivity. How unstable is the peg and/or ecosystem, and how many tools does this ecosystem have at its disposal to adapt to shocks? Does it have substantial reserves on- or off-chain to maintain the peg?
  3. Refund policy. If the market value of the stablecoin collapses, can I still redeem in units of the peg?
  4. Vitalik’s conundrums. What if I were suddenly the only person left in this ecosystem? Or, what if everyone in crypto clamored in? What if everyone suddenly decided to leave?
  5. Centralization and control. After all these considerations, how drastically could the operators of this stablecoin simply alter policies without my knowing? Could a sudden change in policy or implementation alter product assessment above?

Further Content


  1. An arguable feature of this post is that Vitalik does not categorize USDC or other centralized coins as “stablecoins.” This is a game of semantics, but calling only decentralized coins the “true” stablecoins is a risky semantic assessment. Centralized coins are very stable, and though there is risk in that centralization, if users of UST had instead invested their money in USDC they’d still have it all (imagine the effect of misuing Vitalik’s powerful voice in a marketing ploy: “Only these algorithms are the true stablecoins!”). It would seem important to distinguish between centralized vs. decentralized stablecoins as an initial criterion to understand distinct risks.

Caveats, Disclosures



Etherscan is the leading Ethereum Blockchain Explorer. The core of Etherscan involves extracting data from the Ethereum distributed ledger, indexing and displaying the processed data in a concise and readable manner for the masses and layperson.

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