These Decentralized Stablecoin Projects are Worth Checking Out
The ongoing bear crypto market is indeed disappointing, but stablecoins, which have maintained steady growth amid the downturn, may offer you some comfort. There are four major types of stablecoins in the market defined by the way they are collateralized: they are fiat-collateralized, algorithmic or “non-collateralized”, crypto-collateralized, and commodity-backed stablecoins. Truly has been following a number of budding stablecoin projects closely that, innovatively, do not have direct fiat reserves, and I would like to share some of my favorites with you! Though their market cap may not be impressive for now, they show great potential in technology and market adoption. Now, let’s delve into the concepts and use cases of these decentralized stablecoins:
SUSD is the native stablecoin of the Synthetix protocol. It is a synthetic asset for the traditional U.S. dollar. SUSD is used for trading Synths on the Synthetix Exchange and is minted by staking SNX. Users can mint SUSD by staking SNX tokens as collateral through its staking feature. Currently, Synths require a 400% collateralization ratio. SNX stakers will receive staking rewards weekly for managing their collateral ratio and debts.
Synthetix is a permissionless derivatives platform on Ethereum. Its synthetic assets (known as “Synths”), created with Synthetix’s native token SNX as collateral, can be traded on the Synthetix Exchange. Synths open up a gateway to real-world derivatives, allowing users to trade, borrow, or stake a variety of crypto assets, commodities, and equities without physically holding the underlying assets; Synth holders are also spared from slippage, latency, and fees for withdrawals from exchanges.
Further, SUSD aims to balance the supply and demand of the token to indicate the price of the underlying asset it is pegged to. The platform would track the U.S. dollar like how it does for SUSD. Apart from cryptocurrencies, Synthetix also seeks to consist of synthetics of non-crypto assets such as oil, the euro, the U.S. dollar, gold, and silver, all based on blockchain technology.
Coingecko’s latest data show that SUSD’s market cap is $51,050,983, ranking 19th among all stablecoins. sUSD is now deployed on Optimism, Ethereum, Ontology (ONT), Arbitrum, and Fantom.
cUSD (Celo Dollars)
Celo Dollar (cUSD) is a stablecoin that tracks the U.S. dollar and is backed in part by Celo’s native asset CELO, along with other digital assets, including BTC, ETH, and other stablecoins. Users can send and receive cUSD by using a wallet that supports doing so, such as the Valora wallet, which allows them to store and exchange CELO or cUSD. The wallet enables users to identify other users through contacts’ phone numbers and trade with them. cUSD is primarily used to send, receive, and even store digital value and is free of the volatility related to crypto assets. Users can also use cUSD to pay network transaction fees (also known as “gas fees”).
Since the Celo client is a fork of Ethereum’s Geth node, the cUSD asset is compatible with ERC-20. Users can mint cUSD by posting Celo’s native asset, CELO, as collateral within the Celo Reserve. cUSD can only be minted with CELO, but its reserves involve other cryptocurrencies.
Coingecko’s latest data show that cUSD’s market cap is $43,156,077, ranking 24th among all stablecoins. cUSD is now deployed on Celo, Ethereum,Solana, and Klaytn.
YUSD (Yeti Finance)
Issued by Yeti Finance, a decentralized lending protocol, YUSD is an over-collateralized stablecoin pegged to the U.S. dollar. Its price is kept at one U.S. dollar through multiple mechanisms. Users are allowed to deposit assets as collateral to borrow YUSD, the native stablecoin of the protocol, which may reduce liquidation risks.
Users can borrow YUSD from Yeti Finance or exchange them on decentralized exchanges. For example, YUSD can be exchanged quickly and efficiently through the YUSD-AVAX pool on Trader Joe and the YUSD pool on Curve. Since liquidity providers are generously rewarded, these fund pools tend to enjoy high liquidity over time.
Coingecko’s latest data show that YUSD’s market cap is $14,061,599, ranking the 36th among all stablecoins. It is currently deployed on Avalanche.
DOLA (Inverse Finance)
Issued by Inverse Finance, DOLA is a decentralized debt-backed stablecoin pegged to the U.S. dollar. DOLA can be borrowed against various collaterals supported by its lending protocol. Users can borrow DOLA using their crypto assets (e.g., Ethereum) as collateral. The DOLA borrowed is valued at $1 when borrowed. Assets staked as collateral are loaned out to generate interest, enabling efficient capital usage.
Regardless of market conditions or how much DOLA moves away from a 1:1 peg against USD, each DOLA always represents $1 worth of collateral and can be used to borrow other assets.
The latest data on Coingecko shows that DOLA’s market cap is $26,962,787, ranking 30 among all stablecoins. It is currently deployed on Optimism, Ethereum, and Fantom.
Each of these stablecoins has its advantages: cUSD is easier to use as it can be traded on mobile devices; DOLA can be borrowed against multiple kinds of collateral; native stablecoins like sUSD and YUSD are conducive to the growth of their protocols thanks to their innovative designs. In the case of YUSD, it can be traded through decentralized exchanges, creating stronger liquidity for the protocol. Ultimately, protocols can design stablecoins based on their needs and use cases, making themselves increasingly decentralized.
Curve, an AMM protocol for stablecoin swapping, and Aave, a lending protocol, have announced plans to launch stablecoins. The latest news shows Aave has released a technical paper on GHO, its upcoming stablecoin, along with its first security audit results. Leading security firm Open Zeppelin conducted the audit and found no critical or high-severity bugs in the codebase.
Not long after that, developers of decentralized exchange Curve Finance have released code and a whitepaper for the crvUSD stablecoin. The stablecoin will rely on a novel algorithm dubbed Lending-Liquidating AMM (LLAMMA), which will work to continuously liquidate and sell the deposited collateral to better manage potential collateralization risks. The soon-to-be-launched native stablecoin also features liquidity range, EMA oracle, integrated AMM, etc. We look forward to the launch of these two forthcoming stablecoins.
As the crypto market evolves, decentralized stablecoins are increasingly diversified. Stablecoin projects, including over-collateralized or algorithmic stablecoins, are breaking new ground in technology and their applications, constantly delivering novel options to users. Nevertheless, thanks to their robustness and security, USD-backed stablecoins like TUSD will continue to play a critical role in the diversified portfolio among crypto investors.
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