Chainfeeds Summary:
It has been ten years since Tether launched the first US dollar-backed cryptocurrency, and stablecoins have become one of the most widely adopted products in the cryptocurrency field, with a current market capitalization of nearly $180 billion. However, stablecoins still face many challenges and limitations. This article delves into the problems of existing stablecoin models and attempts to predict how we can end the currency civil war.
Source:
https://mp.weixin.qq.com/s/dmacX8h5RyCrQ_SsiCLxtw
Author:
Minerva
Viewpoint:
0xUnicorn: Although stablecoins have the ideal characteristics of lower transaction costs, faster settlement speeds, and higher yields compared to traditional finance (TradFi) alternatives, the existing models still face many problems. 1. Fragmentation: According to data from RWA.xyz, there are currently 28 active US dollar-pegged stablecoins. The problem with having so many stablecoin options is that, although they all represent tokenized US dollars, they are not interoperable with each other. This fragmented landscape is similar to the pre-central banking era, when each bank issued its own banknotes. But DeFi lacks a central bank to establish currency unity. Some projects, such as M^0, are trying to solve the interoperability issue by developing decentralized crypto-dollar issuance platforms. 2. Counterparty risk: Fiat-backed stablecoins (such as USDT and USDC) retain the basic characteristics of bank money and tokens, while adding the advantages of blockchain networks and interoperability with DeFi applications. Although they serve as an enhanced payment rail layer on top of the existing monetary stack, they are still closely tied to the traditional banking system, bringing counterparty risk. 3. Yield: A race to the bottom. In this cycle, the dominant narrative around stablecoins is "returning yields to users." While this is a step in the right direction, it has also prompted issuers to significantly reduce fees to gain greater market share. Ultimately, yield or fee structure cannot be a long-term differentiating factor, as they are likely to converge to the minimum sustainable rate required for operations. Issuers will need to explore alternative monetization strategies, as stablecoin issuance itself does not accrue value. The future landscape of stablecoins may be divided into three domains: 1. Payments: Stablecoins provide a seamless, low-cost cross-border transaction settlement method. USDC is currently in the lead in this area, and its collaboration with Coinbase and Layer 2 may further consolidate its position. DeFi stablecoins should avoid direct competition with Circle in the payments domain and focus their efforts on the DeFi ecosystem where they have clear advantages. 2. Yield: RWA protocols issuing yield-bearing stablecoins should learn from Ethena, which has already cracked the secret of generating high and relatively sustainable yields through crypto-native products and related products. Whether it's utilizing other delta-neutral strategies or creating synthetic credit structures that replicate traditional finance swaps, there is room for growth in this area, as USDe faces scalability limits. 3. Middleware (all content in between): For low-yield decentralized stablecoins, there is an opportunity to unify the fragmented liquidity. An interoperable solution will maximize the ability of DeFi to match lenders and borrowers, and further simplify the DeFi ecosystem.
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