Inventory of exciting changes in DeFi stablecoins

Author: Ignas, DeFi researcher; translation: Golden Finance xiaozou

Is the Golden Age of Decentralized Stablecoins Coming? Don’t be misled by the drop in the total market capitalization of stablecoins from over $180 billion to $125 billion (DeFi stablecoins account for only 9%). Let’s take a look at the exciting changes in DeFi stablecoins to meet the future bull market!

Safety first! The non-profit Bluechip has published its economic security ratings for major stablecoins. Which are the highest rated? BUSD, PAXG, GUSD and the safest DeFi stablecoin LUSD. Safer than USDC. LUSD served as a safe haven during the USDC decoupling event in March.

DeFi stablecoins like DAI and RAI received a B+, while USDD and Tron USDD received an F. These ratings are important because they will focus on experimental DeFi stablecoins. Whether you are a DeFi miner or a risk averse, there are stablecoins for everyone.

Lybra

Let’s take a look at Lybra eUSD, a competitor to LUSD. As a fork of Liquity, it differs from Liquity in that it accepts stETH as collateral. This nets eUSD holders about 7.2% APY. However, eUSD’s yield distribution is done through a rebase mechanism, which has caused adoption issues within DeFi.

To address this and other issues, Lybra v2 introduces a new stablecoin - peUSD. The upgrade also includes full-chain functionality, minting with various collaterals, and easier integration with DeFi protocols. v2 is currently live on the Arbitrum testnet.

Easy liquidity at zero interest rates, one-time borrowing fees, and censorship resistance are cool. But to keep up with the competition, Liquid launched v2, which aims to solve the “stablecoin trilemma” of decentralization, stability, and scalability.

Liquity v2 introduces principal protection leverage and a secondary market to ensure stability when ETH prices fall, thanks to a delta-neutral model backed by reserves. It’s complex, but offers leverage, earnings and trading opportunities. Release is planned for 2024.

Synthetix

Why is the founder of SNX optimistic about decentralized stablecoins? I guess this is due to Synthetix v3! Although sUSD’s market cap has dropped to $94 million, the launch of v3 could change that trend. It heralds an exciting change for the Synthetix ecosystem.

The main improvements of sUSD are:

Multi-collateral staking: v3 supports different collaterals to back synthetic assets. No longer only SNX is supported. sUSD liquidity is expected to increase.

Synthetix Lending: Minting sUSD has no debt pool risk and no issuance fees.

MakerDAO

Plus, Maker is thriving:

MKR is up 26% in a month.

· DAI will soon receive 8% yield through DSR.

Spark Protocol — a DAI-focused fork of Aave — reached $57 million TVL.

Maker reduced its reliance on USDC from 65% to 17%.

· It is now the third largest revenue generator, surpassing Lido.

FRAX

Another look at FRAX: it has a D (unsafe) rating on blue chips. Related issues are fractional collateralization of FXS and heavy reliance on centralized assets, but with the release of v3, this may change soon.

While the full details have not been released, Frax is currently voting to partner with FinresPBC to jointly hold managed low-risk cash equivalent assets. It will enable on-chain access to off-chain traditional assets and bring benefits to the Frax protocol while reducing reliance on USDC.

Ghost

Meanwhile, Aave recently launched its stablecoin GHO with a market cap of $11 million, which is off to a steady start. The potential of GHO goes beyond Aave: to be a facilitator for GHO minting using real-world assets, treasury bills, or parts of algorithms such as the FRAX model.

The key things to know about GHO are as follows:

· It is over-collateralized and only minted/burned by approved Facilitators.

· Accrued interest is set by Aave governance (currently 1.5%).

· Cannot be supplied to the Aave Ethereum market.

· stkAave holders provide a loan discount model.

Curve

As it turns out, the crvUSC released by Curve is critical to the platform. Following the hack, crvUSD played a key role in providing liquidity to the Fraxlend CRV/FRAX lending pool, as well as the TriCypto pool’s CRV, while maintaining the peg. This is a very timely release.

The loan liquidation AMM algorithm based on the soft liquidation mechanism makes crvUSD stand out. Through the gradual conversion between collateral and crvUSD - selling collateral when the price falls, and buying back collateral when the price rises - the liquidation problem is solved, bringing more transaction volume.

The collapse of UST and the decoupling of USDC taught us a good lesson and let us know what we need to improve. What works today may not work tomorrow, and what seems impossible now may become the norm in the near future. Amid these lessons, DeFi stablecoins are forging ahead.