Stablecoins II
In the last issue of DeFi Digest, we discussed the need for stablecoins to have utility to maintain their pegs, before diving deep into the different kinds of stables. Now that we have a lay of the (stables) land, we extract essential lessons from stable projects which have come and gone before us. Then, we take a step back to examine the dilemma stablecoins face from first principles.
While the projects below may have different peg-maintaining characteristics and catalysts for their downfall, they have two things in common:
- Lack actual utility / demand for them apart from high Pool 2[1] yields
- Inflate beyond organic demand and suffer from the repercussions of such in a sharp irreparable downturn
Graveyard of Stablecoins Past
While asset-backed stables are relatively ‘safer’ than algo stables, they are not exempt from de-peg risk. Remember, utility is pivotal for stables to maintain their peg, arguably more so than the mechanisms through which stables maintain their pegs.
Having said that, more algo stables projects have been created (and failed) relative to asset-backed stables given their superior capital efficiency and experimental nature. This is because algo stables do not need to custody USD for every ...Reports you may have missed
FIGURE: PEPE LEARNING ABOUT GHO AFTER BEING RUGGED BY UST Source: Fundstrat INTRODUCTION Founded by Stani Kuchelov, Aave (formerly LEND) is the largest DeFi lending market by TVL (~$8b across v2 and v3) and the fifth largest dApp overall. The protocol is currently live across five networks and 11 markets, hosting more than 30 assets across its platform. In July ‘22, Aave announced that they are launching their native stablecoin,...
Fundstrat’s recently launched Crypto Core Strategy offers subscribers a digestible tool to manage their crypto portfolio, with the goal of outperforming bitcoin. For those looking to amplify the returns of their long positions, this complementary issue of DeFi Digest strives to cast light on some of the best risk-adjusted yields. We first describe our methodology to filter for yield opportunities, then dive into the protocols offering the yields, and describe...
FIGURE: PEPE TRYING TO GET AN UNCOLLATERALIZED LOAN ZERO-TO-ONE (Z2O) SERIES Given the decentralization and transparency benefits of blockchains, many have pointed to DeFi as crypto’s ‘killer use case.’ After all, finance today is built along opaque and slower traditional finance rails ripe for disruption by distributed ledger technology. Sobering up from the highs of the bull market of ‘21, however, DeFi advocates are now left wondering: ‘How much of...
