What's next for the DeFi stablecoin sector?
After what happened with BUSD, interest in decentralized stablecoins has increased. Let's look at which of them can draw some of the liquidity.
In addition to the main task of being an analogue of the dollar, stablecoins often have additional monetary value that allows them to beat their competitors. For example, for DAI it is liquidity, long-term presence on the market, use in many DeFi protocols (what is DeFi and how does it work?< /a>) and in the real world. For centralized stablecoins, this means compliance with regulatory requirements, greater liquidity and reliability. Due to recent events, BUSD has lost its monetary value - it is no longer reliable, liquidity will inevitably decline, support will decrease.
Review of stablecoins
The US dollar also has additional monetary value due to political stability, military and economic power, as well as a large financial market. And, for example, the Terra UST stablecoin had a low monetary value, since it was not used for reliable storage of capital and protection from volatility, and was itself a risky asset with a 20% annual return.
DAI is also used to generate income as long as the regulator allows it, but its goal is more global - the creation of an independent world currency, with decentralized collateral.
Another stablecoin that strives to be uncensored and maximize decentralization is LUSD from Liquity. It is not exposed to real world assets, only uses ETH as collateral, and does not abandon its peg to the US dollar (unlike DAI). LUSD is unlikely to overtake DAI in capitalization due to its architecture and immutable smart contracts. However, it has a future as a niche dollar-pegged stablecoin for those concerned about the risks of centralization and censorship.
Frax founder Sam Kazemian said that stablecoins pegged to the US dollar will sooner or later face regulation, despite their imaginary or even real decentralization. Therefore, the Frax stable has a different strategy. They applied for an account with the Fed, which would allow them to hold dollars and conduct transactions directly with the Fed. This will ultimately eliminate the use of USDC as collateral.
FRAX has not yet gained such popularity as DAI. It is now being used to squeeze out every percent of the profit in its ecosystem. While almost all DAI is stored in wallets to avoid volatility and preserve value.
The application of Synthetix sUSD is similar to Frax with a strong tie to its own DeFi ecosystem. The adoption of sUSD will depend on the growth of the DeFi ecosystem products.
Maker, the company behind the DAI stablecoin, also wants to develop the DeFi ecosystem. For example, the liquid staking protocol EtherDAI and Spark Protocol will soon be launched, aimed at growing the ecosystem. It is unlikely that it will become a competitor to AAVE; on the contrary, there is a high probability of their interaction in the future. Maker DAO's long-term goal is to promote the DAI token. And AAVE's goal is to increase the cash flow of its DeFi platform, while the GHO stablecoin is a tool to achieve this.
Curve is also working on a stablecoin - crvUSD. It is not a threat to FRAX or DAI, and will likely increase spot liquidity for all DeFi stablecoins. If DAI is made available on Aave, then more GHOs could be minted by the protocol and could also be supported on Maker's Spark Protocol.
Ultimately, all stablecoins must learn to work together to enhance each other with their unique advantages, especially now with increased regulation.
