Cryptocurrency

Encryption regulatory issues make decentralized stablecoins attractive to DeFi investors

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In the past few years, stablecoins have become a fundamental part of the cryptocurrency ecosystem because they can provide cryptocurrency traders with a trading platform during periods of volatility and are widely integrated with decentralized finance (DeFi). These are necessary for the health of the entire ecosystem.

Currently, Tether (USDT) And U.S. dollar coins (USDC) Are the dominant stablecoins in the market, but their centralized nature and the constant threat of stablecoin regulation have prompted many people in the crypto community to avoid them and look for decentralized alternatives.

The top 9 stablecoins by reported market capitalization.Source: Mesari

Binance U.S. Dollar (BUSD) is the third-ranked stablecoin and is controlled by the Binance Cryptocurrency Exchange. DAI is the highest-ranked decentralized stable currency, with 38% of its supply backed by USDC, which once again raises questions about its “decentralization”.

Investors’ attention to decentralized stablecoins can be reflected by the rising market value and the number of DeFi platforms that integrate TerraUSD (UST), FRAX (FRAX) and Magic Internet Money (MIM).

The following are some of the factors that support the growth of each stablecoin.

Tyra dollars

TerraUSD (UST) is an interest-bearing algorithmic stablecoin, which is Terra (Luna) Ecosystem, designed to remain linked to the value of the U.S. dollar.

In order to mint a new UST, the user needs to interact with the Anchor Protocol, or burn the equivalent network native LUNA token, or lock an equivalent amount of Ether (Ethereum) As collateral.

Adding Ether as a form of collateral does help promote the development of UST, because it allows some of the value held in Ether to migrate to the Terra ecosystem, which leads to an increase in the circulating supply of UST.

Due to the growth of UST, Terra Network has recently Beyond the Binance Smart Chain According to DefiLlama’s data, the total value lock (TVL) of the agreement is currently $17.43 billion.

Terra has also been adopted by the Curve stablecoin ecosystem, which further helps it be distributed in many DeFi protocols. This also provides another way for UST holders to earn income, and at the same time provides a 19.5% annual rate of return (APY) for users who pledge their UST on the Anchor Protocol.

FRAX

FRAX (FRAX) is the first score algorithm stablecoin developed by Frax Protocol. It is partly backed by collateral, and the rest is algorithmically stable.

The true story behind FRAX’s growth began with the adoption of the DeFi community in multiple well-known projects and decentralized autonomous organizations (DAOs), voting to increase support for stablecoins in its ecosystem and treasury.

FRAX has been OlympusDAO rebase agreement As a form of mortgage, it can be bound to obtain the platform’s local OHM tokens. It has also become the stable currency of choice in the recently launched TempleDAO protocol.

On December 22, 2021, FRAX was added to Convex Finance (CVX) and was immediately pushed into the ongoing Curve Wars. A few major DeFi protocols are working hard to accumulate CVX and Curve (CRV) to gain voting rights on the Curve network and Improve their stablecoin yields.

This week, after Tokemak members voted to add FRAX and Frax Share (FXS) to its token reactor, Curve Wars welcomed new participants. swear In order to “push the battle to a new scale.”

The magical internet currency

Magic Internet Money (MIM) is a mortgage-backed stablecoin issued by a popular DeFi protocol called Abracadabra.Money. The difference with this coin is that when a user deposits one of the 16 supported cryptocurrencies into a “cauldron” that supports MIM, it will be “called” to exist.

There are restrictions on the amount that can be borrowed from assets supported by Abracadabra, which is part of the agreement’s efforts to avoid problems faced by MakerDAO (DAI). In other words, there is a history of excessive centralized stablecoins and catastrophic liquidation during market volatility.

Some popular tokens Can be used as collateral Casting MIM includes wrapped ether (wETH), ether, Shiba Inu (SHIB), FTX token (FTT) and Fantom (FTM).

MIM has also been integrated into the Curve Finance pool, further highlighting the important role of Curve in the DeFi ecosystem for stablecoins and emphasizing the motivation for participating in Curve Wars.

MIM’s cross-platform and centralized exchange integration, including its long list of collateral options, has increased its circulating supply to $1.933 billion, making it the sixth-most stablecoin by market value.

Although the value of these decentralized stablecoins is only a small part of USDT and USDC, their market share may continue to increase in the coming months as decentralized supporters choose them instead of centralized opponents.

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