Alternative Stablecoins
Last updated
Last updated
New stablecoins designs have attempted to connect users to exogenous yield. These usually leverage low-return TradFi products like T-Bill wrappers. There are several of these stablecoins that have come to production after the long run of high interest rates in the US.
Other designs leverage a similar model to Celsius. These Celsius models, dubbed CeFi or CeDeFi, take user tokens in the form of loans. They then execute a few simple yield strategies to earn yield for stablecoin holders. Much like Celsius, these models expose users to uncovered/unhedged risks: custodian risk, centralized decision making by teams, and asystematic risks of protocols they integrate.
Many decentralized stablecoins scaled by extracting value from token emissions, particularly DEX emissions. Most of these models leveraged a minting system that maintained protocol control of liquidity on DEXs, allowing teams to capture at least 50% of the emissions received by their token pools. Now that emissions are at an all-time low, these stablecoins have stopped growing or collapsed.
CDP stableocins connect users willing to leverage crypto assets, with users seeking USD yield. These models are the perfect example of endogenous designs. Growth of these models is directly tied to leverage demand via these platforms. As markets cycles evolve, CDP usage drastically shifts. This causes significant fluctuations in market caps and results in periodic deviations from peg.
Another barrier to growth for CDPs is competition. Alternative leverage products like perpetual DEXs and centralized exchanges have historically taken much of the industry's leverage demand.
