U.S. dollar stablecoins such as USDT have become the financial settlement infrastructure of the United States: an article explains the evolution history of stablecoins
A recent piece of news in the circle has aroused heated discussions among people. I believe that when I look back at the end of the year, the importance of this news will definitely rank among the top ten news in 2021 in the circle.
"On the evening of January 4th, the largest banking regulator in the United States, the U.S. Department of the Treasury's Office of the Comptroller of the Currency (OCC) announced on its official website that it would allow U.S. banks to use public blockchains and U.S. dollar stablecoins as settlement infrastructure in the U.S. financial system. .”
It is said that due to the huge number of visits, the official website was once paralyzed. Regarding this news, we can make the following three interpretations:
1. The "dollar stablecoin" referred to in the article refers to a stablecoin that has been reviewed and approved by the regulatory authority and accepted its continuous supervision. Mainly including USDC, GUSD, PAX, etc. USDT is not good, and DAI, which is native to the blockchain, is definitely not good.
2. The public blockchain here will most likely not be Ethereum, but an alliance chain with an access mechanism. Regulatory regulations such as user real-name, anti-money laundering, and anti-terrorist distribution must be complied with.
3. It can be seen that China and the United States have different ideas about digital currency. It can be seen from CDBC that we use the top-level design of the central bank to promote the development of digital currency from top to bottom, while the United States is more of a "bottom-up" plan led by major financial institutions. At present, each has its own strengths, and it will take time to test which is better.
But in any case, the official announcement of the OCC has completely raised the height of stablecoins to a new level. The biggest hotspot in the blockchain industry in 2021 may be on stablecoins. Judging from the recent launch of dozens of algorithmic stablecoin projects that have become very popular, we can smell some clues.
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2013-2017: The pre-stablecoin era
Friends who are abroad and veterans who entered the field before 2018 should be familiar with this term. Yes, before 2017, no one paid attention to the stablecoin thing, and it can be said that there was zero sense of existence.
You may be wrong, USDT was issued in 2015.
The words are correct, but we must know that the rise of USDT started from the support of the three majors in the second half of 2017. What happened before that.
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2017-present: The Era of Fiat-backed Stablecoins
Tether USD is the full name of USDT, and the Chinese name is TEDA currency. The issuer Tether listed USDT on Bitfinex and Poloniex in 2015. As a stable currency, Tether promises that there is one dollar worth of cash or equivalent behind each USDT to support the value of USDT.
USDT only became popular in the second half of 2017 when the three major trading platforms launched USDT one after another and opened USDT trading pairs.
In the first half of 2017, USDT only printed more than 10 million. At the end of 2017, it quickly increased to 1 billion. Now you look back at the wave of mad bull at the end of 2017. Do you know how it got up? The skyrocketing of BTC at the end of 2017 has a lot to do with USDT's crazy printing.
USDT has experienced several credit crises in the past few years. Users are mainly worried about whether there is a sufficient 1:1 USD deposit in TEDA Bank and compliance issues, but each time they have basically passed through smoothly.
Now it has issued a scale of 20 billion U.S. dollars, and it will continue to occupy the top spot in the stable currency. It has also gradually expanded from the earliest BTC chain to ETH, TRX, Algorand, OMG and other chains.
Later, everyone saw the business opportunities in the stablecoin market, and major institutions issued their own stablecoins one after another. For a while, various USDXs occupied people’s attention, including the current second largest USDC, and later TUSD, PAX, GUSD ...
From the current point of view, USDT is undoubtedly the best in the circle. The trading platform supports trading pairs, the scale of issuance, and the number of public chains are all huge advantages. In terms of exiting the circle, the best one is USDC, which has strict audits and fully complies with the supervision...
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2018-Present: The Era of Cryptocurrency-Collateralized Stablecoins
The cryptocurrency-collateralized stablecoin is basically a one-man show of DAI alone. Although there are many other projects trying to copy or improve MakerDAO, it can be said that no project has achieved even the slightest threat to DAI. The threat of USDX to USDT is far inferior.
In the field of cryptocurrency-collateralized stablecoins, if you understand DAI, you can basically understand all stablecoins of this type.
It is completely different from centralized institutions such as USDX and the style of currency backed by U.S. dollars. DAI is basically supported by ETH (now DAI can have multiple encrypted collaterals, including BAT, OMG, etc., for simplicity, we use The initial single-mortgage ETH is introduced).
Maker relies on ETH mortgages and the game of arbitrageurs to achieve relatively stable prices. For example, an ETH of 1,000 US dollars, you mortgage 1ETH to open a CDP (collateralized debt position) and then receive 700DAI, you will have to repay 700DAI to get back your 1ETH in the future.
If the price of DAI falls to 0.9 USD, the CDP owner can buy 700 DAI at a price of 630 USD to repay the loan, making a net profit of 70 USD. US dollars, the same profit of 70 US dollars.
However, DAI has several problems:
1. The capital utilization rate is not high. Because the anchor is ETH instead of US dollars, and the price of ETH itself fluctuates greatly, so it can only be over-collateralized, resulting in a capital utilization rate of only about 60-70%, which limits the capital utilization rate. This is why Lien et al. The direct reason for the rate of stablecoin projects.
2. The arbitrageur game model mentioned above is actually not always so effective because of the existence of over-collateralization. Because USDT is 1:1 mapped to US dollars, the arbitrageur game model can work perfectly, which is why the fluctuation of DAI is much greater than that of USDT. Expanding on this topic is completely the length of a whole article, so I will briefly mention it here.
3. When ETH plummeted, the liquidation system was affected by the current ETH performance, which was prone to problems. 312 At that time, because of the black swan ETH price plummeted instantly, there were many situations in which 0 yuan won the auction in the liquidation. As a result, the Maker system had bad debts, and the gap once exceeded US$500 W. Later, Makerdao had no choice but to issue MKR to repay the debt
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2020 - Present: The Era of Algorithmic Stablecoins
On this track, we have almost entered the second half. For the summary of the first half, please review the article from a month ago"In the never-ending rapid evolution of DeFi, the skyrocketing algorithmic stable currency is just a carnival for a few people? "。
In the past month or so, Basis, the leading stablecoin of the three generations of algorithms, has seen dozens of imitation disks, and has expanded to the Huobi public chain, TRX, and Binance Smart Chain, which shows how popular it is. So here follows the previous article, and write about the current step of the algorithmic stablecoin.
Vernacular blockchain Note: The algorithmic stablecoin projects mentioned below are examples and do not make any suggestions. The current risks are relatively high, so do not blindly follow suit.
1. Three generations: Basis, Mith, Onecash
Among Basis and its dozens of imitations, these three are the most worth writing.
Basis: Three generations of originals have experienced explosive growth and reached a market value of nearly 100 million. In recent days, they have come to underwater (underwater means BAC<1 US dollars), and have begun to withstand the test of the "death spiral". Tens of millions of debts, even if they come out of the water (on the water, that is, BAC>1 US dollars), it is very likely that the debts will be brought back underwater quickly, and the situation is not optimistic.
However, as an original, Basis is still the most promising of the three generations, because the blockchain world has generous rewards for the first original on any track. If the three-generation algorithmic stablecoin is falsified as a whole, then Basis should also be the last one to fall.
Mith: Basis high imitation, without any changes, pure high imitation, even the text on many pages was still BAS at the beginning, but it was found and posted by sharp-eyed users, which became the joke of the whole network.
However, the creator is Huang Licheng, the creator of Mithril Coin, who is known as Big Brother Maji and is called "Old Huang" by people in the circle. He has a strong amount of funds and a very wide network of contacts in the circle. It is directly held up, and its market value is close to that of Basis. The three generations of doing their part rank second. Recently, like Basis, they are also undergoing underwater tests.
Onecash: The most original project among the many imitations of Basis, including the 10% limit of Rebase, the new LP pool in Boardroom, the original liquidity design of the bond system, etc., which have effectively improved many of the defects of the original design of Basis.
Because of the 10% additional issuance design, the market value has grown slowly, and it is still only about 1 million. It is currently one of the few Basis imitation projects that remain above water.
2. The fourth generation (i.e. stable currency with partial mortgage algorithm): Frax, XUSD
Frax: Similar to Token, it is also a three-currency model, FRAX (stable currency), FXS - Frax Shares (governance and value accumulation Token), Frax Bonds (debt financing Token).
The difference is that there is no Rebase. At the beginning, Frax is 100% collateralized with USDC to be minted. As time goes by, when casting Frax, you need to use part of USDC + part of FraxShares (FXS will be destroyed) x Share The ratio is getting larger and larger, and eventually Generated entirely by Frax Share collateral, completing the transition to a purely algorithmic stablecoin.
The way to maintain Token price stability is the same as that of DAI. It is through the difference between the price and 1 US dollar, and the price difference is filled by arbitrageurs. I won’t go into details here.
XUSD: Frax imitation disk, the difference is that it is Fair Launch, unlike Frax which has private placement
3. Five generations: StableCredit? A new project integrating the first four generations of Dacheng?
AC Recently made a comeback, and then announced a Wyfi, which caused the price of YFI to go straight to the sky.
To put it simply, the StableCredit loan + stablecoin that AC is going to do is a combination of "everything can be used for MakerDao + partially mortgaged stablecoin. The amazing thing is that everything can be mortgaged like MakerDao to obtain stablecoins.
At the same time, these mortgaged Tokens will enter the AMM pool as a single token to form a loan pool of "Various Tokens: StableCreditUSD", which opens up the asset interoperability between Swap and lending. It will not be like the current assets in different projects such as Uniswap and AAVE. Seriously fragmented issues, capital efficiency has always been an issue that AC is most concerned about.
At the same time, Wyfi was introduced, which is similar to Frax Share in Frax. Not only can you share 50% of the profits of the stable currency of the entire system, but you can also burn Wyfi to mint StableCreditUSD when the price of StableCredit USD is greater than 1 US dollar, thereby performing arbitrage and stabilizing the price of StableCredit USD.
WYFI is generated by YFI1:1000 and is irreversible, so it is a great benefit for YFI with deflation function. In other words, is it possible for a project to emerge in the market in the future that integrates all the features of previous stablecoins?
For example, it supports USDC's static mortgage and ETH's dynamic mortgage + elastic rebase at the same time, just like USDC+MakerDAO+Basis. If such a project appears, whether you participate or not, I think it is always right to learn about it as soon as possible.
