The narrative of each cycle is different. If we say that in the last round of bull market, the core narrative is DeFi and distributed storage Filecoin.

Then this round of possible outbreak points has the following aspects: ZK plate; Arb plate; Polygon ecology; BTC second layer; stable currency; LSD.

In the past few issues, veDAO has brought you a series of interpretations about the BTC ecology. This time, veDAO will think about this industry from the perspective of stable coins.

Silicon Valley Bank thunderstorm, USDC decoupling

Last weekend, the most eye-popping news was the collapse of Silicon Valley Bank. Regarding more information about the collapse of Silicon Valley Bank, VeDAO Research Institute will present it in another article. This article will focus on the development of stablecoins in the era of economic crisis from the perspective of stablecoins.

But first, we need to start with the concept of what a stablecoin is.

Stablecoins (StableCoins) are a form of expression of cryptocurrencies, and their value is often anchored to mainstream fiat currencies in the real world. At the same time, it also makes stablecoins have value stability that other cryptocurrencies do not have. This stability makes them attractive to investors and traders who want to hedge against the volatility of other cryptocurrencies.

However, these tokens themselves are not immune to volatility, and when encountering a huge black swan event, the stablecoin will also decouple from the pegged currency. This means they deviate from their pegged value.

There are currently three common types of stablecoins:

• Fiat currency stable currency: mainly USDT, USDC, BUSD

• Decentralized stable currency: mainly DAI

• Algorithmic stablecoins: The classic "black swan" LUNA in 2022 is a typical representative.

As an emerging concept, algorithmic stablecoins have always been concerned by the industry, but the life cycles of LUNA and UST are short, so this article will mainly discuss the models of the first two stablecoins.

According to dune data, the current stablecoin track is still dominated by fiat currency stablecoins.

As shown above, USDT+USDC+BUSD has reached 81.4% of the entire stablecoin market. Although fiat currency stablecoins are powerful, they have encountered real-world interventions one after another in recent years. Just last month, BUSD, one of the stablecoins, was suspended by US regulators on the grounds that it was "defined as a security" and began to review Paxos, the issuer behind it.

However, more serious things are yet to come. The Silicon Valley Bank thunderstorm incident mentioned above also directly triggered an upsurge in the decoupling of fiat currency stablecoins from the U.S. dollar, and thus brought about a huge sense of distrust in the market for stablecoins.

USDC issuer Circle announced on March 10 that USDC has depegged from the U.S. dollar, with about $3.3 billion of its $40 billion USDC reserves held in the now-defunct Silicon Valley Bank. Affected by the decoupling event, the exchange rate between USDC and the undecoupled stablecoin USDT once fell below 0.9, and the lowest fell to 0.85. Given the fallout from USDC, other stablecoins have followed suit in depegging the dollar.

Not only that, the decoupling boom triggered by USDC has also extended to the field of decentralized stablecoins. The decentralized stablecoin DAI issued by MakerDAO based on the Ethereum protocol also experienced a short-term decoupling from the U.S. dollar.

secondary title

Market Needs New Decentralized Stablecoins

The old USDC and DAI have been decoupled, and the USDT without decoupling has been unable to prove that its tokens have sufficient cash collateral. While the old stablecoins are in a crisis of trust, we might as well turn our attention to emerging decentralized stablecoin projects.

HOPE: Supported by BTC and ETH

Basic Information:

Official website: https://hope.money/

Twitter: https://twitter.com/hope_ecosystem

Introduction: HOPE is a decentralized stable currency. The base price of its token $HOPE will fluctuate with the price of BTC and ETH, starting from around $0.5. The HOPE ecosystem includes four protocols: HopeSwap, HopeLend, HopeConnect and HopeEcho, providing functions of trading, lending, derivatives and synthetic assets.

Detailed description:

HOPE economic model:

• $HOPE: is the ecosystem’s native reserve-backed pricing token, which will launch at a $0.5 discount and gradually implement the peg as the cryptocurrency market recovers.

• $stHOPE: is the tokenized representation of the $HOPE stake. Through staking, users can use HopeSwap, HopeLend, HopeConnect, HopeEcho and other applications in the ecosystem. In addition, users can also get $stHOPE by staking $HOPE, and get $LT rewards by holding $stHOPE.

• $LT: It is the incentive and governance token of the HOPE ecology, which is used to motivate users, participate in the HOPE ecology and perform governance.

• veLT: It is the tokenization of voting locked when $LT exercises governance rights, indicating that veLT holders can obtain $LT reward bonuses and vote on governance proposals, including $HOPE monetary policy, Teasury policy and protocol income Many key issues, including distribution.

HOPE ecology:

• The HOPE ecosystem will consist of 4 major protocols, providing a complete and rich set of application scenarios around $HOPE and $stHOPE including exchange, lending, and margin, and encouraging users to participate in ecological applications and community governance through $LT.

• HopeSwap: It is an AMM Swap built on Ethereum, which is the gateway for users to the HOPE ecosystem. Users can quickly trade between $HOPE, $stHOPE, $LT and other assets, or provide liquidity for trading pairs to earn $LT rewards and fee sharing.

• HopeLend: It is a multi-liquidity pool non-custodial lending agreement. Lenders can earn interest by depositing liquidity; while borrowers can provide mortgage assets to obtain over-collateralized loans.

• HopeConnect: As the industry's first DeFi innovation protocol, users can trade derivatives on top CEXs through HopeConnect without centralized asset custody.

• HopeEcho: Synthetic assets that track real-world asset (RWA) prices, including stock indices, fixed-income instruments, commodities, foreign exchange, etc., lowering the barriers to accessing TradFi services.

Running logic:

• The first stage: $HOPE will be supported by BTC and ETH in the early stage of development, and tokens will be minted and destroyed.

• The second and third stages: $HOPE's capital reserve pool will add more stable coins until the funds in the reserve pool reach several times the market value of $HOPE (not yet determined), and $HOPE will gradually be anchored from $0.5 to $1 , until it becomes a stable currency.

Angle: A Decentralized Stablecoin Pegged to the Euro

Basic Information:

Official website: https://www.angle.money/

Twitter: https://twitter.com/AngleProtocol

What it is: Angle is a decentralized, capital-efficient, and over-collateralized stablecoin protocol consisting of smart contracts running on an open blockchain. Angle's decentralized solution fills the gaps of current approaches and leverages the strengths of both centralized and decentralized protocols, it also has the robustness that comes with over-collateralized designs while maintaining capital similar to low-collateralized designs efficiency. Angle will go live in November 2022, and as of now, its token $Angle has a market cap of approximately $67 million.

Detailed description:

Angle economic model:

• $ANGLE: 1 billion total supply, minted by Angle Governor Multisig.

• veANGLE: veANGLE stands for "voting escrow" ANGLE and is the governance token of the Angle protocol. ANGLE’s tokenomics was upgraded in January 2022 with the ability to lock ANGLE into veANGLE, making it a vesting and earning system based on Curve’s veCRV and Frax’s veFXS mechanisms. A key attribute of veANGLE, in addition to being a governance token, is that it is non-transferable and not traded on a liquid market.

• Angle's operating logic: Angle allows people to exchange stable assets and stable asset collateral at a ratio of 1: 1: 1 Euro collateral, you can get 1 stable currency, 1 stable currency Coins, you can always redeem 1 EUR worth of collateral.

• The protocol involves 3 groups, common in other DeFi protocols, that all benefit from Angle:

• Stability seekers and holders (or users) who mint, spend or burn stable assets

• A hedging agent (HA) can gain on-chain leverage in the form of perpetual futures on one trade of the protocol, and by doing so insure the protocol against the volatility of its collateral.

• Standard Liquidity Providers (SLPs), who bring additional collateral to the protocol and automatically earn interest, transaction fees, and rewards.

• first level title

RAI: Vitalik's most promising decentralized stablecoin

Basic Information:

Official website: https://app.reflexer.finance/

Twitter: https://twitter.com/reflexerfinance

What it is: Reflexer is a platform that can use cryptocurrency collateral to issue non-pegged stable assets. RAI is the first of its kind, and like the original DAI, it is only generated by ETH over-collateralization and has a local funding rate calculated by the on-chain PI controller to correspond to the complex market state. The market price of RAI converges towards the redemption price.

Detailed description:

The exchange rate of RAI/USD is determined by its supply and demand relationship, and the agreement will try to stabilize the price of RAI by continuously depreciating or revaluing its value. The supply and demand mechanism is between SAFE users (those who generate RAI with ETH) and RAI holders.

Compared with other stablecoins on the market, RAI proposes a new concept: redemption mechanism. RAI uses an on-chain PI controller to set the rate of change of its redemption price, called the redemption rate, expressed as an annualized rate. Through the adjustment of the redemption rate, RAI can accurately control the supply of stable coins in the market, and then make the price of RAI close to the ideal price set by the system.

The RAI's monetary policy consists of four elements:

• When the market price of RAI > the redemption price for a period of time, the redemption rate will become negative.

• When the market price of RAI < the redemption price for a period of time, the redemption rate will become positive.

• Redemption price: The expected price of tokens established in advance by the RAI protocol.

• Market price: the actual transaction price of RAI in the secondary market.

• Redemption rate: RAI depreciation calculation.

• Global Settlement: The protocol is closed and the user redeems the collateral.

Compare the pros and cons:

• Advantages: without pegging to $1, the agreement can depreciate or revaluate RAI according to changes in the market price of RAI; encountering less risk of loss.

• Summarize:

Summarize:

The above three decentralized stablecoin projects are all emerging or undiscovered stablecoin ecosystems in the market. In fact, the current narrative based on decentralized stablecoins has flourished enough. In addition to the above three, a stablecoin project including LUSD, FRAX, KAVA, MIM, HAY, etc. is also worthy of attention.

After all, although the current market share of decentralized stablecoins is low, they cannot avoid the influence of the real black swan. But to some extent, as the global economic environment deteriorates and the world enters the stock game, there will be more and more black swan events. At this time, fiat currency stablecoins that do not have minting rights and are threatened by centralization may not be a good choice.

References

References

1. CeFi has been hit hard repeatedly, how can the distributed stablecoin $HOPE learn from each other?

Link: https://m.mytoken.io/news/428359

2.RAI: The decentralized stable currency "ideal type" in the eyes of Vitalik

Link: https://mp.weixin.qq.com/s/_-bJhDcQwoDKMMY 1 J 3 QNJA

3. What are the design highlights of Angle, a decentralized stablecoin protocol led by a16z?

Link: https://www.bitpush.news/articles/1817404

4. A detailed explanation of the status quo and future of decentralized stablecoins

Link: https://www.odaily.news/post/5184608

5.Stability without Pegs

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