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The Battle of Decentralized Stablecoins: Who Can Stand Out and Become the New King
Decentralization stablecoin Depth Observation: Who Can Claim the Championship?
Stablecoins can be divided into centralized stablecoins and decentralized stablecoins. As long as they are not completely decentralized, they face the risks brought by centralization. In the face of increasing regulatory threats, decentralization has become a key attribute of stablecoins.
Most stablecoins struggle to become the fundamental currency of the crypto world; they resemble commercial paper and achieve mainstream stablecoin lending functions through trading pairs. An ideal stablecoin mechanism should not only serve as a medium of exchange but also create unique economic activity scenarios.
The pattern of centralized stablecoins is basically determined, with USDT and USDC difficult to distinguish. Although CrvUSD has centralized risks, it has a complete functional module and certain potential. The decentralized stablecoin track is currently not mature, but there is a basic demand, and there are still development opportunities in the future.
The Necessity of Decentralization for Stablecoins
Decentralized currency is the source of currency and has appeared multiple times throughout history. Whether it's commodity exchange or debt currency theory, centralized credit was not initially involved in the currency generation process.
The purpose of issuing stablecoins is to increase credit, while centralized stablecoins lack the right to mint. Crypto fundamentalists believe that the power of currency issuance has been usurped by centralized institutions. Once a centralized stablecoin is issued in a decentralized network, the issuer will become a traditional financial institution.
Centralized stablecoins face threats of centralization, with credit often being questioned and value frequently challenged. Decentralized stablecoins offer users an alternative.
The Development Dilemma of Stablecoins
Stablecoins need to overcome scale limitations to achieve a positive cycle. Small-scale stablecoins find it difficult to establish sufficient trading pairs, resulting in high transaction costs. To offset these costs, project parties are forced to increase operational expenditures and offer higher yields. Therefore, stablecoins are a scale economy business.
However, once the scale reaches a certain level, it will inevitably face the attention of traditional powers. Institutions like the IMF are hostile towards cryptocurrencies, and central bank-led digital currencies are poised to emerge. Stablecoins face the dilemma of insufficient scale making it difficult to operate sustainably, while being too large leads to regulatory intervention.
Stablecoin Industry Structure Analysis
Currently, the stablecoin industry is dominated by USDT, USDC, and others, but there are various types. Stablecoins can be divided into two categories: "high-energy coins" and "broad currency."
Many non-mainstream stablecoins are actually variants of lending systems, exchanging for mainstream stablecoins through trading pairs to participate in economic activities. This model is equivalent to mainstream stablecoin lending pools, with lower capital efficiency.
Stablecoin Landscape
Since the establishment of USDT in 2014, various stablecoin attempts have emerged in the market. The mainstream remains a centralized approach, but the exploration of algorithmically created credit has never stopped.
The main methods of stablecoin creation include:
Currently, the algorithm stablecoin sector, which includes centralization risks, is highly competitive. DeFi giants like Curve and AAVE have entered the arena, putting pressure on established projects like MakerDAO. Fully decentralized algorithm stablecoins such as Liquity and Inverse Finance, although smaller in scale, are still in exploration.
Conclusion
In the stablecoin sector, as long as there is not complete Decentralization, there is a risk of centralization. Centralized stablecoins have formed an oligopoly. The market share of decentralized stablecoins is small, but there is inherent demand, and there is still room for development in the future. Currently, there are no decentralized stablecoin projects that have formed a monopoly advantage in niche areas.