Decentralization stablecoin track observation: Who can claim the crown?

Stablecoins are an important infrastructure of the cryptocurrency ecosystem, and decentralized stablecoins are regarded as the "holy grail." However, the stablecoin market is still dominated by centralized options like USDT and USDC, and the development of decentralized stablecoins faces many challenges.

The Decentralization Path of Stablecoins

Decentralization is one of the core value propositions of cryptocurrencies. For stablecoins, decentralization means:

1. Get rid of dependence on centralized institutions, reduce single point risk.
2. Achieve complete coin issuance rights to avoid being controlled by the traditional financial system.
3. Provide users with more choices to meet the needs of combating censorship.

However, the main challenges faced by decentralized stablecoins include:

1. Insufficient scale effect, difficult to compete with centralized stablecoins
2. Price stability is relatively poor and easily affected by market fluctuations.
3. The collateral mechanism is complex, and capital efficiency is relatively low.
4. The user's awareness and usage threshold is relatively high.

Mainstream Decentralization Stablecoin Project Analysis

DAI

As one of the earliest decentralized stablecoins, DAI still holds a dominant position. However, it also faces numerous issues:

1. Introduced real-world assets ( RWA ) as collateral, facing centralization risks.
2. High operating costs, with a net loss of $9.4 million in one year.
3. There is significant competitive pressure from centralized stablecoins like USDC.

FRAX

Adopt a hybrid model of partial algorithms + partial collateral:

1. The underlying collateral assets include USDC, and there are still centralization risks.
2. Financing through the issuance of the token FXS, equivalent to raising $210 million in 2022.
3. The scale advantage is obvious, but long-term sustainability is in doubt.

Liquity (LUSD)

Fully Decentralized Over-Collateralized Stablecoin:

1. Use only ETH as collateral assets to completely isolate decentralization risks.
2. Designed a clearing mechanism to ensure system security.
3. However, the price stability is relatively poor, and the scale expansion is limited.

Inverse Finance (DOLA)

Innovative Decentralization stablecoin design:

1. Use ETH and OETH as collateral assets
2. Introduce DBR token as an interest rate adjustment tool
3. Designed a bond mechanism to incentivize user participation.
4. However, the borrowing interest rates are relatively high, making it difficult to expand the scale.

RAI

Radical Decentralization stablecoin exploration:

1. Use a custom index as the price anchoring target
2. Completely break free from the influence of the US dollar
3. However, the cost of establishing price consensus is high, and the scale effect is insufficient.
4. It has gradually declined, but there is still a possibility of revival.

Future Prospects of Decentralization Stablecoins

1. Complete Decentralization remains the ideal goal of stablecoin.
2. Need to seek a balance between stability, efficiency, and Decentralization.
3. Innovative mechanism design and collateral asset selection are crucial.
4. The scale effect is one of the key factors that determine success or failure.
5. The deep integration with the DeFi ecosystem helps to expand application scenarios.
6. More user education is needed to lower the usage threshold.

Despite the numerous challenges currently facing the development of decentralized stablecoins, their position as the "Holy Grail" of cryptocurrencies remains unshakable. There is still ample room for innovation and development in the future, making it worthy of continuous attention and exploration from the industry.