Decentralization Stablecoin Track Observation: The Smoke Has Yet to Clear, Who Will Claim Victory?

Stablecoins are an important infrastructure in the cryptocurrency world, hailed as the "Holy Grail". Based on the existence of centralization risks, stablecoins can be divided into two major camps: centralized and Decentralization. In the face of increasing regulatory threats, the decentralized property has become a key feature of stablecoins.

Currently, the stablecoin market is still dominated by centralized stablecoins like USDT and USDC, accounting for 91.6% of the market share. Among decentralized stablecoins, DAI and FRAX also partially use centralized stablecoins as collateral, facing centralization risks. Purely decentralized stablecoins are almost a desert, but there is underlying demand in this sector, and there are still development opportunities in the future.

Why do we need decentralized stablecoins?

1. Feasibility of Decentralization Currency: Historically, there have been instances of decentralized currency, such as the grain loan certificates of ancient Egypt.

2. Necessity: Centralized stablecoins do not have true minting rights and are easily subject to government intervention. Decentralization stablecoins offer an alternative.

3. Inherent Market: Demand from user groups sensitive to centralized risks.

The Predicament of Stablecoins

Stablecoins face the dilemma of scale and centralization risks:

• It is difficult to achieve a positive ecological cycle without reaching a certain scale.
• But excessive scale may trigger regulatory intervention.

This is the "Icarus Wings" dilemma of stablecoins.

Stablecoin Industry Structure

Divided by liquidity:

• High-energy coins: such as USDT, USDC
• Broad money: other small-scale stablecoins

Small-scale stablecoins are actually similar to lending products and need to be exchanged for mainstream stablecoins through trading.

Stablecoin Landscape

The mainstream method is still centralized collateral issuance. Algorithmic stablecoins attempt to include:

• Rebalancing: like Ampleforth
• Circulation Restriction: such as FEI
• Minting stablecoin: such as UST
• Over-collateralization: such as DAI, LUSD

Currently, over-collateralization is the most mature algorithmic stablecoin model.

Algorithm Stablecoin Competitive Landscape

1. Algorithmic stablecoin with centralization risks:

   • Curve and Aave enter the market with DeFi advantages
   • MakerDAO and FRAX face challenges

2. Pure Decentralization Algorithm Stablecoin:

   • Liquity: Only ETH collateral, difficult to scale
   • Inverse Finance: Interest rates are relatively high
   • RAI: Detached from the US dollar, consensus cost is high

Conclusion

1. Non-fully decentralized stablecoins face centralization risks.
2. Centralized stablecoins have formed a monopoly.
3. Decentralization stablecoin is still in the early stages of development, with a bleak outlook but full of hope.
4. Decentralization stablecoin has inherent market demand
5. Currently, there is no decentralized stablecoin that has formed a monopoly advantage in the segmented track.