The War of New Stablecoin Players: GHO, crvUSD, Dinero, dpxUSD Who Will Prevail?

Original Title: 《Stablecoin wars: analysis on the present and future of stables》

Author: Chinchilla, Crypto Researcher

Compilation: Deep Tide TechFlow

Stablecoins are one of the greatest innovations in cryptocurrency. But how will the landscape of stablecoins change as the new year arrives?

· GHO

· crvUSD

· Dinero

· dpxUSD

Stablecoins can be used to attract users into DeFi. Moreover, they can also attract liquidity to the native protocols that issue them. In fact, gaining dominance in the number of native stablecoins may be crucial for increasing the protocol's revenue (and perhaps the Token price).

Therefore, first, let's briefly introduce the current situation. As data analysis on Dune indicates, so far, fiat-collateralized stablecoins are the most widely used compared to over-collateralized and algorithmic stablecoins.

However, they have still been hit hard during the bear market.

More specifically, although BUSD saw a significant increase in 2022, USDT and USDC are on a downward trend, and recent FUD against Binance has caused it to lose billions in total supply.

However, about 92% of dollar-pegged coins are backed by centralized entities.

Additionally, after the Luna collapse, decentralized and algorithmic stablecoins took a heavy hit in terms of trust. While their market caps cannot compare to centralized coins, coins like DAI, LUSD, FRAX, and MIM have struggled to keep up.

Let’s not forget other failures, such as:

· Waves' Neutrino USD (USDN);

· Near Protocol's USN;

· Tron's USDD.

Now that we have seen the current situation, let’s take a look at those protocols aimed at gaining market share against centralized stablecoins.

Aave's $GHO

Aave is one of the foundations of DeFi. Even in this bear market phase, its TVL can be maintained at $5.86 billion. Last summer, Aave announced that they would launch a governance-managed over-collateralized stablecoin, GHO.

"Facilitators" will be able to mint and burn GHO, and they will be managed by Aave governance. Additionally, users holding Aave Tokens will be able to mint GHO at a discounted rate. The protocol will be based on arbitrage concepts to maintain the price stability of GHO.

Moreover, it does not rely on external price oracles. I know this sounds scary after the UST collapse, but the mechanism is quite different.

UST's arbitrage was based on its own balance of volatile assets (Luna), while GHO will be over-collateralized by a basket of Tokens.

Curve's $crvUSD

Curve is another milestone in the cryptocurrency ecosystem. In terms of trading volume, it ranks second among all DeFi, reaching $1.36 billion in 7 days, accounting for 22% of the total market.

Similar to Aave, they announced a new stablecoin called crvUSD last summer.

The founder confirmed that crvUSD will be over-collateralized. But the Curve team has two impressive innovations. One has been announced in the whitepaper, while the other is still rumored:

· LLAMA (Lending-Liquidation AMM Algorithm);

· LP-backed.

LLAMA will enable a continuous liquidation mechanism for debt positions (stablecoins). This means that, unlike Dai, collateral positions will be gradually liquidated during shock events. This smoothing process can prevent losses during market volatility.

crvUSD is over-collateralized by tricrypto2 and 3pool. This is just speculation, but rumors are growing that crvUSD will be supported by Curve liquidity pools:

· tricrypto2: Composed of USDT, wBTC, and ETH.

· 3pool: Composed of DAI, USDC, and USDT.

Redacted Cartel's $Dinero

The Redacted Cartel team announced a few months ago that they would launch their first stablecoin: a stablecoin fully backed by over-collateralized Ethereum.

They stated that it would be phased, with the first phase launching in Q1 2023.

As you may know, the Redacted ecosystem provides on-chain liquidity, governance, and cash flow for DeFi protocols. Therefore, perhaps incentives will be key for this stablecoin.

Dopex's $dpxUSD

Dopex is one of the most interesting options protocols in cryptocurrency. It is based on Arbitrum and has been innovating. While we do not know the exact timing, the team announced that they will launch dpxUSD in the future.

dpxUSD will be supported by:

· 75% USDC

· 25% rDPX

This stablecoin provides incentives for minting it by combining rDPX with USDC into a liquidity pair.

But what happens in the event of a decoupling? There are three possibilities:

· The protocol will remove dpxUSD from LP, forcing the pool to rebalance its peg.

· Whales intervene by purchasing dpxUSD, although this would be based on trust.

· In the event of extreme situations, dpxUSD will be redeemed at a discount (0.75 USDC + 0.25 rDpx) of the related assets.

The last strategy will present arbitrage opportunities, as the underlying collateral has been earning yield, and its value should be higher than its dollar value of dpxUSD.

Summary

This is an overview of the upcoming stablecoins. But we should not forget the projects that have recently been in the market, such as Frax Finance (FRAX) and Liquity (LUSD):

· Frax is a stablecoin partially backed by collateral and partially algorithmically supported;

· LUSD is backed by ETH.

In summary, history tells us that decentralized stablecoins often fail or have to change their mechanisms. Or consider what happened to MakerDAO after the collapse of DAI in March 2020. This is why they transitioned from 100% ETH backing to about 50% USDC.

Thus, even though some of these protocols have a "long" history of deploying incredible solutions for DeFi, we should always keep in mind that innovation is inherently risky. Moreover, regulation for this asset class will also come in the next few years.

Nevertheless, all the protocols I listed are attempting to fundamentally innovate cryptocurrency. We have not yet seen a major Token issuance stablecoin or a lending/borrowing dApp with billions in TVL launching a stablecoin. All these innovations are trying to fundamentally change the industry.

We have become accustomed to the Curve wars for acquiring liquidity and voting rights. But the stablecoin wars may be the next phase in attracting market share and real-world utility. Our goal is to take power back from centralized entities and return it to decentralization.