Observing the Decentralization stablecoin Track: Who Can Become the Market Leader?

Stablecoins play an important role in the cryptocurrency ecosystem and are regarded as the "holy grail" of industry development. In recent years, with increasing regulatory pressure, centralized stablecoins have faced numerous challenges, while the development opportunities for decentralized stablecoins have become prominent. This article will delve into the market landscape of stablecoins and explore the current status and prospects of decentralized stablecoins.

Stablecoin Market Status

Currently, the stablecoin market is still dominated by centralized stablecoins, with the three major centralized stablecoins, USDT, USDC, and BUSD, accounting for about 91.6% of the market share. Decentralized stablecoins like DAI and FRAX, while having a certain scale, still rely on centralized stablecoins as collateral.

Centralized stablecoins, although they have significant scale advantages, also face regulatory risks. The recent liquidation of BUSD has once again proven this point. In contrast, decentralized stablecoins have better censorship resistance, and their future development potential is worth looking forward to.

The Necessity of Decentralized Stablecoins

The emergence of decentralized stablecoins is necessary:

1. Avoid centralization risks. Centralized stablecoins are susceptible to regulatory influences, while decentralized stablecoins can circumvent this risk.

2. Achieve true minting power. Decentralization stablecoins can create stable credit independent of centralized authority.

3. Meet specific user needs. Users who are sensitive to centralized risks require decentralized stablecoins.

Mainstream Decentralization Stablecoin Analysis

DAI

As a long-established algorithmic stablecoin, DAI faces intense competition. Its approach involving real-world assets (RWA) also brings centralization risks, overlapping with the user base of centralized stablecoins such as USDT and USDC. Currently, DAI has an annual net loss of $9.4 million, and its development prospects are not optimistic.

FRAX

The collateral assets behind FRAX are USDC and its derivatives, with centralized risks stemming from USDC. In 2022, FRAX raised approximately $210 million by issuing more FXS, but it still struggles to compete with centralized stablecoins.

Liquity (LUSD)

LUSD is only collateralized by ETH, completely isolating centralized risks. However, its stability is relatively poor, and it lacks effective incentives for liquidity, making it difficult to scale.

Inverse Finance (DOLA)

DOLA uses ETH and OETH as collateral and has designed the DBR token as a tool for interest rate adjustment. However, its borrowing interest rate is as high as 4.92%, which is much higher than other stablecoins, making it unfavorable for scale expansion.

RAI

RAI uses a customized index as a price anchor, completely breaking away from the US dollar, which is a more aggressive exploration. However, the cost of establishing price consensus is high, and the current scale is relatively small.

Future Outlook

The decentralized stablecoin sector is still in its early stages of development, with a small market share but huge potential. As centralized risks increase, decentralized stablecoins are expected to gain more attention. Currently, this sector has not formed a monopoly pattern and still has considerable room for growth.

Whether projects with significant economies of scale, strong stability, and high degrees of Decentralization can emerge in the future will be key to the development of this sector. How the new generation of algorithmic stablecoins balances efficiency, security, and Decentralization is worth ongoing attention.