DeFi protocols launch stablecoins to lure new users and liquidity, but does it work?

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DeFi protocols launch stablecoins to lure new users and liquidity, but does it work?
Blockonomics


Stablecoin projects have been in the spotlight over the past month with the popularity of algorithmic stablecoins and the collapse of Project Terra, which has brought into focus the important role dollar-pegged assets play in crypto markets.

In response to the void left by UST, multiple protocols have released new stablecoin projects to attract new users and capture liquidity. In general, the DeFi space is full of gimmicks designed to attract user participation, and the recent stablecoin launch plans may just be the next trending strategy to boost TVL on DeFi platforms.

Let’s take a look at some of the latest stablecoins to market, and the impact they may or may not have in DeFi.

Dollar

One of the largest stablecoin projects to launch recently is USDD, a decentralized algorithmic stablecoin on the Tron (TRX) blockchain. Since its launch on May 5, the circulating supply of USDD has experienced rapid growth, currently approaching 601.86 million, and its integration into the Tron ecosystem is relatively extensive.

okex
USDD market cap growth. Source: CoinGecko

USDD is also available on the Ethereum (ETH) network and the BNB Smart Chain (BSC), which helps increase token distribution and provides additional revenue opportunities.

There are multiple pools of liquidity providers available to USDD holders offering 20% ​​or more APY via various protocols including JustLend, SunSwap, Ellipsis and Curve. Since the launch of USDD, the price of TRX has risen 17% from $0.07 to its current level of $0.0818 after briefly hitting a high of $0.092 on May 31.

Dollar

Fantom recently released fUSD, its first native stablecoin, which is over-collateralized and available with Fantom (FTM), USD Coin (USDC), Dai (DAI), SpiritSwap (SPIRIT), and Wrapped Tether ( fUSDT) as collateral.

To attract more liquidity, the Fantom Foundation set the fUSD staking reward at 11.3% and created a fUSD to USDC swap interface that allows users to buy fUSD and repay their positions to avoid liquidation.

At the time of writing, fUSD has a circulating supply of $60,993,403 and is trading at $0.7112, well below the $1 peg.

Dollar

Following the official launch of the first parachain within the Polkadot ecosystem, the Acala decentralized finance platform released aUSD as the Polkadot project’s first native stablecoin.

aUSD is an overcollateralized stablecoin that can be minted by staking Polkadot (DOT), staking Polkadot (LDOT), Kusama (KSM), staking KSM (LKSM), Acala (ACA) or Karura (KAR) as collateral.

Staking LDOT and LKSM as collateral allows DOT and KSM holders to continue to receive staking rewards while being able to borrow collateral to pledge their assets.

On March 23, Acala joined 9 other parachain teams to launch a $250 million “aUSD Ecosystem Fund” designed to support early-stage startups planning to build robust stablecoin use cases on any Polkadot or Kusama parachain.

As of May 31, $6.31 million has been minted and the amount of pledged capital locked in Acala is $91.53 million.

Related: UK Government Proposes Additional Safeguards Against Risk of Stablecoin Failure

USD/USD

Origin Protocol’s OUSD is a stablecoin fully backed by better-known stablecoins such as USDC, USDT, and DAI.

OUSD market cap growth. Source: CoinGecko

Users can mint OUSD by staking their stablecoin collateral on the Origin Dollar protocol and earn a 12.79% yield by holding OUSD in their wallets. The payout to OUSD holders comes from automated strategies managed by smart contracts that use the deposited funds for DeFi.

After a brief dip to a low of $0.967 on May 12 at the height of UST’s impact, OUSD has largely maintained prices above $0.996 with a current circulating supply of $63,605,444.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk and you should do your own research when making a decision.





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