Interest-earning stablecoin: A new trend in the encryption industry

Stablecoins are becoming the market consensus. Recently, multiple projects have focused on innovations around stablecoins, including Stripe's acquisition of Bridge, Huma using stablecoins to replace bank intermediaries, and a certain trading platform becoming a new player thanks to its stablecoin.

Ethena takes the lead, MakerDAO rebrands to Sky and shifts to yield-bearing stablecoins, Pendle, and a certain lending platform are also rapidly transitioning to yield-bearing stablecoins. Currently, yield-bearing stablecoin (YBS) still falls within the category of stablecoins, making it difficult to understand the fundamental differences between USDe and other YBS projects compared to traditional stablecoins. The YBS project attracts users through yield generation, distributing part of the asset income to users, and after completing the deposit collection, continues to earn asset income.

In contrast, the issuance of traditional stablecoins is a process of creating new assets, with reserves managed by regulators or project parties, and it has no relation to users. Users can only passively accept its value of 1 dollar and hope for recognition from others.

YBS follows the on-chain banking logic of deposit-lending, deconstructing the power of asset issuance. The history of the encryption industry is a history of innovation in asset issuance models, and this time, under the name of stability, it appears to be more moderate.

For example, a certain protocol has at least 5 types of stablecoins, including the V1 and V2 versions of rUSD and fxUSD, as well as $btcUSD, $cvxUSD, and even fETH is referred to as a stablecoin. Stability originates from volatility, and volatility creates stablecoins.

From Traditional Finance to Emerging Stablecoins

Yield stablecoins and StableFi are new forms of stablecoins. Stablecoins originated from Bitcoin as a peer-to-peer electronic cash payment system. However, Bitcoin's price is highly volatile, making it difficult to stabilize in the short term.

Early attempts at stablecoins occurred within the Bitcoin ecosystem, later shifting to the exchange valuation domain. Fiat stablecoins were thus born, with a mechanism that is not complex; it only requires trust in the issuer and recognition of its market trading stability.

The subsequent DAI adopted an over-collateralization mechanism, which, although reduced capital efficiency, increased the trust of market participants. After that, the history of cryptocurrency has been a process of how to reduce the staking rate.

The failure of UST marks the end of classic algorithmic stablecoins. Currently, interest-bearing stablecoins require both an interest-bearing mechanism and a stablecoin mechanism, which can be based on CDP mechanisms or delta-neutral mechanisms, etc. The key lies in the interest and profit distribution mechanism, which depends on the source of the interest-bearing assets.

We have整理了近百个相关项目. According to data platform statistics, there are currently over 180 projects involving stablecoins. After excluding non-interest-bearing stablecoin projects, the mainstream options actively available in the market are basically covered.

A complete yield stablecoin protocol typically includes the stablecoin and its staked version, as well as the protocol's main token and its staked version. Focusing on the protocol rather than a single stablecoin better reflects the relationship of "the protocol in profit distribution, and the stablecoin as a profit distribution certificate."

DeFi ecosystem to YBS building blocks

After screening, we selected 12 representative stablecoin projects. These projects primarily compete in interest calculation, pricing, and payment scenarios for the retail market, and they are also the most challenging and promising tracks.

Similar to the early DeFi Lego blocks, the YBS protocol is also continuously combining with other protocols. Multi-chain, multi-protocol, and multi-pool are standard configurations, and each YBS's organizational method contributes to the TVL and revenue of certain platforms.

These projects still face some issues. First, the sustainability of profits is questionable; some projects may sacrifice protocol profits to attract users. Second, the price performance of the protocol's main token can affect the stability of the yield-bearing stablecoin, potentially leading to a death spiral similar to UST.

Therefore, it is essential to focus on the ongoing profitability of the protocol and the safety of the principal. Beyond the existing leading projects, emerging protocols such as Resolv, Avalon, Falcon, Level, and Noon Capital may become opportunities in the future.

It is worth noting that the eagerness of the YBS project to issue coins is not necessarily a negative signal. The protocol requires secondary market liquidity for its main token, similar to how certain projects introduce mainstream exchange-affiliated VCs to form interest alliances, which essentially cedes the minting rights of the stablecoin.

Overall, YBS is different from simple Meme coins, as it requires a higher level of credibility and capital reserves. As a new type of currency, especially the real YBS that does not rely on government bonds or the US dollar, the establishment of its recognition is as difficult as creating Bitcoin or Ethereum.