this artcle is to investigate stable currency USDT development context and the current development direction.
What’s defi like in 2020?
Recently, a piece of news in the circle has aroused heated discussion. I believe that when we look back at the end of the year, the importance of this news can definitely rank among the top ten news in 2021.
“On the evening of January 4, the U.S. Department of the Treasury’s office of the Comptroller of currency (OCC), the largest banking regulator in the United States, announced on its official website that it would allow U.S. banks to use public blockchain and dollar stable currency as the settlement infrastructure in the U.S. financial system.”
It is said that due to the huge number of visits, the official website was paralyzed for a time. We can make the following three interpretations of this news:
1. The “dollar stable currency” in this paper refers to the stable currency that has been examined and approved by the regulatory authorities and accepted their continuous supervision. It mainly includes USDC, GUSD, PAX, etc. USDT is neither a possible solution nor Dai.
2. The public blockchain here is probably not Ethereum, but an alliance chain with access mechanism. What kind of user’s real name, anti money laundering, anti terrorist transportation and other regulatory regulations must be complied with.
3. From this we can see that China and the United States have different ideas about cryptocurrency. It can be seen from the CDBC that we use the top-level design of the central bank to promote the development of cryptocurrency from top to bottom while we use the “bottom-up” scheme dominated by major financial institutions in the United States. At present, each has its own strong points. It depends on time to test which is better.
But in any case, the official announcement of the OCC has completely lifted the stable currency to a new level. The biggest hot spot of the blockchain industry in 2021 may be the stable currency. From the recent fire of dozens of algorithmic stable currency projects, we can smell some clues.
So let’s take a look at the development of stable currency and the development direction we can see at present.
1. 2013-2017 Pre-stable currency Era
The old buddy who was abroad and the old fellow who was admitted before 2018 should be no stranger to this word. Yes, before 2017, no one paid any attention to the stable currency. It can be said that the sense of existence was zero.
You may not be right. USDT was released in 2015.
That’s right, but you should know that the rise of USDT started with the support of the three major platforms in the second half of 2017.
In the pre-stable currency era, bitcoin was the “exchange medium” for all currencies, while foreign compliance trading platforms always supported the direct recharge and purchase of legal currency.
2. 2017 to present The era of legal currency mortgage stable currency
Tether USD is the full name of usdt, and its Chinese name is TEDA coin. In 2015, tether launched USDT on Bitfinex and Poloniex, you can refer to the Moco Group Partner. As a stable currency, tether promises that there is a dollar worth of cash or equivalent behind each usdt to support its value.
In the second half of 2017, the three major trading platforms launched USDT one after another and opened USDT trading pairs.
In the first half of 2017, USDT only printed more than 10 million shares. By the end of 2017, it rapidly increased the number of shares to 1 billion. Now look back at the wave of mad cow at the end of 17, do you know how it got up? BTC’s all the way to the sky at the end of 2017 has a great relationship with usdt.
In the past few years, usdt has experienced several credit crises. Users are mainly worried about whether TEDA bank has sufficient 1:1 US dollar deposit and compliance issues. However, they have basically survived each time.
Now it has issued a scale of 20 billion US dollars, and it is duty bound to continue to occupy the first place of stable currency. From the earliest BTC chain, it gradually expanded to eth, TRX, algorand, OMG and other chains.
Later, we all saw the business opportunities of stabilizing the currency market. Major institutions issued their own stable currencies one after another. At that time, various kinds of USDX occupied people’s vision, including the current second largest usdc, and later tusd, Pax, GUSD
At present, USDT is undoubtedly the best in the circle. The trading platform has great advantages in supporting trading, issuing scale and the number of public chains. In terms of going out of the circle, USDC is the best. It has strict auditing and is fully in line with the regulation.
Last month, circle, the issuer of USDC, even reached a cooperation with visa. It is possible that visa will issue a credit card sometime in 2021, which allows enterprises using the credit card to send and receive USDC payments directly.
3 2018 to present The era of cryptocurrency mortgage stable currency
Cryptocurrency mortgage stable currency is basically a one-man show of Dai. Although there are many other projects trying to copy or improve MarketDAO, so far, it can be said that no project has made any threat to Dai, which is far less than the threat of USDX to usdt.
Regarding to the Cryptocurrency mortgage stable currency field, understanding Dai means you basically understand this type of stable currency.
Different from the style of currency value supported by a centralized institution like USDX and the US dollar, Dai is basically supported by ETH (DAI can now have multiple encrypted collateral, including bat, OMG, etc. to simplify, we use the initial single mortgage ETH).
Maker relies on the game between eth mortgage and arbitrage to achieve relatively stable price. For example, for an eth of US $1000, after you open a CDP (collateralize debt position) with a mortgage of 1eth, you will receive 700dai. If you want to get back your 1eth in the future, you will have to repay 700dai.
If the Dai price drops to US $0.9, the CDP owner can pay US $630 to buy 700 Dai to repay the loan, making a net profit of US $70. If the Dai price rises to US $1.1, the user can directly sell 700 Dai to US $770, making a profit of US $70.
However, DAI has several problems as listed as following:-
1. The utilization rate of funds is not high. Because eth is anchored instead of US dollars, and eth’s own price fluctuates greatly, it can only be over mortgaged, resulting in a capital utilization rate of only about 60-70%, which limits the capital utilization rate. This is also the direct reason for the birth of lien and other stable currency projects to improve the capital utilization rate.
2. In fact, the arbitrage game model mentioned above is not always so effective because of the existence of excess mortgage. Because USDT is a 1:1 mapping dollar, the arbitrage game model can work perfectly, which is why the fluctuation of Dai is far greater than usdt. This topic is the whole length of an article, so I’ve covered it here.
3. When eth falls sharply, the clearing system is affected by the current ETH performance, and it is easy to go wrong. 312 that time. Because the ETH price of black swan plummeted in an instant, resulting in a lot of 0 yuan winning bids in liquidation. As a result, maker system had bad debts, and the gap was more than $500 at one time. Later, MarketDAI had no choice but to issue additional MKR to repay the debts
Due to the existence of these reasons, although DAI is absolutely No.1 in cryptocurrency mortgage stable currency, it is difficult to expand. In a few years, Dai has only a total circulation of more than 1 billion, which is still far behind USDT, a stable currency of tens of billions.
4. 2020 – present The era of algorithm stable currency
About this track, it’s almost in the second half. For the summary of the first half, please go back to the article “in the endless rapid evolution of DEFI, is the soaring algorithm stable currency just a few people’s carnival?”? 》。
In more than a month, base, the leader of the three generations of algorithmic stable currency, has appeared dozens of imitation disks, and has expanded to the fire coin public chain, TRX and coin security intelligent chain. We can see how hot it is. So here, next to the previous article, write the current step of the algorithm.
Vernacular blockchain note: the following mentioned algorithm stable currency projects are examples, and do not make any suggestions. At present, such projects are relatively risky, so do not follow blindly.
1. Three generations: Basic, Mith, Onecash
Of the dozens of copies of basis, these three are the most worth writing.
Basis: after experiencing explosive growth, it has reached a market value of nearly 100 million yuan. In recent days, it has come underwater (BAC < US $1) and began to stand the test of “death spiral”. At present, it has accumulated tens of millions of debts. Even if it comes out of the water (BAC > US $1), it is very likely that it will be brought back underwater by the debts. The situation is not optimistic.
However, as an original, basis is still the most promising one in the three generations, because the world of blockchain has rich rewards for the first original of any track. If the stable currency of the third generation algorithm is falsified as a whole, then basis should be the last one to fall
Mith: base high copy, without any changes, pure high copy. At the beginning, the text of many pages was still bas, which was found and sent out by sharp eyed users, and became the laughing stock of the whole network.
However, the founder of mith is Huang Licheng, the founder of mith coin. He is known as big brother Maji and “Lao Huang” in the circle. He has abundant funds and a wide range of contacts in the circle. Mith is basically supported by big brother and several big funds like SBF. The market value of mith is close to that of basis, ranking second among the three generations. Recently, like basis, mith is also experiencing the underwater test.
Onecash: many of the most innovative projects in the imitation market of basis, including rebase’s 10% restriction, the newly added LP pool of boardroom, and the original liquidity design of the bond system, have effectively improved many defects of the original design of basis.
Because of the 10% additional issuance design, the market value growth is slow, still only more than 1 million, which is one of the few basis imitation projects to maintain the water.
2. Fourth generation: FraX, XUSD
FraX: similar to token, it is also a three currency model, FraX (stable currency), FXS – FraX shares (governance and value accumulation token), FraX bonds (debt financing token).
The difference is that there is no rebase. At the beginning, FraX was generated by 100% mortgage usdc. As time goes on, the proportion of partial usdc + partial fraxshares (FXS will be destroyed) x share used in casting FraX becomes larger and larger. Finally, FraX share is completely generated by mortgage, completing the transition to pure algorithm stable currency.
The way to keep the token price stable is the same as Dai. It is through the difference between the price and $1, and through the arbitrager to fill in the price difference. I just want to tell you more here
Xusd: FraX imitation disk, the difference is that it’s fair launch, unlike FraX
3. Five generations: stable credit? A new project integrating the first four generations in Dacheng?
AC recently came back, and then announced a wyfi, which led to the price of yfi going up.
In short, the stable credit + stable currency that AC needs to do can be regarded as the combination of “everything can be made” and “makerdao + stable currency with partial mortgage”. What’s more, everything can be mortgaged like makerdao to get stable money.
At the same time, these mortgaged tokens will enter the AMM pool with a single token, forming a lending pool of “all kinds of Tokens: stablecredit USD”, which has opened up the asset interoperability between swap and metonymy. The liquidity of assets in different projects such as uniswap and AAVE will not be seriously separated, and capital efficiency has always been a major concern of AC.
At the same time, wyfi is introduced, similar to FraX share in FraX. It can not only share 50% of the profits of stable currency of the whole system, but also burn wyfi to make stable credit USD when the price of stable credit USD is more than US $1, so as to carry out arbitrage and stabilize the price of stable credit USD.
Wyfi is generated by yfi1:1000 and irreversible, so it is a great advantage for yfi with deflationary function. In other words, is it possible for the market to have a project in the future that integrates all the characteristics of stable currencies before?
For example, it supports static mortgage of usdc and dynamic mortgage of eth + elastic rebase, just like usdc + makerdao + basis. If there is such a project, whether you participate or not, I think it’s always right to get to know it at the first time.