Author: OKX Ventures Ren Jeff, Xu Peiqi, Zhao Wei and Zhong Bingcheng Translation: Shan Oba, Bitchain Vision

1. Summary

From the bull market in 2021 to the bear market in 2023, the cryptocurrency market has changed significantly.The total market value dropped from US $ 3 trillion to $ 1 trillion, but the market value of stable currency fell by only 30%.

As of December 2023, Coingecko data showed thatThe total market value of the stablecoin market is about $ 130 billion.Tether (USDT) occupies a dominant position, accounting for 70% of the share, USDC holds about 20% of the share,The rest are scattered in various other stablecoins.In the context of the current government bond yields (& gt; 5%), the net profit of Tether in the first quarter of 2023 was 1.48 billion US dollars, and the quarterly returns of cash and cash equivalent investment in the third quarter of 2023 again approached $ 1 billion in $ 1 billion, Highlight the profitability of the market.

In addition to Tether and USDC, we have also seen the emergence of many stable coins on the chain, reflecting the demand of different types of stable coins in the DEFI sector, which is both central and not licensed.The innovation of these emerging stablecoins includes the diversification of mortgages, mortgage liquidation mechanisms, and the profit sharing mechanism of the community.Their success depends on maintaining liquidity and attracting the main DEFI protocol.

Although the stablecoin protocol on the new chain is constantly emerging, more than 90% of the market value is still concentrated on centralized stablecoins.*Some startups try to use the payment yields generated by US government bonds to challenge the dominant positions of Tether and Circle, but I think the long -term development of centralized stablecoins requires more cooperation with traditional financial institutions and regulatory authorities.This includes cooperation with compliance custodian, sufficient capital injection and obtaining relevant licenses.

To create the next “super stablecoin” similar to USDC and USDT, we believe that at least the following four key conditions need to be met in order to give full play to the advantages of centralization and decentralized stable coins:

1. Stable currency based on the US dollar: The dollar has a wide range of acceptance globally, and its supporting assets are widely applicable.

2. Global regulatory approval and license: Super stablecoin needs global positioning from the beginning to obtain recognition from the US regulatory agency and global license.

3. Innovative financial attributes: Super stable coins should have innovative financial attributes, such as profit sharing mechanisms to establish community support and sustainable growth.

4. Seamless integration into the DEFI ecosystem: Super stablecoin needs to be an indispensable part of DEFI Lego in order to be widely used in the DEFI field.

5. The stablecoin market plays a vital role in the cryptocurrency ecosystem, and is expected to continue to develop and expand.To successfully build the next super stablecoin, we believe that we may need to meet a series of DEFI gameplay advantages and establish a cooperative relationship.

2. Classification of stablecoin

Decentralized stable currency

In order to solve the problem of centralized stablecoin, decentralized stablecoins introduced innovative solutions.These new stable currency are constructed based on the blockchain protocol, making it more transparent.For example, Curve’s CRVUSD, AAVE’s GHO, and DOPEX DPXUSDSD are all stable coins based on the chain protocol, reducing the centralized factors.Decentralized stablecoin can be divided into two categories:

Extract -mortgage stablecoin:

• Mortgage stable currency is the most common decentralized stable currency type.Their asset support usually comes from other cryptocurrencies, such as Ethereum or Bitcoin to maintain its relative value stability.For example, MakerDao’s DAI is supported by Ethereum as a mortgage.The latest trend is to shift collateral from traditional stable currency and main traditional digital currencies to wider digital currency or multi -layer nested to increase liquidity and provide more application scenarios.For example, the largest collateral of Curve’s CRVUSD is STETH, and Ethena’s stablecoin is also based on Ethereum and mobile pledge tokens (LST).

• potentialAdvantages:The mortgage stable currency may surpass the role of pure payment tools and evolve into more comprehensive digital asset management tools to provide users with extensive choices and flexibility.

• Potential disadvantages:One of the main problems of mortgage stable currency is the risk of decreased asset utilization rate, especially when there is a support for volatility assets such as Ethereum.This volatility brings the possibility of mandatory liquidation and a major challenge.

Algorithm stabilization currency:

• Algorithm stabilizer is one of the most centralized stable currency types.Its idea is to use market demand and supply to maintain fixed prices without the need to support the support.These stable currency use algorithms and smart contracts come from motion management supply to maintain price stability.For example, AMPLEFORTH is a algorithm -based stablecoin, which aims to keep its price at a level close to $ 1.The aim is to use the elastic supply mechanism to automatically adjust the supply according to market demand to balance prices.When the price is higher than $ 1, the supply increases, and the supply decreases when the price is lower than $ 1.

• In addition, there are some mixed algorithms stable coins trying to combine the algorithm with the legal reserves.For example, FRAX is a algorithm -based stablecoin that aims to maintain the price at a level close to $ 1.It adopts a mixed stabilization coin mechanism, partly supported by fiat currency reserves, and partly managed by algorithms to maintain price stability.

• Potential advantages:Algorithm stabilizer is designed to achieve decentralization.Compared with other solutions, we believe that stable currency may have advantages in terms of scalability.The stable currency based on algorithms use transparent and verified code, which makes them attractive.

• Potential disadvantages:Like all digital assets, algorithm stabilizers are easily affected by market sensitivity.When the demand for algorithm stabilizers decreases, its price may fall below the target value.In addition, the operation of algorithm stabilizers depends on smart contracts and community consensus, which may bring governance risks such as code defects, hackers, artificial manipulation or conflict of interest.

Centralized stable currency

Centralized stable currency usually uses legal currency as a mortgage and stores in the bank account under the chain as a reserve for tokens on the chain.They solve the problem of the value of virtual assets, link digital assets to hooking with physical assets (such as US dollars or gold) to stabilize their value.At the same time, solve the problem of virtual assets in the regulatory environment, and provide users with more reliable digital asset storage and trading methods.Centralized stable coins still occupy more than 90% of the market share.*

At present, in addition to the US dollar and the British pound, many centralized stablecoin projects have US Treasury bonds as mortgages.U.S. Treasury bonds are usually hosted by institutions to provide redeemability, while tokenization increases the liquidity of basic financial assets.In addition, they also provide interactive opportunities for DEFI components, such as leverage trading and lending.This enables the project to purchase US Treasury bonds from encrypted users with zero cost and benefit from bond yields directly.

However, there are certain potential limitations for centralized stablecoins.One of them is limited output opportunities.Because centralized stable currency depends on the reserves of trusted entities to ensure stability and value, users may not be able to obtain the revenue of the machine.This limit is derived from the centralized control and management of mortgages.

three.The popularity of the stablecoin market has risen recently

1. US bond yields rose more than the DEFI protocol yield

Compared with DEFI, the soaring yield of government bonds has led to a significant increase in the return rate of Tradfi.At present, the total market value of stabilized currency has reached US $ 130 billion, becoming the 16th major holder of US Treasury bonds, with an annualized return rate of up to 5% or higher.The stable currency is lent to others to get interest, and the loan yield is about 3%, and the demoter trading platform such as UNISWAP provides about 2% of the return by automatic market (AMM) **.This situation reflects that the decline in bond prices and the rise in yields may cause some investors to seek higher returns in the traditional financial market, which may lead to a decline in Defi’s yield.

2. The emergence of a stable currency project with a profit sharing mechanism

At present, most of the profits of centralized stablecoin have flowed to its issuers and related investors.For example, USDC shares part of the profit with investors such as Coinbase.Coinbase then allows users to store USDC on the platform to get rewards to attract more users.However, there are some innovations in the market, and the income is divided into the scope of investors and ecosystem participants.

3. TRADFI company gradually enters the stable currency market

According to Brevan Howard’s research report, in 2022, the amount of settlement on the chain of stable coins reached $ 11.1 trillion, exceeding Paypal’s $ 1.4 trillion, which was equivalent to Visa’s $ 11.6 trillion.This highlights the huge potential of stable currency in the payment field, especially in providing high -efficiency chain settlement systems.In addition, in developing countries with underdeveloped payment and banking systems, the application of stable currency is particularly critical and meets the demand for high -efficiency and low -cost payment solutions.Therefore, stabilization coins play an increasingly important role in the global financial ecosystem, especially in promoting financial inclusiveness and economic growth.

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Many companies, including PayPal and Visa, are entering the stabilization currency market.PayPal has launched Pyusd with Paxos, which is a stablecoin supported by US dollar deposits, short -term government bonds and cash equivalent.Pyusd can be exchanged in the PayPal application and can operate with Venmo and other cryptocurrencies.It aims to provide Paypal’s 431 million users entering the entrance point entering the web3 world.At present, PYUSD’s circulation is about 1144.6 billion US dollars, ranking 14th, accounting for 0.1%of the total stablecoin market.The launch of PayPal may greatly affect the widespread adoption of cryptocurrencies, linking traditional financial convenience with digital currency innovation.

1. Exchange

In the first half of 2023, USDC accounted for nearly half of COINBASE revenue, totaling about 399 million US dollars.

source:Coinbase

A. The cooperation between exchanges and stable currencies brings income growth

• In the first half of 2023, some of Coinbase’s income came from the profit sharing agreement with Circle.As of the end of the third quarter of 2023, the USDC balance on Coinbase reached 2.5 billion US dollars, higher than the US $ 1.8 billion at the end of the second quarter.Circle and Coinbase manages USDC through the central alliance and distribute income according to USDC holdings.In August 2023, Coinbase Ventures acquired a few equity of Circle and strengthened the cooperative relationship between the two parties.

Source: coinbase

• In addition, Circle also announced that it is using USDC to expand its web2 business by cross -border settlement.In September 2023, VISA expanded the Circle’s USDC stabilization currency settlement to the solana blockchain to increase the speed of cross -border payment.Coin price.

• Markets show that USDT is mainly used for derivatives transactions for centralized exchanges, while USDC is more commonly used in Web3 Dapps.Choosing a trusted stable currency issuance agency is vital to the exchange.Traditional institutions such as Meilong Bank of New York are high, and the financial conditions of major cryptocurrency issuers such as Tether and Circle are relatively strong.Factors such as third -party custody services, audit companies and licenses are also important.Taking BUSD and TUSD as an example, using multiple custers can reduce the risk of trading opponents.

B. The potential of stable currency payment promotes the increase in traffic of exchanges and issuers

• Stable currency payment, especially cross -border transactions, has huge potential and can promote the traffic of exchanges and issuers.The issuer can integrate stable coins into the payment process by cooperating with the web2 payment company.For example, as of the fourth quarter of 2023, PayPal has 433 million active retail accounts and 35 million active merchant accounts worldwide.PayPal allows PYUSD to settle, and Pyusd can be purchased, held and sent by merchants on PayPal, Venmo and Xoom.Venmo has about 80 million users in the United States to contribute to Paypal’s 320 million global users.*At present, PYUSD is only supported by PayPal US accounts due to license restrictions, but in view of PayPal’s extensive user base, it has growth potential.However, Pyusd is facing the risk of Paxos from its publisher,

Source: Bao

2. layer 1 and layer 2

A. BUSD’s effect on the total lock value (tvl)

• The market value of 6 public chain and the BUSD, which is mainly active in Ethereum and BSC, has decreased, resulting in its market value fell to $ 2 billion.This decline has a significant impact on the Ecological System of the Intelligent Chain (BSC), because the decline in the value of BUSD has caused the stable currency value to decrease by 44%, and the total value (TVL) in the BSC protocol decreases by 66%(BSC) The key role of the ecosystem.Blockchain ecosystem health stablecoin.

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B. TUSD’s influence on the ecology of the wave field

• After a series of operations after February 2023, the market value of Trueusd (TUSD) increased from about $ 1 billion to $ 3 billion.

• February 2023: TUSD implements the CHAINLINK reserve certificate mechanism to ensure the safety of its coinage process and further ensure transparency and reliability.

• March 2023: TUSD hires the American Independent Accounting Firm that specializes in the blockchain industry The Network Firm LLP to provide real -time verification for its US dollar reserve coverage.

• April 2023: TUSD introduced native support on the BNB chain.

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• There is also a positive correlation between the market value of stable currency on the public blockchain and the total lock value (TVL) on the blockchain, as shown in the TRON blockchain shown below.

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C. USDC on different blockchain

USDC has been issued on more than 15 public blockchains, and its total value lock (TVL) ranking is Ethereum, Solana and Polygon.USDC is actively seeking to expand its application scenarios, mainly concentrated on payment, especially cross -border payment.

Table: The distribution of USDC’s TVL on different blockchains

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• USDC and Solana: VISA cooperates with Circle to use USDC on the Solana blockchain for chain settlement. It aims to use Solana’s high throughput and low transaction costs to achieve faster and cheaper cross -border payment.

• USDC and Polygon: In October 2023, Circle supports native USDC on the Polygon POS main online.The main Polygon protocols such as AAVE, Compound, Curve, Quickswap, and Uniswap announced their support for the development of native USDC, and plans to achieve cross -chain interoperability at the end of 2023.

• USDC and SEI Network: In November 2023, Circle invested in SEI Network to support the native USDC on the chain and noticed the performance advantage of SEI. The final determination time of the transaction was 0.25 seconds, surpassing SUI, Solana, and Aptos.

D. DAPP issuance stable currency

The impact of stable coins issued by top DEFI protocols such as MakerDao, Curve, AAVE, etc. are huge on public chain.Here we take the rise of stablecoin CRVUSD and GHO as an example for reference.

Curve’s CRVUSD was launched in May 2023, allowing users to use various encrypted assets as mortgage cast stablecoins, of which WBTC significantly promoted its growth.The protocol adds Lido’s WSTTH and Bitgo’s WBTC and other collaterals, which quickly obtained market dominance and shows the influence of Curve in the DEFI field.These development not only enhanced the influence of Curve’s DEFI, but also affected the asset liquidity and the use of stable coins on public blockchain.This trend highlights the innovation and importance of the leading DEFI protocol in the encrypted ecosystem, and shows that their continuous development roles may bring new motivation and challenges to the use of blockchain and market stability.

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As the largest lending agreement*, the total lock -up value (TVL) AAVE, which has reached $ 5.64 billion, launched an excess mortgage stable currency GHO.Therefore, all tokens supported by the AAVE V3 protocol can be used as GHO mortgages, and this mortgage will continue to generate income in the lending agreement.Since its launch in July, GHO’s cumulative TVL has exceeded $ 20 million.

*source:Defillama

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3. Stable currency issuance agency

At present, most stable currency supply is supported by short -term assets with high liquidity such as the US dollar and Treasury coupons, and the risk of breach of contract is very low.The primary risk of centralized stable currency issuance agencies is to ensure that users’ purchase and exit channels are unblocked; if the issuer fails to redeem during the user withdrew, the ecosystem may collapse.

Finding a trustworthy stable currency issuer is vital to ecosystem participants.Analyze the cryptocurrency ecosystem and the traditional financial market system, and the crypto native custodian institutions, traditional financial custodian institutions, banking, and asset management platforms have absolute credibility.For example, Fireblocks, Bitgo, New York Meron Bank, and Berlaide and other institutions are more suitable as stable currency issuers.

ETF asset management can be used as a model. Multi -party parties can ensure the publicity of capital storage and liquidity through the “surveillance sharing agreement” and enhance credibility.In addition, the data tracking platform on the third -party chain audit and Oklink can jointly regulate the security of funds.

4. Host service provider

In 2023, USDC’s brief decoupling due to SVP bankruptcy highlights the importance of the risk management of balance sheets.Some stabilized currency projects, such as PYUSD, entrust the asset management to PAXOS, holding the asset management to hold the New York Bitlicense and undergo the New York State Financial Services (NYDFS) supervision, reduce certain risks by transferring assets to third -party compliance agencies by transferring assets to third -party compliance agencies.custodian.

In addition, Circle has collaborated with BlackRock, one of the world’s largest asset management companies, to create a Circle Reserve Fund, registered in SEC and was regulated.The main goal is to manage the reserve of USDC. At present, the agency holds about 94% of reserves.

5. Infrastructure on the chain

M^Zero Labs provides examples of blockchain infrastructure.M^Zero Labs is committed to establishing decentralized infrastructure, allowing institutional participants to allocate and manage assets on the blockchain.The platform is open source, which connects financial institutions to other decentralized applications to promote chain value transfer and collaboration between participants.

5. Conclusion

As the cryptocurrency pattern evolved from its peak in 2021 to a bear market in 2023, stabilization coins uniquely emphasized its flexibility and key role in a wider range of crypto ecosystems.Although the market has shrunk from US $ 3 trillion to $ 1 trillion, the relative stability of the market value of stable currency highlights their potential for their portable ports in cryptocurrency volatility.Mainstream stablecoins such as USDT and USDC have consolidated their position in the market.

The rapid growth and diversification of the stabilized currency industry have proved the continuous innovation of the cryptocurrency field.The evolution of the market, from excess mortgage to algorithm stable coins, shows a dynamic response to diversified financial needs.The originality of these emerging and stable coins, including different collateral types, liquidation processes, and income sharing mechanisms, not only enhances the flexibility of the DEFI ecosystem, but also establishes laboratories for the potential market evolution.

In the foreseeable future, stable coins are expected to significantly expand its influence in the encrypted ecosystem.With the advancement of technology, we expect that the application of stable coins in financial services will continue to expand, especially in the fields of cross -border payment and settlement.The realization of this potential requires the industry to increase transparency, security, and integration with existing financial infrastructure.

All in all, stable currency is not just a subset of the cryptocurrency market.They are essential for connecting traditional finance and digital currency.Their journey is a continuous evolutionary journey, which requires continuous innovation, adaptation and collaboration to control the dynamic trend of market and regulatory changes.For market participants, grasping and adapting to these changes is essential for ensuring long -term success in this changing environment.