Google “new stablecoin” Every week, you can expect to see at least one new one emerge from the shadows.
Tether dominates the stablecoin market, and it could prove lucrative to claw away a portion of this business. USDT reported a profit of nearly $1 billion per quarter in 2023.
Tether is attractive to traders because of its high liquidity. DeFiLlama estimates that there are currently over 100 billion dollars worth of USDT. This represents over 70 percent of the stablecoins. But a new crop of upstart stables are hoping to beat Tether on a different point — yield.
Tether has stated that its revenue is largely derived from the investment it makes in US Treasurys. In an attempt to overtake Tether (which does not offer yield natively), some stablecoin projects pay the return earned from Treasury investments.
Pablo Veyrat is CEO at Angle Labs, a stablecoin development company. He said that this strategy was partly inspired by MakerDAO’s impressive returns. Maker has its own stablecoin that offers a yield.
Users can earn a token by depositing DAI into the DAI Savings Rate (DSR). SDAI was an attractive DeFi Investment during the 2023 bear market, when interest rates were high.
Ondo Finance used this strategy with USDY. “tokenized note” This product offers a yield on US Treasurys. USDY’s market capitalization has grown from $95m to around $105m since its launch on August 20, 2023. However, it isn’t available in the US.
You can find several examples where this is done. Steakhouse, a DAO-consulting firm, has compiled ten dashboards. “securities tokens” — most of which launched in mid-to-late 2023.
Stablecoins are a relatively new concept. Some projects push the boundaries further. Ethena went to mainnet in late February with USDe — which it calls a synthetic dollar. USDe’s peg is maintained through cash-and carry trades, in which it balances its staked Ethereum deposits with the corresponding short position on perpetual futures. This keeps the backing of USDe constant.
Ethena offers another version of USDe that is yield-generating and locked, called sUSDe. SUSDe’s yield comes from staked ETH rewards and the fee paid to short positions by those with long positions — called the funding rate.
Ethena’s website states that its trailing weekly average daily yield is 60.9%. There have been questions about the scalability of sUSDe if markets become less bullish, and funding rates fall. According to its website, the new stablecoin still has $1.2 billion worth of total value locked.
“With Ethena, we are finally seeing some innovation in the stablecoin space after a long lull post-Terra collapse,” Clara Medalie told Blockworks, in an email, that she is Kaiko’s director of research. “However, when it comes to actual usage, Tether is still dominant.”
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