Stablecoin 101
USDC, BUSD, USDT*
DAI, MIM, MAI
UST, USDN, USN, FRAX
collateralized by purely USD
collateralized with crypto assets
non-collateralized, relay of ‘backed’ crypto token
user sends USD to token issuer's bank account
issuer creates an equivalent amount of stablecoin via smart contract
newly minted USDC are delivered to the user, while the substituted US dollars are held in reserve
deposit accepted crypto as collateral
mint corresponding amount of new DAI via smart contract
pay back the borrowed DAI to get back locked collateral
incentive-based mechanism to sell $1 cost DAI at >$1 & mint discounted DAI when <$1
Above $1 (contracts LUNA supply):
users burn $1 worth of LUNA to mint 1 UST, sell in market for profit
Below $1 (contracts UST supply):
users burn 1 UST to redeem $1 worth of LUNA, sell in market for profit
Centralized
Decentralized
Decentralized
The most stable
Relatively stable
The most fluctuating
Low risk
Medium risk
High risk
Taking the stable advantage to bridge 1:1 real world fiat into crypto space, but somehow involve
Issuance doesn’t rely on any intermediary, favored by people who pursue decentralized & ownership
Kind of experimental projects, attract adoption with high interest (APY), but mostly not sustainable
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