Stablecoins are a stable store of value and a key entry point for various on-chain activities. Today, stablecoins have entered the real world, demonstrating financial efficiency that surpasses traditional banking systems in retail payments, B2B transactions, international remittances, and more.
In emerging markets such as Africa, Asia, and Latin America, the application value of stablecoins is gradually becoming apparent. Their high financial inclusivity enables residents of third-world countries to effectively offset high inflation caused by government instability. Moreover, stablecoins can also participate in global financial activities, gaining access to cutting-edge virtual services such as online education, entertainment, cloud computing, and AI products.
The next step for stablecoins is the traditional payment systems in emerging markets. In the foreseeable future, the legalization and accelerated adoption of stablecoins will become inevitable, while the rapid development of artificial intelligence will further drive demand for stablecoins. The only constant compared to the past two years is that Tether and Circle still maintain a dominant position in this field, while more startup projects are focusing on the upstream and downstream of stablecoins.
Stablecoins are generally divided into three categories.
Fiat-collateralized stablecoins: These stablecoins are backed by fiat currency and are usually issued at a 1:1 ratio. Companies creating these digital currencies deposit a significant amount of real money in a real bank. For instance, if they issue 1 million digital coins, they will prepare 1 million dollars in the bank as collateral. This is to ensure that at any time, users can exchange their digital coins for an equivalent amount of real-world money.
Over-collateralized stablecoins: These stablecoins are created by over-collateralizing other volatile and liquid high-quality crypto assets (such as ETH or BTC). To reduce potential price volatility risks, these stablecoins typically require a higher collateralization rate, meaning the value of the collateral must significantly exceed the value of the minted stablecoins. Typical examples include $Dai and $Frax.
Algorithmic stablecoins: These stablecoins are entirely regulated by algorithms that control their supply and circulation, linking the price of the stablecoin to a reference currency (usually the US dollar). Generally, when the price rises, the algorithm issues more currency, and when the price falls, it repurchases currency from the market. The most famous example is the Luna stablecoin.
Ethena @ethena_labs is the fastest-growing fiat-collateralized stablecoin project since the collapse of #TerraLuna. Its native stablecoin USDe has surpassed Dai, reaching a market size of 5.5 billion dollars, ranking third. The overall approach of the project is based on using Ethereum and Bitcoin as collateral for Delta Hedging. The stability of USDe is achieved by shorting Ethereum and Bitcoin on CEX, with the short position amount equivalent to the value of the collateral. This is a risk hedging strategy aimed at offsetting the impact of price fluctuations on the value of USDe. If the prices of both assets rise, the short position will incur losses, but the value of the collateral will also rise, offsetting the loss; conversely, if the prices fall, the short position will profit, but the value of the collateral will also increase. The entire process relies on off-exchange settlement service providers to facilitate this, which means that the assets of the protocol are hosted by multiple external entities.
Ethena's revenue sources mainly include three points. Ethereum staking rewards: Users' staked LST can generate staking rewards from Ethereum; Hedging trading profits: Ethena Labs' hedging trades may yield funding rate or basis profits; Liquid Stables fixed rewards: Depositing USDC or other stablecoins in exchanges like Coinbase can earn deposit interest.
$ENA Despite experiencing a prolonged downturn around mid-year, with significant declines in yields and questioning of the design logic, no systemic risks have emerged. As a key innovation in this wave of stablecoins, Ethena provides a design logic that integrates on-chain and CEX elements, bringing a large amount of LST assets from the mainnet into exchanges, creating scarce short-selling liquidity in a bull market, generating considerable fees and new liquidity for exchanges. Looking ahead, it remains to be seen whether this model can be used to build completely decentralized stablecoins with the rise of DEX and the emergence of more mature blockchain abstractions.
Usual @usualmoney is a RWA stablecoin project created by former French parliament member and advisor to President Macron, Pierre PERSON.
The project attracted significant attention after its launch in Binance's new coin pool, with its total locked value rapidly soaring from tens of millions to about 700 million dollars. The project's native stablecoin USD0 adopts a 1:1 reserve support system. Unlike USDT and USDC, users do not need to exchange fiat currency for an equivalent amount of virtual currency. Instead, they exchange fiat currency for an equivalent amount of US Treasury bonds, which is the core selling point of the project—sharing the profits earned from Tether.
The operational logic of traditional fiat stablecoins, using Tether as an example, is that users do not earn any interest when minting USDT with fiat currency. To some extent, Tether's fiat can be seen as 'unearned income.' The company uses a large amount of fiat to purchase low-risk financial products (primarily US Treasury bonds), making a profit of 6.2 billion dollars last year, and then reinvests in higher-risk projects to generate passive income.
Usual's operational logic is built around the core concept of 'becoming an owner, not just a user.' The design of the project redistributes infrastructure ownership to TVL providers, meaning users' fiat currency is converted into ultra-short-term US Treasury bonds (RWA). This process is implemented through USYC, managed by one of the leading on-chain institutional asset management firms, Hashnote, and supported by DRW partners. Profits ultimately flow into the protocol's treasury, owned and managed by the protocol's token holders.
The native token of the protocol$USUAL will be distributed to locked USD0 holders, enabling profit sharing and early coordination. Additionally, the token has a lock-up period of 4 years, which aligns with the maturity period of certain US medium-term government bonds.
Usual's advantage lies in breaking the control of stablecoins by centralized entities like Tether and Circle, while maintaining capital efficiency and redistributing profits more fairly. However, the longer lock-up period and relatively lower yields compared to Ethena may make it difficult for it to achieve large-scale growth in the short term. For retail investors, the appeal may more focus on the value of Usual tokens.
On the other hand, in the long run, it has clear advantages. First, it allows citizens of countries without US bank accounts to invest in US Treasury bonds more easily. Second, it provides stronger underlying asset support, with a project scale far larger than Ethena. Third, the decentralized governance model also means that stablecoins are less likely to be frozen, making them a better choice for non-trading users.
Stablecoins will always be a battleground; they represent a highly challenging area within the crypto space. Stablecoins not only play a significant role in the DeFi sector but are also starting to enter the traditional financial realm. As the legalization process of stablecoins accelerates, the market demand for their applications in retail payments, international transfers, and cross-border e-commerce will continue to grow. In emerging markets like Africa, Asia, and Latin America, the application of stablecoins can effectively address high inflation and currency instability issues, allowing residents to participate in global financial activities and access better financial services.
As a significant innovation in the cryptocurrency field, stablecoins are leading the transformation of the global financial system. Whether it is the stablecoin applications that consolidate the dominance of the US dollar or the explorations of various emerging projects in decentralization and innovative design, the stablecoin market is showing a trend of diversified development.
With the continuous development of the market and technological advancements, we have reason to believe that stablecoins will play a more important role in the future financial system and become a key force in promoting the efficiency of global payments and financial services.
