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Stablecoin Summer Is In Full Swing
Whilst “DeFi Summer” was all of the craze back in 2020, fast forward to today and we are on the verge of Stablecoin Summer - if this week’s news is anything to go by. From centralised stablecoins, to novel decentralised algorithmic stables, crypto’s most profitable business model is blossoming. From more productive stablecoin regulation being passed globally, helping open up the path to stablecoins become an everyday means of payments, to stablecoin businesses issuing more exotic forms of stablecoins - it’s safe to say stables have come a long way since 2020.
So what’s new this week and why are we on the verge of a Stablecoin Summer?
Seeking New Horizons:
From PayPal’s USD stablecoin (PYUSD) launching on Solana, to Agora Dollar (AUSD) launching on Sui, the past week has seen a number of different coins moving onto other blockchain networks. This is an important step for any stablecoin as it not only diversifies risk through not being reliant on any single network, but helps increase accessibility and adoption.
Not So Boring:
Stablecoins have historically been pretty basic in their functionality - i.e. they aimed to offer 1:1 redemption against their respective fiat currencies, but that was it. This has made them useful for payments and acting as a store of value, but they have never been as exciting as their more volatile cryptocurrency peers - and for good reason too, they are supposed to be stable! Yet, this hasn’t meant innovation has slowed down. This week, Paxos (a major stablecoin issuer) unveiled their yield-generating stablecoin Lift Dollar (USDL). Unlike many stablecoins, this stablecoin has programmatic daily yield, which is expected to be around 5% APY, backed by short-term U.S. government securities.