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DeFi protocols launch stablecoins to lure new users and liquidity, but does it work?

The Cointelegraph ​

Cryptocoins News / The Cointelegraph ​ 160 Views

Stablecoin projects have been thrust into the limelight over the past month as the popularity of algorithmic stablecoins and the collapse of the Terra project put a spotlight on the important role dollar-pegged assets play in the crypto market.

In response to the void left by UST, multiple protocols have released new stablecoin projects in an effort to attract new users and capture liquidity. Generally speaking, the DeFi sector is full of gimmicks that are designed to entice user participation and it's possible that the recent stablecoin launch programs are simply the next trending tactic being used to boost TVL on DeFi platforms. 

Let's take a look at some of the newest stablecoins to hit the market and what impact they may or may not be having within DeFi.

USDD

One of the biggest stablecoin projects to launch recently is USDD, a decentralized algorithmic stablecoin on the Tron (TRX) blockchain. Since launching on May 5, USDD has experienced rapid growth in terms of its circulating supply, which currently sits near 601.86 million and its integration within the Tron ecosystem is relatively widespread.

USDD market cap growth. Source: CoinGecko

USDD is also available on the Ethereum (ETH) network and the BNB Smart Chain (BSC), which has helped to increase the tokens distribution along with providing additional yield opportunities.

There are multiple liquidity provider pools available to USDD holders that offer 20% APY or more across various protocols, including JustLend, SunSwap, Ellipsis and Curve. In the time since USDD launched, the price of TRX has increased 17% from $0.07 to its current price of $0.0818 after briefly hitting a high of $0.092 on May 31.

fUSD

Fantom recently released fUSD, its first native stablecoin, which is an over-collateralized and can be minted using Fantom (FTM), USD Coin (USDC), Dai (DAI), SpiritSwap (SPIRIT) and wrapped Tether (fUSDT) as collateral.

In an effort to attract more liquidity, the Fantom Foundation set the fUSD staking reward at 11.3% and created a fUSD to USDC swap interface that allows users to purchase fUSD and repay their positions to avoid liquidations.

At the time of writing, the circulating supply of fUSD stands at 60,993,403 and it is trading at a price of $0.7112, which is significantly below its $1 peg.

aUSD

Following the official launch of the first parachains within the Polkadot ecosystem, the Acala decentralized finance platform released aUSD as the first native stablecoin for Polkadot projects.

aUSD is an over-collateralized stablecoin that can be minted by pledging Polkadot (DOT), staked Polkadot (LDOT), Kusama (KSM), staked KSM (LKSM), Acala (ACA) or Karura (KAR) as collateral.

Pledging LDOT and LKSM as collateral allows DOT and KSM holders to continue earning staking rewards while simultaneously being able to borrow collateral against their holdings.

On March 23, Acala joined with nine other parachain teams to launch a $250 million “aUSD Ecosystem Fund” that is designed to support early-stage startups planning to build strong stablecoin use cases on any Polkadot or Kusama parachain.

As of May 31, 6.31 million aUSD have been minted and the amount of pledged capital locked on Acala stands at $91.53 million.

Related: UK government proposes additional safeguards against stablecoin failure risks

OUSD

Origin protocol’s OUSD is a stablecoin that is fully backed by more recognizable stablecoins like USDC, USDT and DAI.

OUSD market cap growth. Source: CoinGecko

Users can mint OUSD by pledging their stablecoin collateral on the Origin Dollar protocol and earn a yield of 12.79% by holding OUSD in a wallet. Yields that are paid to OUSD holders come from automated strategies managed by smart contracts that put the deposited funds to work in DeFi.

After briefly dropping to a low of $0.967 on May 12 during the height of the UST fallout, OUSD has, for the most part, maintained a price above $0.996 and has a current circulating supply of 63,605,444.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.


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