Stablecoins
Diagrams | Matrices | Innovators
When will stablecoins become the dominant method of payment?
Stablecoins are room-temperature superconductors for financial services. Thanks to stablecoins, businesses around the world will benefit from significant speed, coverage, and cost improvements in the coming years. - Patrick Collison
Most stablecoins are pegged to the USD due to its status as a global reserve currency.
Mechanisms
Mechanisms from safest to riskiest?
- Fiat Backed
- Commodity-backed
- Algorithmic
- Synthetic Dollar
Marketplace
Stablecoins are usually minted or burned based on a collateralisation ratio of a basket of assets. These assets determine the trust assumptions of the stablecoin and can range from fiat/assets being held in a tradFi account (USDC, USDT, PAXG) or crypto assets/tokens (DAI, TUSD, FRAX). Stablecoin protocols are able to set a target collateralisation ratio in order to drive capital efficiency.
| Protocol | Mechanism | Website |
|---|---|---|
| Tether | Fiat Backed | tether.to |
| USDC | Fiat Backed | circle.com |
| SKY | Commodity-backed | sky.money |
| FRAX | Algorithmic | frax.finance |
| Radius | Algorithmic | radiustech.xyz |
| Ethena | Synthetic Dollar | ethena.fi |
Platforms and Products
What forces will influence adoption?
| Platform | Notes |
|---|---|
| Stripe | 1 billion purchase |
| Shopify | |
| Visa |
See Web Payments for more
Engineering
Stable unit of accounting; Borrowed trust from tradFi for fiat-backed stables; Target peg is intuitive due to historical precedent.