Decentralization Stablecoin: Who Can Claim the Crypto Assets Holy Grail?

Stablecoins are an important infrastructure in the world of Crypto Assets, hailed as the "Holy Grail of Crypto Assets." Since 2018, numerous investment institutions and media have referred to stablecoins as the Holy Grail of Crypto Assets. However, centralized stablecoins face regulatory threats, while decentralized stablecoins encounter developmental challenges.

Currently, the stablecoin market is dominated by centralized stablecoins such as USDT and USDC, which account for 91.6% of the market share. Among decentralized stablecoins, DAI and FRAX are still using centralized stablecoins as collateral for credit. This situation puts the strength of decentralization in jeopardy.

Centralized stablecoins, while dominant, face regulatory risks. USDT, USDC, and others have been subject to regulatory penalties for various reasons. In contrast, decentralized stablecoins offer better censorship resistance, but their development faces numerous challenges.

The necessity of decentralized stablecoins lies in:

1. Decentralized currency is feasible, and historically, there have been forms of currency that were decentralized.

2. Centralized stablecoins do not have minting rights and cannot create independent credit.

3. Centralized stablecoins face centralization threats, and their credibility is easily questioned.

4. Decentralization stablecoins have their inherent market, meeting the needs of users sensitive to centralized risks.

However, decentralized stablecoins face the "Icarus Wings" dilemma: being too small makes it difficult to maintain economic viability, while being too large raises regulatory concerns.

The current structure of the stablecoin industry is as follows: USDT, USDC, and others occupy a high-energy currency position, while other smaller stablecoins are more like broad money, needing to be exchanged into mainstream stablecoins through trading.

In the decentralized stablecoin space, there are mainly the following categories:

1. Rebalancing stablecoin: such as AmpleForth, which maintains price stability by adjusting the number of tokens.

2. Restricting the circulation of stablecoins: such as FEI, to stabilize the price by limiting buying and selling.

3. Minted stablecoin: such as UST-Luna, which maintains stability through the interaction between stablecoins and volatile coins.

4. Overcollateralized stablecoins: such as DAI, LUSD, using overcollateralization to ensure stability.

Currently, DeFi giants like Curve and Aave have also begun to enter the stablecoin sector, bringing new variables to the market. In the fully decentralized sector, projects like Liquity, Inverse Finance, and RAI each have their own characteristics, but all are relatively small in scale.

Overall, the stablecoin sector is still in its early stages of development. Although the prospects for decentralized stablecoins are unclear, they are still full of hope. No decentralized stablecoin has yet formed a monopoly advantage in the segmented market, and there is still significant room for growth in the future.