Problem
This section examines the current stablecoin landscape and limitations of existing solutions.
TL;DR
The current stablecoin market, dominated by USDT and USDC with a combined 90% share, offers stability but lacks yield and decentralization. Emerging decentralized stablecoins like DAI, USDe, USD0, and USDz, paired with yield-generating liquid staking tokens (LSTs), aim to address these limitations but still face challenges such as opaque yield processes and limited user control. Integrating real-world assets (RWAs) in DeFi also remains problematic due to low market adoption and usability. Coinshift’s csUSDL is designed to bridge these gaps, offering a balanced solution with transparent yield, enhanced user control, and seamless DeFi integration.
Stablecoin Market Overview
Stablecoins have established themselves as the most widely adopted product onchain, with projections indicating market growth to $10 trillion by 2030, up from $170 billion today. Tether (USDT) and Circle (USDC) lead the market with a combined 90% share, generating over $10 billion in revenue in 2023. Their success is due to deep liquidity, first-mover advantage, and regulatory compliance. However, this dominance comes at a significant cost:
No Yield: Users earn no returns on their holdings, although issuers benefit from the assets under management.
Centralization: Yield and risk management decisions remain centralized.
Complex Strategies: Users must engage with multiple DeFi platforms to generate yield.
The Rise of New Decentralized Stablecoins
The market is evolving, demanding higher yields, greater governance control, transparency in yield and risk management, and seamless DeFi integration. Among the 49 stablecoins currently available, decentralized options are growing fastest. These stablecoins aim to maintain a 1:1 peg to the U.S. dollar and typically offer:
Base Tokens and Liquid Staking Tokens (LSTs): Non-yield-bearing base tokens (e.g., DAI, USDe, USD0, USDz) paired with yield-generating LSTs (e.g., sDAI, sUSDe, USD0++, sUSDz).
Governance and Incentives: Tokens like ENA, MKR/SKY, and Usual to engage users.
DeFi Integration: Strong connections with platforms like Morpho, Pendle, and Curve to enhance yield opportunities.
Emerging Stablecoins and LSTs
MakerDAO / Sky
DAI / USDs is a decentralized, collateral-backed stablecoin pegged to the U.S. dollar, created by locking over-collateralized crypto assets in smart contracts. If collateral values drop significantly, MakerDAO can mint additional MKR tokens to maintain the peg.
sDAI / sUSDs are yield-bearing derivatives of DAI or USDs, formed when users lock their DAI in the DAI Savings Rate (DSR) module. This module distributes protocol revenue to sDAI or sUSDs holders, allowing them to accrue interest over time. The yield allocation is managed by MakerDAO, which adjusts rates based on market dynamics and redistributes revenue from real-world assets (RWAs) and lending activities.
Ethena:
USDe: A synthetic dollar-pegged stablecoin built on the Ethereum blockchain, maintaining its 1:1 peg to the U.S. dollar through a sophisticated delta-neutral hedging strategy. This involves holding staked Ethereum (stETH) as collateral and simultaneously opening short positions on Ethereum futures to counteract price volatility and ensure stability.
sUSDe: users can stake USDe to mint sUSDe, which accumulates yield from Ethereum staking rewards and funding rates from derivative positions.
Limitations of emerging Stablecoins and LSTs
Lack of Transparency and User Control: Base tokens like DAI, USDe, USD0, and USDz do not provide direct yield to users.
Opaque Yield Processes: Yield generation often requires complex steps or lock-ups. Users must engage with liquid staking tokens (LSTs) to earn yield, which rely on intricate and non-transparent asset management strategies.
User Control Constraints: Users only have one choice: to be exposed to the asset selection chosen by the provider. Users cant influence asset utilisation decisions.
Challenges Integrating Real-World Assets (RWAs) in DeFi
Although onchain US Treasury Bills and other RWA-backed assets are gaining traction, their adoption remains limited due to minimal usability within DeFi. Most RWA assets are not accessible in lending and borrowing markets, nor are they available in fixed-rate markets like Pendle or restaking platforms, restricting their strategic potential for DeFi users.
csUSDL by Coinshift
csUSDL addresses these gaps with a unique approach that balances yield generation, stability, user control, and regulatory compliance, all within an intuitive, user-friendly interface.
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