Stablecoins on the Market
Types of Stablecoins and AquaUSD's Place
Aqua Protocol has established itself as the pioneering over-collateralized stablecoin solution in the TON ecosystem, backed by Liquid Staking Tokens (LSTs), significantly advancing the realms of lending and stablecoins.
Overview of Stablecoins
Stablecoins, a subgroup of cryptocurrencies, are specifically designed to track the value of a fiat currency like the USD, maintaining a 1:1 ratio. Many DeFi users allocate a significant portion of their portfolios to stablecoins due to their reliable value preservation and liquidity provisioning.
Currently, stablecoins fall into three primary categories:
Fiat-Collateralized and 1:1 Collateralized: These stablecoins are backed by fiat currencies (such as USD or EUR) and include well-known examples like Tether (USDT), USD Coin (USDC), and TrueUSD (TUSD). Typically, centralized institutions issue and oversee them, and they maintain a 1:1 collateral ratio, meaning that one unit of fiat currency backs each stablecoin.
Crypto Backed and Over-Collateralized: Crypto-Collateralized stablecoins are supported by cryptocurrencies (like Bitcoin or Ethereum) and include Dai, BitUSD, and sUSD. These stablecoins tend to have lower collateral ratios, often around 1:1.5 or 1:2, which means that for each stablecoin issued, 1.5 or 2 cryptocurrencies are pledged as collateral.
Algorithmic and Under-Collateralized: Algorithmic stablecoins, such as Basis Cash and Frax, employ sophisticated algorithms to maintain stable prices. Their price stability mechanisms involve flexible supply adjustments and incentive structures to balance supply and demand and stabilize prices. However, algorithmic stablecoins have faced challenges in maintaining stability during crypto market downturns.
AquaUSD is classified as a "Crypto Backed and Over-Collateralized Stablecoin." It is supported by Liquid Staking Tokens (LSTs) on the Ton blockchain, specifically staked TONCOINs, with a minimum collateral ratio of 1:1.5, providing a strong and reliable collateral framework.
In 2024, Ethena's USDe stablecoin gained significant traction by employing delta-neutral strategies to maintain its stability. This approach is highly capital-efficient, allowing investors to earn higher yields. However, it hasn't yet been battle-tested in a prolonged bear market, raising questions about its resilience.
At Aqua Protocol, we've built our AquaUSD stablecoin on technologies that have proven themselves over many years and across various market conditions. By integrating these time-tested solutions, we aim to establish a solid foundation for the TON DeFi infrastructure, ensuring both reliability and capital efficiency.
The Role and Need for AquaUSD in the TON Ecosystem:
Filling the Over-Collateralized Stablecoin Gap: The TON ecosystem lacks over-collateralized stablecoins. AquaUSD addresses this by providing a stablecoin backed by cryptocurrency collateral.
Expanding LST/LP Utility: The utility of Liquid Staking Tokens in TON is currently limited, especially in borrowing protocols. AquaUSD creates new opportunities for these LSTs.
Diversifying Lending Protocols: The introduction of AquaUSD diversifies the lending landscape in TON, which has been lacking in stablecoin options.
Adding more DeFi options to users
USDT's Presence and Aqua Protocol's Unique Position: native USDT in the TON ecosystem is not seen as a direct competitor to AquaUSD. This is because Aqua Protocol's primary focus is on lending. AquaUSD is specifically designed to enhance the lending framework within TON, offering a distinct and specialized solution that goes beyond the basic utility of a stablecoin like USDT. Aqua Protocol's approach emphasizes leveraging cryptocurrency collateral for lending purposes, making it a unique and essential part of the TON DeFi ecosystem.
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