Mar 07, 2023
Frax Approves Fully USD-Backed Stablecoin, End of Algorithmic Experimentation
The decentralized stablecoin space has seen a lot of experimentation in the past few years with algorithmic stablecoins like UST, and depegging of overleveraged stablecoins like MIM leading to a loss of confidence in the sector. However, the Frax community recently approved a proposal to make its FEI stablecoin fully backed by USD equivalents, rather than maintaining a partially backed and semi algorithmic stablecoin, which could be a major step towards restoring trust in the space.
At present, decentralized stablecoins account for only 5.5% of the total stablecoin supply, with MakerDAO’s DAI commanding 71% of the market. The transfer volumes of decentralized stablecoins have been largely dominated by DAI, and have declined since Q3 2022.
During the bull run of 2021 and 2022, platforms like Abracadabra and Luna flourished due to higher yields, but when the market took a negative turn these stablecoins were some of the first to collapse. Luna’s UST stablecoin crashed in May 2022 after major withdrawals of the stablecoin disrupted its algorithmic mechanism, while Abracabra’s MIM stablecoin lost its peg due to a widespread drop in prices of assets backing it.
MakerDAO’s DAI stablecoin is the longest-standing decentralized alternative and is backed by Circle’s USDC. In October 2022, the MakerDAO community voted to convert $500 million USDC to U.S. Treasury bonds in order to diversify the platform’s backing. Additionally, a court ruling in England forced the platform to include an option to seize assets from a user, creating a considerable regulatory risk for platforms using and launching decentralized stablecoins.
Liquity is another ETH-backed stablecoin platform that has earned a decent reputation in DeFi. The total supply of LUSD is 230 million, with LQTY as the utility token of the platform. The project’s native token, LQTY, doubled in price after its Binance listing on Feb. 28, 2023, although there were allegations of insider trading activity behind the price surge.
Frax’s decision to migrate away from a partially algorithmic design to a fully backed stablecoin could see a rise in demand for FEI. Moreover, Frax is a significant holder of Curve’s CRV and Convex Finance’s CVX token, enabling the DAO to incentivize liquidity provision on Curve.
At present, crypto market volatility and the lack of trust in decentralized stablecoins are preventing the sector from gaining market share. However, over time, decreased volatility and regulatory clarity around cryptocurrencies will likely increase the demand for crypto-backed stablecoins.
NFTs (non-fungible tokens) are becoming increasingly popular as a way to promote and monetize digital art, collectibles, and other digital goods. NFTs are digital tokens that are unique and can’t be replaced, making them ideal for representing digital goods.
NFTs have been gaining traction in the crypto space, with some of the biggest names in the industry using them to promote their projects and generate revenue. While NFTs have been around since 2017, the technology has become more popular recently due to the rise of decentralized finance (DeFi) and the emergence of new platforms like Uniswap and Aave.
As the NFT market continues to grow, more businesses are turning to NFTs to promote their products and services. From Twitter NFT marketing campaigns to NFT marketing agencies, companies are leveraging the technology to reach new audiences and drive engagement.
NFTs can be used to promote a variety of products and services, such as digital art, music, games, and other digital goods. They can also be used to reward customers for their loyalty, or to create exclusive offers and discounts.
NFTs can also be used to create unique experiences for customers, such as virtual concerts or exclusive access to products and services. Companies can use NFTs to create scarcity and drive demand for their products, or to create exclusive collectibles that customers can purchase and trade.
NFTs can also be used to create unique experiences for customers, such as virtual concerts or exclusive access to products and services. Companies can use NFTs to create scarcity and drive demand for their products, or to create exclusive collectibles that customers can purchase and trade.
NFTs can also be used to reward customers for their loyalty, or to create exclusive offers and discounts. Additionally, businesses can use NFTs to promote their products and services on social media and other platforms, as well as to create unique digital experiences for customers.
As the NFT market continues to grow, more businesses are turning to NFTs to promote their products and services. From Twitter NFT marketing campaigns to NFT marketing agencies, companies are leveraging the technology to reach new audiences and drive engagement.
NFTs are becoming increasingly popular as a way to promote and monetize digital art, collectibles, and other digital goods. They can also be used to create unique experiences for customers, such as virtual concerts or exclusive access to products and services. Additionally, businesses can use NFTs to promote their products and services on social media and other platforms, as well as to create unique digital experiences for customers.
The potential of NFTs is huge, and the technology has the potential to revolutionize the way businesses market their products and services. With the right strategy and the right tools, businesses can use NFTs to attract new customers, drive engagement, and increase sales.
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