The Stablecoins Of The DeFi Renaissance

Trump's victory and the recent crypto rally infused the space with another season of high expectations for the future of decentralized finance (DeFi) and its best use case, stablecoins, in particular.

Major centralized stablecoins, such as Tether's USDT and Circle's USDC, play an important role as dollar liquidity providers in global transactions. This segment of the industry has long proven the sustainability of its use case and is currently in the phase of decreasing margins and increased regulatory oversight.

The situation is different in the decentralized, non-custodial stablecoin segment. Since the Luna/Terra collapse, the supporters of these ideas have retreated greatly. The major decentralized stablecoin Sky's USDS (formerly DAI) has a huge centralized crutch and is rebranding itself closer to the centralized tribe.

In DeFi protocols, decentralized stablecoins are fundamental to providing independence and immutability for smart contracts. However, decentralized design is difficult to implement and maintain.

If the DeFi enthusiasts are correct in their predictions, major decentralized stablecoins such as USDS and Ethena's USDe will grow. 

But besides these, which other should you keep an eye on?

We have prepared a list of seven protocol-related decentralized stablecoins with market caps between $50 and $500 million that have the foundations to become the stablecoins of the DeFi renaissance. 

USDB by Blast

With a market cap of over $410 million and a trading volume of more than $21 million in the last 24 hours, USDB is among the top second-league decentralized stablecoins.

USDB uses a 'rebase' mechanism in which the tokens in circulation and price are bonded by a predefined ratio (a bonding curve). The token has maintained its peg to the dollar since launching in March 2024.

USDB is the stablecoin of Blast, an Ethereum Layer 2 that also acts as a DeFi protocol, providing users with yield on Ethereum and stablecoins. The native stablecoin acts as the investor's counterpart for digital assets bridged into Blast.

GHO by Aave

One of the best-known second-tier stablecoins, GHO (pronounced "go"), is a dollar-pegged token from the non-custodial liquidity decentralized protocol Aave managed by its DAO. And here is the reason why:

Despite its over-collateralized design, GHO traded below the peg during the first year after launching in August 2023. Users would sell it for more volatile assets as soon as they minted it, leading its price to fall below $1. The situation has nonetheless improved in recent months. 

The token is a financial instrument of the protocol, created directly within it: it is minted when users supply collateral and burnt when users repay their GHO positions.

GHO has a market cap of $176 million and a daily trading volume of around $5 million.

KUSD by Sora

Still in a lower league compared to the stablecoins in this list, yet attractively trading at around 30% discount, is the Kensetsu USD stablecoin by Sora. This stablecoin plays a vital role in the Sora ecosystem by allowing secure borrowing for the investors.

KUSD is implemented with the Token Bonding Curve mechanism to support the peg to USD in Sora blockchain. To further stabilize the price of Kensetsu, around 20% of all transactions within the Sora network are allocated for the buyback and burning of KUSD.

alUSD by Alchemix

alUSD is the synthetic stablecoin of the self-repaying loans protocol Alchemix, which earns users yield using their collateral on loans. 

It is the counterpart of users depositing Sky's USDS dollar (former DAI) as collateral for their loans on the platform. Because of its connection to the number one decentralized stablecoin, it loses its peg whenever the USDS does, too.

alUSD has been around since 2021. It has a market cap of $167 million and a daily trading volume of about a quarter of a million.

deUSD by  Elixir Network

deUSD is the synthetic dollar introduced by the Elixir Network, the modular DeFi protocol that aims to increase liquidity in order books of decentralized exchanges. It is fully collateralized by stETH and MakerDAO's on-chain T-Bill protocol and maintains its peg through arbitrage mechanisms on Ethereum trades, similar to the Ethena protocol.

Elixir launched the stablecoin in August with allegedly $1 billion in liquidity to back it up. Through a partnership with Securitize, deUSD can also be exchanged against tokenized RWA assets to obtain quick liquidity without selling the underlying assets.

It has a market cap of above $200 million and a daily trading volume of $5 million.

DOLA by Inverse Finance

DOLA is a dollar-pegged synthetic stablecoin by Inverse Finance, a DAO that develops several financial products and manages a fixed-rate DeFi borrowing protocol.

Launched in 2021, the stablecoin is backed by assets such as stETH and WBTC. The DAO mints DOLA whenever the price rises above $1 and burns the excess when the price falls below $1.

Its market cap is close to $78 million, and daily trading volume is around $5 million.

crvUSD by Curve Finance

crvUSD is the native stablecoin of the automated market maker (AMM) and decentralized liquidity pool for trading stablecoins Curve Finance.

Users on the protocol can mint the stablecoin by posting collateral and opening a loan. The protocol uses "Peg Keeper" contracts that automatically mint or absorb debt according to market demands to stabilize crvUSD's value in relation to the dollar. This method is far from having proven results, as the currency has frequently traded slightly below its peg since launching in August 2023. In November, to stabilize the market dynamics, the community voted for crvUSD staking mechanism, thus returning 10% of the fees crvUSD trading fees to its long-term holders.

crvUSD has a market cap of $70 million and a daily trading volume of around $10 million.