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Q84. The growth of non-volatile assets pegged to a fiat currency has been a one of the clear trends in crypto in the last few years. However, during the past days, a big fatal event occurred when Terra UST peg token started to depegging from $1.

Many different projects proposed different models to define their own stablecoins. For this Bounty, analyse the stablecoin landscape on Sushiswap, identifying the various tokens available and their main metrics (volume, number of swaps, TVL, and other relevant for you). Argue why any of these stablecoins could succeeded in comparison to UST and why.

1. What is Stable coin?

Stablecoins are a type of cryptocurrency that is price stable over another asset. These assets can be Fiat currencies such as the dollar and the euro, commodities such as gold and oil, other digital currencies such as Ethereum and Bitcoin, or mathematical and supply-demand algorithms. Stable coins have been created to prevent sharp price fluctuations in the digital currency market and to create a link between centralized and decentralized finance, which now holds a large share of the cryptocurrency market.

A common misunderstanding about stable coins is that their value is fixed relative to all Fiat currencies. In fact, when we talk about "stable coin" or "stable digital currency", we should know that the concept of price stability is quite relative. For example, USD stable coins have a fixed value only against the dollar, but if the price of the dollar changes against other national currencies, the price of stable coins will change accordingly. Also, asset-backed coins (such as gold) or digital currency-paired coins (such as the WBTC) have a value equivalent to their backup units that do not necessarily have a fixed dollar value.

1.1 Types of stablecoins:

• Stable coin backed by national coins: Stablecoins backed by Fiat currencies such as the US dollar, the euro, and the YEN are the first and simplest single-currency stocks backed by a one-to-one ratio. As long as the value of the base currency (or basket of currencies, as Libra originally proposed) remains stable, the StableCoin will maintain its value. They basically borrow from the credit of the Fiat currency exporter, and it is the country's central bank that protects their value. The most famous stable coin backed up with Fiat currency is USDT.

• StableCoin with asset backing: The asset-backed Stablecoin is similar to the Fiat-backed version; Except that it holds physical assets such as gold as collateral. There are other asset-backed stable coins backed by a basket of precious metals or even Swiss real estate. Generally, these stable coins are associated with a certain amount of goods, are stored in a known place, and are often subject to reputable international audits. One of the most famous examples of StableQueen with asset backing is Tether Gold (XAUT), which is offered by Tether Company. Each unit of TetherGold is equal to one ounce of London gold.

• StableCoin backed by digital currency: StableCoins backed up with digital currencies are supported by a portfolio of one or more digital currencies. Because their digital currencies are highly volatile, these stable coins offer very high collateral loans and require borrowers to lock their tokens in smart contracts. If the value of the collateral is reduced too much, the collateral tokens are cashed to prevent further losses. One of the most popular digital currency backed coin stocks is called the DAI, which is worth 1 USD and is owned by a platform called MakerDAO.

• Algorithmic Stablecoin: Algorithmic stable coins, as their name implies, use intelligent algorithms and contracts to protect price stability. These stable coins maintain their price levels with the policy of increasing or decreasing supply (when needed) and using market forces. These algorithms automatically increase or decrease the supply of tokens in the market, thus keeping the price of the token equal to the Fiat currency in question. If the value of these stable coins starts to fall against the dollar, euro or any other currency, the algorithms will take the tokens out of circulation. Also, if the value of the Stable Coin exceeds the Fiat currency, the Stable Coin system will launch new coins to keep the price of the Stable Coins constant by balancing supply and demand. One of the most famous algorithmic stablecoin is TerraUSD or UST.

2. Approach:

In this essay, the performance of Stablecoins on Sushiswap has been assessed based on these metrics:

• Volume and number of swaps
• TVL analysis
• Price analysis (Peg)

3. Results:

The results associated with the proposed approach have been illustrated in this chapter.

First of all, the stablecoins that used in Sushiswap have been identified. As mentioned in the approach part, the tokens with average price between 0.99 and 1.01 have been selected as stable coins.

The following table reveals the address and first time of use for obtained stablecoins. Its expected that USDT, DAI and USDC are the first stablecoins that used in Sushiswap.

3.1 Volume and number of swaps

The swap behavior (volume and number) of stablecoins have been displayed in graphs. From these figures, we can say that:

1. USDC, DAI and USDT are most used stablecoins for swapping on Sushiswap.
2. The buy and sell (swap in and swap out) of stablecoins are usually symmetric as shown in the first two figures.
3. Due to the market condition, the volume of swaps for stablecoins has been enlarged since May 9th, 2022.

3.2 TVL Analysis

3.3 Peg Analysis

4. Comparison with UST

Now, in this part the discussion about stablecoins has been made. Also, the most popular stablcoins used on Sushiswap have been compared with UST.

According to my investigation and outcomes of this essay it can be said that:

1. What distinguishes algorithmic stable coins from other types of stable coins is that they are unsupported. In fact, algorithmic stable coins are the most complex type of stable coins whose value is controlled by special algorithms and intelligent contracts.
2. The stablecoins with Money or asset backups remain resilient in market crushes.
3. **The combination of various techniques for creating stablecoins is the most suitable way in my opinion. Because in that circumstances the dependency has been distributed among assets and algorithms and make stablecoin resilient and reliable in market downturns and case of attacks.

We know that the first rule related to stablecoins is their price consistency and peg to 1 USD as mentioned before.

The price of most popular stablecoins and UST has been compared to each other in this figure.

According to this figure, the UST lost its peg since May 8th but other tokens remain stable in the hard market condition.

To evaluate these metrics, the following methodology has been utilized:

• Identifying stablecoins

  select tokens with average price between 0.99 and 1.01 USD and used in Sushiswap
  

• Swap assessment

  select volume and count of swaps from flipside_prod_db.ethereum_sushi.ez_swaps
  

• TVL

  select balance in USD from flipside_prod_db.ethereum_core.dim_dex_liquidity_pools
  where platform = 'sushiswap' selected as pool
  

• Price analysis

  select price from ethereum.token_prices_hourly
  

5. References

1. Cover graph
2. Sushiswap
3. Article about stablecoins
4. Market crush

This area chart presents the TVL of stablecoins on Sushiswap.

According to this figure, USDC holds the largest area and it shows the dominance of it in TVL.

ALSO, DAI and USDT have the next space on TVL as shown in the figure.

The overall scheme of TVL was decreasing since May 8th.