Stablecoins

    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.

    Introduction

    1. Stablecoins are cryptocurrencies that are pegged to the value of 1 US dollar.
    2. They gain price stability by holding reserve assets as collateral or by employing algorithmic formulas designed to control supply.
    3. In this dashboard, we will look at how various USD pegged stablecoins available on Sushiswap have fared in terms of peg stability and swap volume since January 1st, 2022.

    Chains of Stablecoins in this dashboard.

    • MIM -> ETH
    • FRAX -> ETH
    • USDT -> ETH
    • USDC -> ETH
    • DAI -> ETH

    Algorithmic or collaterised stablecoin

    • MIM -> Algorithmic stablecoin

    • FRAX -> Partially algorithmic and collaterised stablecoin

    • USDT -> Fiat-backed stablecoin

    • USDC -> Fiat-backed stablecoin

    • DAI -> Crypto-backed

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    1. The above line graph depicts the peg of the 5 different stablecoins on the Ethereum chain since January 1, 2022.
    2. Of stablecoins on Sushiswap, only MIM has experienced a depeg of more than 1% in the last 5 months. MIM has depegged twice, once near the end of January 2022 and again near the end of March 2022.
    3. MIM is an algorithmic stablecoin. Peg stability is lower for algorithmic stablecoins because they do not rely on collateral to maintain their peg.
    4. To ensure peg stability, collateralized and decentralised stablecoins such as DAI are overcollateralized by other assets such as Ethereum. USDC and other custodial stablecoins are very stable and reliable, as long as the issuer is trustworthy and transparent.

    Let us look at swap to/from and total swap volume of these 5 stablecoins on Sushiswap.

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    1. The line graphs above shows the swap from/to and total swap volume of MIM, FRAX, DAI, USDT and USDC on the Sushiswap by day.

    2. These 5 stablecoins' daily swap from volume is very close to their daily swap to volume.

    3. While FRAX, DAI, USDT, and USDC have fairly consistent daily swap volume over time, only MIM has seen a decrease in daily swap volume over time.

    4. For majority of the days, USDC has the highest swap volume on Sushiswap. This is followed by USDT, FRAX, DAI and MIM stablecoins.

    Why any of these stablecoins could succeed in comparison to UST and why.

    1. It appears that USDC has a better chance of success than UST because USDC has not experienced a depeg of more than 1% since January 1st, 2022.
    2. In addition, these USDC have seen high usage with consistent daily swap volume.
    3. As long as the issuer is trustworthy and transparent, USDC and other custodial stablecoins are very stable and reliable.

    Conclusion

    1. Of the stablecoins on Sushiswap, only MIM has experienced a depeg of more than 1% in the last 5 months. MIM has depegged twice, once near the end of January 2022 and again near the end of March 2022.

    2. FRAX, DAI, USDT, and USDC have had fairly consistent daily swap volume over time, only MIM has seen a decrease in daily swap volume over time.

    3. The majority of the days, USDC has the highest swap volume on Sushiswap. This is followed by USDT, FRAX, DAI, and MIM stablecoins.

    4. USDC could succeed in comparison to UST due to its peg stability and consistent high swap volume.