Over the past few years, stablecoins have become a foundational part of the cryptocurrency ecosystem due to their ability to provide a way out for cryptocurrency traders during times of volatility, as well as their widespread integration with decentralized finance (DeFi). These are necessary for the health of the entire ecosystem.

Currently, Tether (USDT) and dollar coins (USD/USD) are the dominant stablecoins in the market, but their centralized nature and the ongoing threat of stablecoin regulation have prompted many in the crypto community to shun them and look for decentralized alternatives.

Binance USD (BUSD) is the third-ranked stablecoin and is controlled by the Binance cryptocurrency exchange. DAI is the No. 1 decentralized stablecoin, with 38% of its supply backed by USDC, again raising questions about its “decentralization.”

Investor interest in decentralized stablecoins can be seen in the rising market cap and the number of DeFi platforms integrating TerraUSD (UST), FRAX (FRAX) and Magic Internet Money (MIM).

Below are some of the factors supporting the growth of each stablecoin.

tera dollar

TerraUSD (UST) is an interest-bearing algorithmic stablecoin belonging to Terra (Luna) ecosystem designed to remain pegged to the value of the U.S. dollar.

In order to mint new USTs, users need to interact with the Anchor protocol and either burn an equivalent amount of network-native LUNA tokens or lock up an equivalent amount of ether (Ethereum) as collateral.

The addition of ETH as collateral does help UST accelerate as it allows some of the value in Ether to migrate into the Terra ecosystem, which leads to an increase in the circulating supply of UST.

1/ bETH is now live on the Anchor web app!

you can borrow now $UST For bETH, this is a packaged version of ETH 2.0’s stETH collateralized derivative.

we and @LidoFinance Provides a guide to using bETH on Anchor. https://t.co/T5KkGNNAYE

— Anchor Protocol (@anchor_protocol) August 13, 2021

Terra network recently Beyond Binance Smart Chain According to DefiLlama, the total value locked (TVL) of the protocol is currently $17.43 billion.

Terra is also adopted by the Curve stablecoin ecosystem, further helping it to be distributed across numerous DeFi protocols. This also provides UST holders with another way to earn income, as well as a 19.5% annual yield (APY) for users who stake UST on the Anchor protocol.

FRAX

FRAX (FRAX) is the first fractional algorithmic stablecoin developed by Frax Protocol. It is partially backed by collateral and the rest is stabilized algorithmically.

The real story behind FRAX’s growth began with the adoption of the DeFi community in several high-profile projects, and the vote of the Decentralized Autonomous Organization (DAO) to increase support for stablecoins in its ecosystem and treasury.

FRAX has long been OlympusDAO Rebase Protocol As a form of collateral, it can be bound to obtain the platform’s native OHM token. It has also become the stablecoin of choice in the recently launched TempleDAO protocol.

On December 22, 2021, FRAX was added to Convex Finance (CVX) and immediately pushed into the ongoing Curve Wars, with a handful of major DeFi protocols vying for CVX and Curve (CRV) to gain voting power on the Curve network and increase their stablecoin earnings.

This @fraxfinance Convex soft start has begun.https://t.co/oZ9WKZxNXR

Deposit + Exchange $FXS arrive $cvxFXS

– Convex Finance (@ConvexFinance) December 22, 2021

This week, Curve Wars welcomed a new participant after Tokemak members voted to add FRAX and Frax Share (FXS) to its Token Reactor, swear To “elevate combat to a new scale”.

Magic Internet Currency

Magic Internet Money (MIM) is a collateral-backed stablecoin issued by a popular DeFi protocol called Abracadabra.Money. What makes this coin different is that it is “summoned” into existence when a user deposits one of the 16 supported cryptocurrencies into the MIM-enabled “cauldron.”

The amount that can be borrowed from Abracadabra-backed assets is limited as part of the protocol’s efforts to avoid the problems faced by MakerDAO (DAI). Namely, the existence of a plethora of centralized stablecoins and a history of catastrophic liquidations during market volatility.

some popular coins Can be pledged as collateral to mint MIM including wrapped Ether (wETH), Ether, Shiba Inu (SHIB), FTX Token (FTT) and Fantom (FTM).

???!

Our first zero-interest lending marketplace is here!

1?? Provide $WETH as collateral and mint $MIM or use your $ETH!

– 0% interest
– Clearing fee 4%
– LTV 90%
– Borrowing fee 0.5%

What are you waiting for? Now mint!https://t.co/N3r54iPo7n

— ??? (@MIM_Spell) December 31, 2021

MIM has also been integrated into Curve Finance’s mining pool, further highlighting Curve’s important role for stablecoins in the DeFi ecosystem and underscoring the motivation to participate in Curve Wars.

MIM’s cross-platform and centralized exchange integration, including its long list of staking options, increased its circulating supply to $1.933 billion, making it the sixth-largest stablecoin by market cap.

While the amount of value held by these decentralized stablecoins is only a fraction of the value held by USDT and USDC, they may become more common in the future as decentralized proponents choose them over their centralized counterparts. Several months have continued to see its market share increase.

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