{"id":477536,"date":"2022-07-25T05:41:13","date_gmt":"2022-07-25T02:41:13","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/stablecoin-projects-need-collaboration-not-competition-frax-founder\/"},"modified":"2022-07-25T05:41:13","modified_gmt":"2022-07-25T02:41:13","slug":"stablecoin-projects-need-collaboration-not-competition-frax-founder","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/stablecoin-projects-need-collaboration-not-competition-frax-founder\/","title":{"rendered":"# Stablecoin projects need collaboration, not competition: Frax founder"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a25daced183c\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a25daced183c\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/stablecoin-projects-need-collaboration-not-competition-frax-founder\/#%E2%80%9D_Stablecoin_projects_need_collaboration_not_competition_Frax_founder_%E2%80%9C\" >&#8221; Stablecoin projects need collaboration, not competition: Frax founder &#8220;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/stablecoin-projects-need-collaboration-not-competition-frax-founder\/#USDC_is_key\" >USDC is key<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/stablecoin-projects-need-collaboration-not-competition-frax-founder\/#Algo_stablecoins_dont_work\" >Algo stablecoins don\u2019t work<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Stablecoin_projects_need_collaboration_not_competition_Frax_founder_%E2%80%9C\"><\/span>&#8221; Stablecoin projects need collaboration, not competition: Frax founder &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDcvYjJlMDRjZjAtYzM3Zi00NGYxLThmMDEtMDJmZWMzNTI3NTJjLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-28d77a7a>Stablecoin projects need to take a more collaborative <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roach to grow each other\u2019s liquidity and the ecosystem as a whole, says Sam Kazemian, the founder of Frax Finance.<\/p>\n<p>Speaking to Cointelegraph, Kazemian explained that as long as stablecoin \u201cliquidity is growing proportionally with each other\u201d through shared liquidity pools and collateral schemes, there won\u2019t ever be true competition between stablecoins. <\/p>\n<p>Kazemian\u2019s FRAX stablecoin is a fractional-algorithmic stablecoin with parts of its supply backed by collateral and other parts backed algorithmically. <\/p>\n<p>Kazemian explained that growth in the stablecoin ecosystem is not a &#8220;zero-sum <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/game\/\" data-internallinksmanager029f6b8e52c=\"7\" title=\"Game\" target=\"_blank\" rel=\"noopener\">game<\/a>&#8221; as each token is increasingly intertwined and reliant on each other&#8217;s performance.\u00a0<\/p>\n<p>FRAX uses Circle\u2019s USD Coin (USDC) as a portion of its collateral. DAI, a decentralized stablecoin maintained by the Maker Protocol, also uses USDC as <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/daistats.com\/#\/\">collateral<\/a> for more than half of the tokens in circulation.\u00a0As FRAX and DAI continue to expand their market caps, they will likely need more USDC collateral.<\/p>\n<p>However, Kazemian pointed out that if one project decides to dump another, it could have negative effects on the ecosystem.<\/p>\n<blockquote><p>\u201cIt\u2019s not a popular thing to say, but if Maker dumped its USDC, it would be bad for Circle because of the yield they\u2019re earning from them.\u201d<\/p><\/blockquote>\n<h3><span class=\"ez-toc-section\" id=\"USDC_is_key\"><\/span>USDC is key<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The current top three stablecoins by marketcap in order from the top are Tether (USDT), USDC, and Binance USD (BUSD). DAI and FRAX are both decentralized stablecoins that take the fourth and fifth places among the top.<\/p>\n<p>USDC has had the largest growth over the past year of all three, with market cap more than doubling last July to $55 billion, bringing it nearly within arm\u2019s reach of USDT according to <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.coingecko.com\/en\/coins\/usd-coin\">CoinGecko<\/a>.<\/p>\n<p>Kazemian feels that USDC\u2019s proliferation across the industry and arguably greater transparency about its reserves should make it the most valuable stablecoin for collaboration within the ecosystem. <\/p>\n<p>He called USDC a \u201clow-risk and low-innovation project,\u201d and acknowledged that it serves as the base layer for further innovation from other stablecoins. He said:<\/p>\n<blockquote><p>\u201cWe and DAI are the innovation layer on top of USDC, like the decentralized bank on top of a classical bank.\u201d<\/p><\/blockquote>\n<h3><span class=\"ez-toc-section\" id=\"Algo_stablecoins_dont_work\"><\/span>Algo stablecoins don\u2019t work<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Though the FRAX stablecoin is partially stabilized algorithmically, Kazemian says that pure algorithmic stablecoins \u201djust don\u2019t work.\u201d<\/p>\n<p>Algorithmic stablecoins like Terra USD (UST), which collapsed in a dramatic fashion in May, maintain their peg through complicated algorithms that adjust supply based on market conditions rather than traditional collateral.<\/p>\n<blockquote><p>\u201cIn order to have a decentralized on-chain stablecoin it needs to have collateral. Doesn\u2019t need to be overcollateralized like Maker, but it needs exogenous collateral.\u201d<\/p><\/blockquote>\n<p>The death spiral in Terra\u2019s ecosystem became evident when UST, which is now known as USTC, lost its peg. <\/p>\n<p>The protocol started minting new LUNA tokens to ensure there were enough tokens backing the stablecoin. Rapid minting drove down the price of LUNA, now known as LUNC, which sparked a complete retail sell-off of tokens, dooming any hopes of re-peg.<\/p>\n<p><strong><em>Related: Liquidity protocol uses stablecoins to ensure zero impermanent loss<\/em><\/strong><\/p>\n<p>In the weeks leading up to the UST depeg, Terraform Labs founder Do Kwon stated that his project needed to fractionally back the stablecoin with different forms of collateral, especially BTC. <\/p>\n<blockquote><p>\u201cAt the end, even Terra realized that their model wouldn\u2019t work,\u201d Kazemian added, \u201cso they started buying up other tokens.\u201d<\/p><\/blockquote>\n<p>By the end of May, Terra had sold nearly all of its $3.5 billion worth of BTC.<\/p>\n<p>Terra took down other projects in its wake, including fellow algo stablecoin DEI from Deus Finance, which also has failed to return to the dollar peg as of the time of writing.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/stablecoin-projects-need-collaboration-not-competition-frax-founder\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Stablecoin projects need collaboration, not competition: Frax founder &#8220; Stablecoin projects need to take a more collaborative approach to grow each other\u2019s liquidity and the ecosystem as a whole, says Sam Kazemian, the founder of Frax Finance. Speaking to Cointelegraph, Kazemian explained that as long as stablecoin \u201cliquidity is growing proportionally with each other\u201d&#8230;<\/p>\n","protected":false},"author":1,"featured_media":477537,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDcvYjJlMDRjZjAtYzM3Zi00NGYxLThmMDEtMDJmZWMzNTI3NTJjLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[75936,76701,74983,75493,74355,117],"class_list":["post-477536","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-circle","tag-dai","tag-decentralization","tag-stablecoin","tag-adoption","tag-business"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/477536","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=477536"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/477536\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/477537"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=477536"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=477536"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=477536"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}