Stablecoins are indisputably important in decentralized finance (DeFi) for their predictable, non-volatile base value, making them ideal for providing liquidity in Automated Money Maker (AMM) pools or earning yield in stable assets. Yet, much innovation is happening in stablecoins, extending beyond the lock up a fiat dollar and mint a digital dollar approach.
This report reviews three stablecoins—RAI, FRAX and FEI—that use algorithmic approaches to reduce volatility rather than pegging fiat dollars. The detailed analysis evaluates how each works, its governance structure and potential risks inherent in the approach.
We've already seen new models in stablecoins leveraging crypto-based collateral to reduce volatility, but more innovation is occurring, said Kent Barton, author of the report and ShapeShift Head of Research and Development. Newer algorithmic approaches automatically adjust supply and other parameters to keep these coins 'stable.' How successful—and how competitive—will they be? We explore these questions in this report.
DENVER
ShapeShift, a decentralized, non-custodial cryptocurrency platform, released a new report in their New Frontiers series called Algorithmic Stablecoins: RAI, FRAX and FEI.
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