Interest-Generating Stablecoin: The Beginning of a New Round of Asset Innovation

Stablecoins are becoming a market consensus. Recently, there have been a series of new developments in the stablecoin field: a payment platform acquired a stablecoin company, a fintech company is using stablecoins to replace the intermediary position of banks, and a stablecoin issuer has entered the ranks of industry newcomers with its product. These can all be seen as imitations of the existing mainstream stablecoins.

At the same time, the interest-generating stablecoin (YBS) project is rapidly developing. A certain protocol has emerged, and a well-established DeFi protocol has transformed into an interest-generating stablecoin, while multiple well-known DeFi projects are also quickly laying out their strategies in the YBS track. Currently, YBS is still classified as a type of stablecoin, and the market has limited understanding of its fundamental differences from traditional stablecoins.

The YBS project essentially attracts users through asset returns, distributing a portion of the profits to users, and continues to generate asset returns after accumulating deposits. This is different from the issuance mechanism of traditional stablecoins. The reserves of traditional stablecoins are managed by regulators or project parties, and users can only passively accept their value.

YBS follows the deposit-loan logic of on-chain banking, deconstructing the power of asset issuance. Compared to traditional stablecoins, YBS has a lower issuance threshold and has shown explosive growth. To some extent, the history of the crypto industry is a history of innovation in asset issuance models, but this time it appears to be more moderate under the name of stability.

Stability is derived from volatility, and volatility creates stablecoins. Yield-bearing stablecoins are a new expression of stablecoins. Looking back at the development of stablecoins, their origin can be traced back to Bitcoin. As a peer-to-peer electronic cash payment system, Bitcoin is unstable, but it has spurred the demand for stablecoins.

The earliest fiat-backed stablecoins emerged in the Bitcoin ecosystem and later shifted to the exchange pricing domain. Their mechanism is not complicated, mainly relying on user trust in the issuing institution and market recognition. Subsequently, decentralized stablecoins like DAI appeared, employing an over-collateralization mechanism. Although capital efficiency is lower, they provide higher credibility.

Since then, the history of cryptocurrency from an on-chain perspective can be summarized as an exploration of how to reduce staking rates. Algorithmic stablecoins were an important attempt but faced setbacks. Currently, hybrid mechanism stablecoins have become mainstream.

Yield-bearing stablecoins require a yield mechanism and a stablecoin mechanism, which can be implemented through various methods such as CDP, Delta neutral, etc. The core lies in the yield and profit-sharing mechanisms, with yield-bearing assets coming from on-chain staked assets or off-chain income-generating assets.

Currently, there are about 50 active yield-generating stablecoin projects in the market. Considering the cross characteristics of DeFi, physical assets, and stablecoins, it is expected that ultimately no more than 5 projects will stand out. Established DeFi protocols issue yield-generating stablecoins more to strengthen their own ecosystem, while emerging projects are the real market competitors.

When evaluating interest-bearing stablecoin projects, it is necessary to pay attention to multiple dimensions such as fundamentals, interest-bearing methods, and APY calculation methods. Special attention should be paid to the sustainability of the project's returns and the profitability of the protocol, as this directly relates to the safety and stability of the interest-bearing stablecoin.

Overall, interest-bearing stablecoins mark the beginning of a new round of asset innovation and are reshaping the landscape of the stablecoin market. In the future, the ability to stand out in fierce competition will depend on the project's innovation capabilities, risk control, and long-term profitability.