Stablecoin Brief: January 10th, 2024

Key Insights

• New classes of stablecoin protocols are on the rise. The key differentiator relative to the incumbents for many of these new stablecoin protocols is their ability to offer a yield-bearing stablecoin.
• The yields generated from these stablecoin protocols largely stem from base chain staking rewards or real world assets (RWAs), which are generally decoupled from leverage demand cycles.
• The Solana network continues to see an increase in stablecoin supply and activity, adding $318 million of USDC over the past 30 days.

While the two largest stablecoins, USDT and USDC, clearly provide value (e.g., boasting a combined market capitalization of nearly $120 billion), they lack one key property – yield generation for holders. These giants of the stablecoin ecosystem meet market demands for access to a form of U.S. dollars; however, they have yet to pass through any of the underlying yields to holders. Now, under the surface, new stablecoin protocols are vying for a slice of the ever-growing stablecoin pie.

At the highest level, many of these new stablecoin protocols are circling around the same concept to gain an edge over the incumbents — creating a yield-bearing stablecoin. To achieve this, a few different approaches are being explored:

• Treasury Bills – Mountain protocol enables KYB’d entities to mint/redeem their USDM stablecoin, which is backed by short-term U.S. Treasuries. This model is quite similar to USDC and USDT, except that Mountain protocol passes through yield via its rebasing USDM stablecoin.