Yield-Bearing Stablecoins Battle Heats Up as New Protocols Emerge to Challenge Ethena Labs

The market's desire for decentralized stablecoins has never waned. From DAI to UST, the evolution of decentralized stablecoins has gone through several iterations.

Stablecoins, pegged mainly to the US dollar, serve not only as chips for exchanging other tokens but also for payment functions. With the overall market capitalization of this sector exceeding $200 billion, it is a relatively mature segment of the crypto market.

However, the most common stablecoins on the market today, USDT and USDC, are both centralized entities, with their combined market share approaching 90%. Other projects are also eager to grab a piece of this pie. For instance, the Web 2 payment giant PayPal launched its own stablecoin, pyUSD, in 2023 to secure its position early; recently, XRP's parent company Ripple also issued RLUSD in an attempt to challenge the stablecoin market.

These two cases primarily focus on the payment functionalities of stablecoins, which are mostly backed by US dollars or short-term government bonds, while decentralized stablecoins emphasize yield, pegging mechanisms, and composability with DeFi.

The market's desire for decentralized stablecoins has never waned. From DAI to UST, the evolution of decentralized stablecoins has gone through several iterations, with Ethena pioneering the use of futures arbitrage and staking to generate yield with USDe, which has opened users' imaginations regarding yield-bearing stablecoins. The market capitalization of USDe stablecoin ranks third in the entire market, reaching $5.9 billion. Recently, Ethena partnered with BlackRock to launch the USDtb stablecoin, which provides yield from RWA, avoiding the risk of funding rates turning negative, and ensuring stable income during both bull and bear markets, thus completing its overall product line and making Ethena a focal point of market attention.

In light of Ethena's success, more yield-bearing stablecoin-related protocols have emerged in the market, such as Usual, which recently announced a partnership with Ethena; Anzen, built on the Base ecosystem; and Resolv, which uses ETH as collateral. What are the pegging mechanisms of these three protocols? Where do their yields come from? Let's take a look with WOO X Research.

USUAL: Strong Team Background with Ponzi-like Attributes in Token Design

The RWA yield-bearing stablecoin has short-term government bonds as its underlying yield-bearing assets, with the stablecoin pegged at USD0. After staking USD0, users receive USD0++, with $USUAL as the staking reward. They believe that current stablecoin issuers are overly centralized, akin to traditional banks, which rarely distribute value to users. USUAL aims to make users co-owners of the project, returning 90% of the generated value to users.

Regarding the project's background, CEO Pierre Person has served as a member of the French National Assembly and as a political advisor to French President Macron. The Asia-Pacific executive Yoko was a former fundraiser for the French presidential election. The project has strong political and business connections in France, and the key to RWA is transferring real assets onto the blockchain, where regulatory and governmental support is crucial for the project's success. Clearly, USUAL has good political and business relationships, providing a strong moat for the project.

Returning to the project mechanism itself, USUAL's token economics exhibit Ponzi-like attributes; it is not merely a mining coin, with no fixed issuance volume. The issuance of USUAL is linked to the TVL of staked USD0 (USD0++), forming an inflation model, but the issuance volume will vary based on the protocol's "revenue growth," strictly ensuring that the inflation rate is less than the protocol's growth rate.

Whenever new USD0++ bond tokens are minted, a corresponding proportion of $USUAL is generated and distributed to various parties. The conversion ratio, known as the Minting Rate, will be highest at the beginning after the TGE, following a gradually declining exponential curve, aimed at rewarding early participants and creating token scarcity later, thereby driving up the intrinsic value of the token.

In simple terms, the higher the TVL, the less USUAL is emitted, and the higher the value of a single USUAL.

Higher USUAL price -> Incentivizes staking USD0 -> Increases TVL -> Reduces USUAL emissions -> Increases USUAL price

USD0's market capitalization increased by 66% over the past week, reaching $1.4 billion, surpassing PyUSD, with USD0++ APY also reaching 50%.

Recently, Usual has also partnered with Ethena to accept USDtb as collateral and subsequently migrate part of the supporting assets of the stablecoin USD0 to USDtb. In the coming months, Usual will become one of the largest minters and holders of USDtb.

As part of this collaboration, Usual will establish an sUSDe vault for holders of the bond product USD0++, allowing Usual users to earn sUSDe rewards while maintaining exposure to Usual. This will enable Usual users to leverage Ethena's rewards