📒 Decentralized stablecoins on TON: Why are they needed?

⚫️ The new stablecoins participating in The Open League stand out from the familiar USDt with their «decentralized over-collateralized» approach. Let’s break down what sets them apart and their pros and cons.

⚫️ Stablecoin prices are typically maintained by collateralized assets. For instance, a company might deposit an equivalent amount of dollars in a bank, issue stablecoins equal to that amount, and back each token with a reserved dollar.

⚫️ This method of storing reserves in banks is used by major stablecoins like USDt. However, it comes with risks: you must trust a third party. What if the token issuer absconds with the reserves? Or if the reserves are seized by a government? Or if the bank goes bankrupt?

⚫️ Decentralized stablecoins, on the other hand, are backed by other cryptocurrencies. This eliminates the need for banks, and everything happens on the blockchain, reducing the potential for abuse and external control. However, it introduces another challenge: how to stabilize the price of a stablecoin without fiat dollars but with volatile cryptocurrencies whose values constantly fluctuate?

⚫️ This is addressed with the «over-collateralized stablecoin» model, where the collateral exceeds the value of the issued tokens. For example, if you lock $100 worth of Toncoin as collateral but mint only $50 worth of stablecoins, the collateral remains sufficient even if Toncoin’s price drops by 40%.

⚫️ Current season of The Open League features three decentralized stablecoin projects: Aqua Protocol, Delea Finance, and TonStable. All three allow users to mint stablecoins by first over-collateralizing them with pledged assets. Later, you can return the stablecoin to the protocol and reclaim your collateral. However, it’s important to note that if the collateral’s value drops too much, creating a risk of insufficient backing, liquidation may occur.

🖊 Collateral options include liquid staking tokens such as tsTON and stTON, and in Aqua Protocol’s case, other assets like LP-tokens from DeDust.io. This means you can keep your funds in staking or liquidity pools for passive income while simultaneously using the stablecoin minted against your collateral — without the need to withdraw tokens from staking and convert them into USDt.

@thedailyton