- Planned Launch of Synthetic Stablecoin
- Mechanism of Synthetic Stablecoin
- Competition in the Synthetic Stablecoin Market
Crypto trading and market-making startup DWF Labs plans to launch a new synthetic stablecoin. According to co-founder Andrei Grachev, the project has finalised the design for its synthetic stablecoin.
Planned Launch of Synthetic Stablecoin
Synthetic stablecoins operate on a soft peg with fiat currencies like the U.S. dollar and are underpinned by collateral assets like Bitcoin (BTC) and other cryptocurrencies. To maintain parity, synthetic stablecoins rely on opening and closing short-leveraged positions for the underlying collateral.
Mechanism of Synthetic Stablecoin
While synthetic stablecoins are considered decentralized, their design could introduce extra volatility due to dependence on perpetual trades. Grachev mentioned that DWF Labs’ synthetic dollar would support a basket of collaterals, including the three largest stablecoins: Tether (USDT), USD Coin (USDC), and DAI, which was recently rebranded to USDS.
Competition in the Synthetic Stablecoin Market
Entering the synthetic dollar market could position DWF Labs against Ethena, the issuer of crypto’s largest on-chain collateralized stablecoin, USDE. Since its launch for public trading in February, Ethena’s offering has captured $2.69 billion in deposits. Most of this total value locked exists on Ethereum’s blockchain, valued at about $2.58 billion.
The launch of a new synthetic stablecoin may face skepticism in the crypto community, especially in light of recent events with TerraUSD. Time will tell if DWF Labs can overcome these challenges and establish its position in the synthetic stablecoin market.
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