Thread by @WagameEth

Hey anon, wondering how to remain safe in crypto after all that just happened with #FTX 😭?

A lot of FUD around STABLECOINS these days. Let's assess the various risks associated with them and few other areas. As usual, there's a cheat-sheet for this

🧵👇

So you’ve already swapped your 💩 coins into stables and withdrawn from CEX to on-chain and it’s all 💯 fine, right? Well, may be not 😭. Not all stablecoins are created equal. Let’s review each.

❗️NFA, make own decisions where to move funds based on your risk appetite

🧵 SECTIONS:

🪙 Stablecoins - order follows MCAP from @DefiLlama

Additional risk areas:

🔄 Wrapped tokens (non-native stablecoins)
🔸 CEX chains

defillama.com/stablecoins

🪙 Stablecoins - $USDT

The 🐘 in the room: USDT FUD is looming yet again, but the depeg risk appears to be unfounded - it’s backed by mostly high quality assets & audited, @YeTopez breaks this down. 🧵👇

👎 Downsides: centralised, blacklisting risk

https://twitter.com/yetopez/status/1591967906895888385

🪙 Stablecoins - $USDC (1/2)

@circle is widely regarded as the most transparent and regulatory-compliant stablecoin issuer and therefore always on the forefront. It’s based in 🇺🇸 & regulated. It’s 1to1 backed with high quality liquid assets (cash & US gov debt)

🪙 Stablecoins - $USDC (2/2)

👎 But with regulation also comes risk of blacklisting. Circle has to comply with gov requests and blacklist certain wallets onchain (making USDC in those wallets worthless). @usdcblacklist tracks such cases. Perils of centralisation 🤨

🪙 Stablecoins - $BUSD

Issued by @PaxosGlobal - NYDFS regulated and fully backed, native on Ethereum Mainnet, BNB-chain $BUSD is the "Binance-pegged" version, meaning in custody of Binance.

👎 Downsides: centralised, blacklisting risk just like with USDC & USDT

🪙 Stablecoins - $DAI (1/2)

One of the first decentralised stablecoins issued by @MakerDAO. Liquid and supported by many DeFi protocols. Overcollaterlized

👎 But Maker governance slowly corrupted its collateral composition, current focus is on enabling RWA (real world assets)

https://twitter.com/makerdao/status/1592943378471464960

🪙 Stablecoins - $DAI (2/2)

RWAs are basically government and corporate bonds. This is likely to bring in TradFi influence and make it less decentralised over time.

@RuneKek "endgame" broken down by @madladshad 🧵👇

https://twitter.com/madladshad/status/1565100861017112576

🪙 Stablecoins - $FRAX

Partially collateralised (majority $USDC) algorithmic stablecoin heavily involved in the "Curve wars"

👎 Downsides: exposure to USDC centralisation & not fully backed

Diehard fan @ADonnySoldier breaks down $FRAX 🧵👇

https://twitter.com/adonnysoldier/status/1588275703161552896

🪙 (alternative) Stablecoins - $LUSD (1/2)

👍 ETH collateral only (ie decentralised collateral that can’t blacklist wallets). Immutable smart contracts / 0 governance (nothing can change, unlike with $DAI). No frontend (code only), so you can use via 3rd party like @DeFiSaver

🪙 (alternative) Stablecoins - $LUSD (2/2)

👎 USD pegged, not detached from TradFi system

@ReveloIntel breaks down $LUSD 🧵👇 cc @TokenBrice

https://twitter.com/revelointel/status/1589890577251717126

🪙 (alternative) Stablecoins - $VST

@vestafinance $VST - #Arbitrum #L2 native USD pegged stable, backed at a min. ratio by ETH, renBTC (halted), $gOHM, $GMX, $DPX, $GLP.

👍 GMX & GLP collateral are deposited into GMX to farm yield

👎 Probably questionable collateral selection

🪙 (alt) Stablecoins - $RAI (1/3)

@reflexerfinance $RAI is forked from @MakerDAO $SAI

👍 only backed by ETH (Unlike USDC/USDT, it’s decentralised and can’t blacklist wallets)
👍 overcollateralised
👍 floating (not pegged to USD, not subject to regulation)

cc @RezaJafery

🪙 (alternative) Stablecoins - $RAI (2/3)

TL;DR: How is the price stability achieved?
1⃣ Mint/borrow $RAI 📉 market sell $RAI 📉 price decreases
2⃣ Burn/repay $RAI 📈 market buy $RAI 📈 price increases

🪙 (alternative) Stablecoins - $RAI (3/3)

🪄 Redemption rate (+/- automatically set by protocol) aims to achieve stability by changing the redemption price ($RAI borrow amount per ETH)

🪄 by arbitraging either option 1⃣ or 2⃣ (see tweet 👆) market price will get in equilibrium

🪙 (alternative) Stablecoins

Finally, keep an eye on Curve’s new stablecoin $crvUSD and Aave’s $GHO - both in plans

https://twitter.com/0xalunara/status/1545070140357808129

🔄 WRAPPED TOKENS (non-native stablecoins)

Currently it's advised to be cautious with any tokens issued by centralised entities, it has yet to be seen how far the #FTX contagion has spread

To play it safe, hold only native assets and avoid wrapped tokens

🔄 WRAPPED TOKENS

⚠️ Reminder: Sollet wrapped tokens (issued by FTX/Alameda) have essentially become worthless overnight, infamous example is soBTC, which is rn trading at less then 10% than the #BTC that it represents 😱

🔸 CEX chains

⚠️ CEX (run) chains like #Cronos #Heco #KCC could potentially see depegs if their "parent CEX" becomes insolvent 😱

Decentralised chains like Ethereum (incl. #L2s) or Avalanche don't bear this risk. (NFA/DYOR)

CONCLUSION:

$RAI emerged as our favourite from this comparison:
👍 decentralised & permissionless
👍 ETH only collateral
👍 moving towards an immutable system
👍 free float to detach from any TradFi correlation

Out of L2s, currently best liquidity can be found on Polygon