Yield-bearing stablecoin: A new direction for financial innovation in the future

Stablecoins are becoming a market consensus. Recently, many new stablecoin projects have emerged in the market, demonstrating the industry's high attention to stablecoins. Yield-bearing stablecoin (YBS), as a new type of stablecoin, is rapidly developing.

YBS follows the on-chain banking logic of deposit and lending, deconstructing the power of asset issuance. Compared to traditional stablecoins, YBS attracts users through an interest-earning mechanism and allocates a portion of asset income to users. This model causes the YBS project to show explosive growth.

The development of the cryptocurrency industry can be seen as a history of innovation in asset issuance models. YBS, as a new round of innovation, promotes industry development in the name of stability, and compared to previous innovations such as ERC-20 and NFTs, its impact is relatively mild.

Interest-bearing stablecoins need to have both an interest-bearing mechanism and a stablecoin mechanism. The interest-bearing assets can come from on-chain staked assets or off-chain yield-bearing assets like US Treasuries, and both can be used in combination. The stability mechanism can employ various methods such as over-collateralization, algorithmic stabilization, etc.

There are currently nearly a hundred interest-bearing stablecoin-related projects in the market, but there are not many truly promising ones. Based on indicators such as the underlying assets of the projects, core mechanisms, and TVL, more than a dozen relatively promising projects can be filtered out. These projects will mainly compete in the retail market for interest calculation, pricing, and payment scenarios, apart from the DeFi giants.

The main challenges faced by interest-generating stablecoin projects include: the sustainability of yields, the profitability of the protocol, and the impact of the price fluctuations of the main token on the stablecoin. Investors need to closely monitor the ongoing profitability of the protocol and the profit-sharing ratio.

In the future, interest-bearing stablecoins are expected to become a new direction for financial innovation. It is not only a new type of stablecoin but also a new form of currency. To gain market recognition, interest-bearing stablecoin projects need to establish sufficient credibility and capital reserves, which is also key to distinguishing them from other crypto assets.