Sam Kazemian, the founding father of the world’s first fractional-algorithmic stablecoin, Frax Finance, mentioned that the expansion of the stablecoin ecosystem and liquidity requires an additional collaborative strategy.
In an interview with Cointelegraph, Kazemian identified that there’ll by no means be true competitors between stablecoins. He defined that stablecoins may develop liquidity proportionally with one another through shared swimming pools and collateral schemes.
The skilled acknowledged that the stablecoin ecosystem will not be a “zero-sum recreation, ” including that tokens are steadily getting extra reliant on the efficiency of each other and the ecosystem.
The FRAX stablecoin is backed partially by collateral and different elements algorithmically. FRAX, like Maker Protocol’s DAI makes use of Circle’s USD Coin as a part of its collateral, a reliance that’s solely anticipated to extend because the stablecoins develop.
Kazemian believes that the initiatives are interdependent, and any try and again off from the connection would negatively have an effect on the ecosystem:
“It’s not a preferred factor to say, but when Maker dumped its USDC, it will be dangerous for Circle due to the yield they’re incomes from them.”
The manager believes that larger transparency about USDC reserves and proliferation throughout the business will allow it to behave as an important medium for collaboration within the stablecoin ecosystem.
Calling USDC a “low-risk and low-innovation venture,” Kazemian recognised that the stablecoin serves as a foundational layer for future innovation within the ecosystem:
“We and DAI are the innovation layer on high of USDC, just like the decentralized financial institution on high of a classical financial institution.”
Addressing the dramatic collapse of algorithmic stablecoin Terra, Kazemian acknowledged that purely algorithmic stablecoins “simply don’t work.” Terraform Labs founder Do Kwon emphasised the necessity to fractionally again Terra with totally different types of collateral, together with BTC.
“On the finish, even Terra realized that their mannequin wouldn’t work,” Kazemian identified, “in order that they began shopping for up different tokens.”