The Development Dilemma of Stablecoins: The Game Between Decentralization Ideals and Real Demand

Stablecoins, as one of the few products in the cryptocurrency sector with a clear product-market fit, have attracted considerable attention in recent years. The market generally expects that within the next five years, there will be trillions of dollars worth of stablecoins flooding into traditional financial markets. However, the development path of stablecoins is not without challenges.

The Evolution of the Stablecoin Trilemma

The three dilemmas faced by early stablecoins include: price stability, Decentralization, and capital efficiency. As the market matures, the demand for scalability conflicts with the ideal of Decentralization. Recently, some mainstream stablecoin projects have even replaced "Decentralization" with the subset concept of "anti-censorship," reflecting that true Decentralization is facing setbacks.

Although censorship resistance is one of the fundamental features of cryptocurrency, it is merely a subcategory compared to complete Decentralization. Currently, most stablecoin projects still retain a certain degree of centralization characteristics, such as being managed by a team with strategies and distributing profits to holders.

Real Challenges and Compromises

The market crash event on March 12, 2020, exposed the vulnerability of pure decentralized stablecoins. Since then, many projects have turned to using centralized stablecoins like USDC as reserves, partially acknowledging the failure of decentralization in the face of mainstream stablecoins. At the same time, various algorithmic stablecoin experiments have also failed to achieve the expected results.

The tightening of the regulatory environment has further exacerbated this trend. The rise of institutional stablecoins has also weakened the survival space for experimental projects. In this context, projects like Liquity, which adhere to a purely Decentralization approach, have gained some attention, but still face challenges in terms of scalability.

Emerging Trends and Future Directions

Currently, various new stablecoin models have emerged in the market:

1. Hybrid projects aimed at institutions, designed to expand the traditional financial sector.
2. Stablecoins from Web 2.0 giants are attempting to expand the cryptocurrency user base.
3. Projects focusing on underlying strategies, such as RWA and Delta-Neutral strategies
4. The emerging ecosystems ( such as MegaETH and HyperEVM ) bring innovative attempts.

These projects vary in their degree of Decentralization, but most still retain certain centralized characteristics. Some projects, such as the CapMoney plan, aim to gradually achieve Decentralization, while Liquity fork projects like Felix Protocol seek breakthroughs on emerging chains.

Conclusion

Centralization is not entirely negative; it provides projects with better control and scalability, and it is also easier to adapt to regulatory requirements. However, this contradicts the original idea of cryptocurrency. A truly decentralized stablecoin should ensure censorship resistance and be an asset that users truly own.

Despite the attractive nature of emerging alternatives, we should not forget the original trilemma faced by stablecoins: price stability, Decentralization, and capital efficiency. Balancing these three while pursuing development remains a core challenge in the field of stablecoins.