🧵The Stablecoin Trilemma: An Unavoidable Challenge: Part 2

5/8 - Example of a Trilemma: USDS

USDS, a decentralized stablecoin that replaced DAI, manages to maintain stability and decentralization, but requires a high level of overcollateralization, making its capital inefficient.

6/8 - Example of a Trilemma: Tether (USDT)

Tether is stable and capital efficient, but depends on a centralized entity to guarantee its reserves, compromising decentralization.

7/8 - Hybrid Solutions

Some projects, such as Frax, attempt to combine algorithmic mechanisms with partially collateralized guarantees to find a balance between these three elements.

8/8 - Conclusion

The stablecoin trilemma shows that it is difficult to achieve a perfect balance between stability, decentralization, and capital efficiency. Each stablecoin makes tradeoffs, and it is important to choose according to your needs.

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