Toward a more perfect stablecoin

The total value of all stablecoins in circulation has steadily grown from about $5 billion at the beginning of 2020 to about $200 billion at the end of 2024. Stablecoins enable crypto traders to transact in traditional fiat currencies without having to go through the hoops of the traditional banking system. They are the backbone of decentralized finance, allowing the settlement of trades, lending and other financial transactions in a trustless environment. However, despite enabling many decentralized applications, stablecoins themselves often are quite centralized, which poses a risk.

Regardless of how reputable, regulated and wealthy an issuer is, centralized stablecoins create a single point of failure. If the issuer fails, the whole ecosystem built around that stablecoins falls with it. Single points of failure are to be avoided when designing a robust information technology system. And true fault-tolerance and scalability can only be reached through redundancy and decentralization.