Stablecoin projects need collaboration, not competition: Frax founder

As long as stablecoins "liquidity increases in proportion to each other", there will never be real competition among stablecoins, says Sam from Frax Finance Kazémian.

Stablecoin projects need to take a more collaborative approach to increasing liquidity for each and the ecosystem as a whole, says Sam Kazemian, the founder of Frax Finance.

Speaking to Cointelegraph, Kazemian explained that as long as "the liquidity of stablecoins increases in proportion to each other" through shared liquidity pools and collateral systems, there will never be real competition. between stablecoins.

Kazemian's FRAX stablecoin is a fractional algorithmic stablecoin with parts of its supply backed by collateral and other parts algorithmically backed.

Kazemian explained that the growth of the stablecoin ecosystem is not a "zero-sum game", as each token is increasingly intertwined and dependent on the performance of the other.

FRAX uses USD Coins from Circle (USDC) as part of its warranty. DAI, a decentralized stablecoin maintained by the Maker Protocol, also uses USDC as collateral for more than half of the tokens in circulation. As FRAX and DAI continue to increase their market capitalization, they will likely need more USDC collateral.

However, Kazemian pointed out that if one project decides to reject another, it could have negative effects on the ecosystem.

"It's not a popular thing to say, but if Maker were to drop their USDC, it would be bad for Circle because of the return they get from it."

The current top three stablecoins by market capitalization in order from the top are Tether (USDT), USDC, and Binance USD (BUSD). Both DAI and FRAX are decentralized stablecoins that rank fourth and fifth among the best.

USDC has seen the strongest growth over the past year of the three, with its market capitalization more than doubling last July to $55 billion, bringing it closer...