Superliquid Mechanisms for Decentralized Stablecoins by Ariah Klages-Mundt | Devcon SEA

[Music] hi everybody I'm Mariah clausman I am a co-founder of gyroscope which is a decentralized stable cone protocol and liquidity protocol uh and today I'm going to talk a bit about uh how to make decentralized stable coins more Super liquid and this talk is going to be a mix of uh our work building out gyroscope as well as a background of academic work uh coming from our phds uh that went into actually building gyroscope and it's going to be a largely high level talk uh focusing on the concepts but also trying to ground it in some uh some real examples so let's uh let's take stock of the stable coin space and kind of start at the top so there's something like a stable coin Renaissance right now uh but at the same time uh usdc and usdt are largely dominating uh the the the space and uh what we see is there's a surge particularly in centralized stable coins coming to Market so this is like new contenders like payal's PUSD uh as well as Athena which is a delta neutral stable coin and other real world assets mainly backed by by T bills um and at the same time there's also an increasing maturity uh in decentralized stable coins so one example is there's no more Tera there's there's no more Fay uh and there there's new Innovative mechanisms that are coming to Market things like curve USD uh gyroscopes guid which which we built obviously uh and several more examples but as a category decentralized stable coins haven't really grown in the last two years and in fact they've kind of shrunk in that time um so the main question we want to ask is is why and at least one reason uh which is the focus of this talk is that scaling liquidity at Peg is is very hard and actually this applies to to any stable coin uh but particularly to decentralized stable coins as they're set up now so one primary challenge is attracting any liquidity in the first place and uh basically new stable coins they have to attract new liquidity uh and it Compares with like usdc and usdt in many ways it's like an inherent disadvantage uh because usdc and usdt have entrenched use cases and a lot of natural trading uh demand and pairings which basically means that uh usdc and usdt LPS are independently profitable from from trading volume but when you start a new stable coin you have to start from zero you don't you don't have that it's basically like a chicken or the egg problem and it's very costly um because the the cost to attract stable coin capital is basically between 15 and 30% these days uh and also borrowing stable coins uh is also similarly expensive the second part of the challenge is competing with entrenched liquidity that's that's at Peg and uh the scope of the problem becomes pretty clear when you start looking at historical price deviations uh and this is something that also affects all new stable coins so the chart here is showing new centralized stable coins that have come to Market and showing a histogram of uh price deviations from Peg for for those new stable coins and these are pretty major players including like Pi USD and and Athena uh and and one thing to note is just uh how regular the deviations of like 20 Basin points of or more uh actually occurs for these pretty major stable coins which adds quite a lot of friction in terms of the usability of these systems so from the usability angle uh it one thing that's very important is how easy it is to move in and out of a new stable coin especially with with low slippage being very important and so 20 basis point deviations or more can be uh make it a lot more difficult to actually use the stable coin uh this is how decentralized stable coins compare so actually you see a lot of similar problems with a lot of uh uh kind of like spread out pricing uh but something that's uh that's that Sparks some optimism is that uh there are actually two decentralized exceptions here um so there's both D and gyroscopes gyd um I guess the die is a little hidden in the in the graphic but it it shows up very similarly um uh and this basically just presents some some ideas that maybe you can actually do better by using some advantages of of of decentralized stable coins and then the third part of the challenge is that it's just very difficult technically especially for decentralized stable coins and walk through a few of these reasons um when when a stable coin's price is expected to move around uh it becomes harder to get deep liquidity for it and this is just a practical consequence uh you need to