One of Ethereum's inventors, Vitalik Buterin, argues that Ethereum needs higher decentralized stablecoins to present people true independence from the standard economic system.
“We need higher decentralized stablecoins,” Buterin said in a post on Sunday
However, Buterin said that for this to occur, decentralized stablecoins would want to deal with three issues.
Three problems that decentralized stablecoins face
One of the issues is that the majority stablecoins are pegged to the US dollar. Data from CoinGecko shows that 95% of stablecoins are pegged to the USD.
Buterin argued that while tracking the US dollar could also be acceptable within the short term, the viability of a stablecoin mustn’t rest on the shoulders of a nation-state.
“What if hyperinflation occurs, even moderately, over a 20-year period?” Buterin said, arguing that there must be an index that’s “higher” than the worth of the U.S. dollar.
The second issue is expounded to oracles fetching real-world data for blockchains to make sure stablecoins maintain accurate value and proper collateralization.
Buterin said an oracle should be strong enough to face up to manipulation attacks without allowing protocols to extend costs for users or artificially inflate token prices.
The third problem, based on Buterin, is that staking returns must remain high without destabilizing collateral or hindering usage.
He proposed drastically reducing the staking return to around 0.2% while introducing a brand new way of staking that avoids the same old cutback risks.
He also warned that stablecoin security must take into consideration each protocol errors and network attacks, noting that no amount of Ether (ETH) can ensure the soundness of a stablecoin and that mechanisms should be in place to handle large price fluctuations.
Source: Vitalik Buterin
The stablecoin market has grow to be a $311.5 billion market in 2026, up around 50% for the reason that start of 2025.
Individuals in emerging markets often use it for cross-border transfers and as a savings tool, while institutions use it for big transactions and liquidity management.
Decentralized stablecoins are far behind USDT and USDC
Tether (USDT) and Circles USDC (USDC) – each centralized stablecoins – currently account for over 83% of the market and lead trading volumes by an identical margin.
Decentralized stablecoin innovation appeared to stall after stablecoin TerraClassicUSD (USTC) lost its peg in May 2022, consuming $60 billion from the Terra ecosystem.
The stablecoin Ethena USDe (USDe) has since grow to be arguably probably the most notable addition to the industry, while Dai (DAI) remains to be widely utilized in DeFi for borrowing, lending, and liquidity provision.
However, neither USDe nor DAI have seriously challenged the dominance of USDT and USDC, with market caps of $6.3 billion and $4.2 billion, respectively.
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