Messari: Can DYAD solve the stablecoin trilemma?

Author: Justin Baba, Messari Research Analyst; Compiler: 0xjs@黄金财经

The crypto industry has long been struggling to solve the stablecoin trilemma, that is, to create a decentralized, capital-efficient, and value-stable stablecoin.

• Centralized stablecoins such as USDT and USDC meet scalability requirements, but their reliance on centralized entities makes them vulnerable to government intervention.

• On the other hand, decentralized stablecoins, especially collateralized debt position (CDP) models like MakerDAO's DAI, offer a more censorship-resistant alternative, but face huge scaling challenges because these stablecoins have too high collateralization ratios (which means that the value of the collateral backing the stablecoin is higher than the value of the minted stablecoin). This leads to inefficient use of capital.

So here comes DYAD, a CDP stablecoin designed to solve the capital efficiency problem while maintaining decentralization.

• DYAD can mint stablecoins at a 1:1 ratio with collateral. This is achieved through DYAD's utility token, KEROSENE.

• To mint DYAD, users must first obtain a Note NFT. Notes can be minted directly from the protocol or purchased on the secondary market, and their cost increases over time. Once a Note is obtained, users can deposit various collateral types such as WETH, wstETH, tBTC, and sUSDe and mint DYAD against that collateral.

• When the collateral value falls below the required 150% Collateralization Ratio (CR), liquidations occur. In this case, other Note holders can liquidate their positions, receiving their collateral and a 20% bonus.

KEROSENE is a key element that unlocks the DYAD mechanism, enabling users to mint stablecoins at higher loan-to-value ratios.

• KEROSENE tokenizes excess collateral deposited into the protocol, allowing users to leverage this previously unused collateral. However, it is important to note that, unlike Luna, KEROSENE does not increase the TVL of the protocol.

• Its value is deterministic and can be calculated by subtracting the value of the total supply of DYAD from the amount of exogenous collateral deposited, and then dividing that value by the total supply of KEROSENE tokens.

• Note holders can earn KEROSENE by providing liquidity to the DYAD-USDC liquidity pool. Additionally, users can increase their earnings through XP, which is earned over time by liquidity providers based on the amount of KEROSENE held in their Notes. When a user withdraws KEROSENE from their Note, the Note’s XP balance is slashed.

Source: @coffeexcoin’s Dune Dashboard

DYAD represents an attempt to redefine decentralized stablecoins by combining improved capital efficiency with flywheel token economics. If the protocol can continue to grow DYAD supply and its TVL, then demand for KEROSENE will increase as users look to access this additional capital.