Stabl.Fi Docs

Yield-Bearing Stablecoin Inefficiencies and Risks

The team at Stabl Labs has identified several inefficiencies and risks to the traditional yield-bearing stablecoin model:
  • All YBS protocols have to choose between higher yields or higher security
    • With several different YBS protocols available, there is a "competition" for the highest yields. This can lead to protocols farming in less-established or riskier strategies to keep pace with competitors
    • The protocol can stay in safer strategies, but yields from these strategies are usually >5% APY, which is not overly enticing to most DeFi users. As a result, their TVL likely suffers.
  • Collateral is always 1:1
    • While advertising "100% collateralization" is typically a point of pride among YBS protocols, history has proven 100% to not be enough. Some YBS protocols have farmed in riskier strategies which has resulted in loss of collateral funds. In this instance, there is no reserve or "insurance policy" to draw from, resulting in undercollateralization of their token.
      • There is no alternative to undercollateralization but to suffer a depeg of the YBS token, or perform a "negative rebase" where YBS tokens are actually removed from user wallets to regain 100% collateralization. Obviously, in the end the user loses funds which is not acceptable for what should be a stablecoin-denominated protocol.
We believe that the $CASH token can address all of these inefficiencies and risks through an outside treasury and the partnership of Stabl.Fi and Retro.