How to build a stablecoin protocol from funding rate arbitrage
Quick Take
- The well-known stablecoins today are custodial (e.g. USDC), crypto-collateralized (e.g. DAI), and algorithmic (e.g. Empty Set Dollar).
- Each of these designs trades off the kinds of adversarial conditions they can defend against. For example, a custodial stablecoin like USDC can be subject to regulatory pressures.
- A stablecoin designed from tokenizing funding rate arbitrage positions can provide an interesting and trust-minimized alternative to current approaches.
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Author: Mika Honkasalo
