The ecosystem of stablecoins is not a zero-sum game

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Last Updated on July 26, 2022 by Bitfinsider

According to Sam Kazemian, the founder of Frax Finance, the world’s first fractional-algorithmic stablecoin, the growth of the stablecoin ecosystem and liquidity requires a more collaborative approach.

Kazemian stated in an interview with Bitfinsider that there will never be true competition between stablecoins. He explained how stablecoins could grow liquidity in proportion to one another through shared pools and collateral schemes.

According to the expert, the stablecoin ecosystem is not a “zero-sum game,” and tokens are becoming increasingly dependent on the performance of one another and the ecosystem.

FRAX stablecoin is backed in part by collateral and in part by algorithms. FRAX, like Maker Protocol’s DAI, uses Circle’s USD Coin as collateral, a reliance that is only expected to grow as the stablecoins grow in popularity.

Kazemian believes that the projects are interdependent, and that any attempt to end the relationship would harm the ecosystem.

The executive believes that greater transparency about USDC reserves and widespread adoption will enable it to serve as an important medium for collaboration in the stablecoin ecosystem.

Kazemian stated that purely algorithmic stablecoins “just don’t work” in response to the dramatic collapse of algorithmic stablecoin Terra. Do Kwon, founder of Terraform Labs, emphasised the importance of fractionally backing Terra with various forms of collateral, including BTC.


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Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.


Hardware wallets are safe and secure devices that can be used offline. They keep your cryptocurrency offline, making it impossible for you to be hacked. To find out more on the leading hardware wallets, you may view our reviews here: Ledger & Trezor
Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.

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