In the world of cryptocurrencies, stablecoins are undoubtedly one of the most important financial instruments. As the market develops, how to achieve scalability, censorship resistance, and stability have become urgent issues within the industry. This article will explore the potential of the ENA token and how it can create an independent financial settlement layer globally through derivatives infrastructure.
The importance of stablecoins
Stablecoins are the cornerstone of the cryptocurrency market. Across centralized and decentralized exchanges, more than 90% of order book transactions and 70% of on-chain settlements are denominated in stablecoins. In 2023, the total amount of stablecoins settled on the chain will exceed US$12 trillion, becoming two of the five largest assets in the market, accounting for more than 40% of the total locked value (TVL) of decentralized finance (DeFi). Stablecoins are not only the foundation of the entire industry, but also have over 100 million users, demonstrating their true fit in the global market.
Challenges to Existing Stablecoins
Although stablecoins play an important role in the market, existing centralized stablecoins such as USDC and USDT also face many challenges. These stablecoins rely on traditional financial infrastructure, and while providing stability and capital efficiency, they introduce the following issues:
Non-hedgeable custody risk: The collateral for these stablecoins is held in regulated bank accounts, making them susceptible to scrutiny.
Reliance on existing banking infrastructure: The operation of stablecoins is affected by country-specific regulations, which limits their flexibility.
User's "no return" risk: The issuer internalizes the income generated by using mortgage assets and passes on the risk of de-anchoring to users.
The fragility of decentralized stablecoins
Among decentralized stablecoins, although they do not rely on traditional financial infrastructure, they have historically experienced many problems, including scalability, mechanism design, and insufficient user incentives.
Over-collateralized stablecoins: The growth of these stablecoins is closely tied to Ethereum’s on-chain leverage requirements, resulting in limited scalability.
Algorithmic Stablecoins: The mechanism design of this type of stablecoin was found to be inherently fragile and unstable, making it difficult to achieve sustainable expansion.
"Delta-neutral synthetic dollars": Past attempts have been due to the lack of liquidity in decentralized exchanges, making them difficult to scale and exposed to the risk of smart contract vulnerabilities.
Solutions for ENA Token
So, how to build a trust-minimized, scalable and relatively stable asset without relying on the banking system, while creating economic returns at the protocol level to benefit ecosystem participants?
The answer is through the use of derivatives markets. ENA tokens will utilize the native income generated by Proof-of-Stake assets, combined with the liquid derivatives market, to create a scalable permissionless currency. This innovation not only improves capital efficiency but also reduces reliance on the traditional financial system.
Potential of ENA Token
The launch of the ENA token marks a major change in the stablecoin market. Through the use of derivative commodities, ENA tokens can demonstrate their unique advantages in the following aspects:
Scalability: The ENA token is designed to scale efficiently without relying on traditional financial infrastructure.
Censorship resistance: Through the decentralized mechanism, ENA tokens can effectively avoid the risk of censorship and provide users with greater freedom.
Economic returns: Through the design of the protocol layer, ENA tokens can provide participants with continuous economic returns and enhance their attractiveness.
future outlook
As the crypto market continues to evolve, the role of stablecoins will become increasingly important. The emergence of ENA tokens not only provides new ideas for the future of stable coins, but also lays the foundation for the healthy development of the entire crypto ecosystem. Its success will provide reference for more innovations and push the entire industry forward.
in conclusion
The launch of the ENA token marks an important progress in the field of stablecoins. By combining derivatives markets and proof-of-stake assets, ENA tokens can not only solve the challenges faced by existing stablecoins, but also provide users with higher security and economic returns. In the future, ENA tokens are expected to become an important part of the global independent financial settlement layer and contribute to the sustainable development of the cryptocurrency market.