December 30, 2020, 6:30AM EST
• 9 min read
How to build a stablecoin protocol from funding rate arbitrage
- 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.