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Cryptocurrency market maker DWF Labs has plans to launch a stablecoin product that can compete with Ethena’s USDE.
According to Andrei Grachev, co-founder of DWF Labs, the cryptocurrency trading and market making startup has… x.com/ag_dwf/status/1831647454862651837″ target=”_blank”>finalized the design of its synthetic stablecoin.
Synthetic stablecoins operate on a soft peg to fiat currencies like the US dollar and are backed by collateral assets like bitcoin (btc) and other assigned cryptocurrencies.
To maintain peg, synthetic stablecoins rely on opening and closing leveraged short positions for the underlying collateral. While this design is supposed to be decentralized, it could introduce additional volatility due to its reliance on perpetual transactions tied to other tokens.
Grachev shared that DWF Labs’ synthetic dollar would back a basket of collateral, including the three largest stablecoins: Tether (USDT), Circle’s USD Coin (USDC), and (DAI), which was recently rebranded as USDS due to Maker’s change to the Sky name.
DWF Labs' Grachev x post also listed other underlying assets such as Ethena (USDE), btc, ethereum (eth), a limited list of long-tail altcoins and blue chips.
DWF Labs had not confirmed whether the blue chip category referred to non-fungible tokens, though the label suggests highly acclaimed nfts could be involved.
Entering the synthetic dollar market could position DWF Labs against Ethena, the issuer of the largest on-chain collateralized stablecoin in cryptocurrencies, USDE. Ethena’s offering, which launched to the public market in February, has attracted $2.69 billion in deposits, with monthly attestations committed to its product.
The majority of this total value locked exists on the ethereum blockchain, valued at roughly $2.58 billion, according to DefiLlama, with the remainder spread across networks like Mantle, Arbitrum, and Blast.
DWF Labs could face the same skepticism that synthetic dollar protocols have encountered within the crypto community. Following the launch of Ethena, decentralized finance leaders like Fantom developer Andre Cronje compared the sector to TerraUSD, the algorithmic stablecoin involved in a $60 billion ecosystem crash in 2022.
