Stablecoinomics (noun) /ˌsteɪbəlˈkɔɪnɒmɪks/ is the branch of monetary economics that studies how stablecoins are issued and circulated, including how collateral, liquidity, and credit interact with each other.
Stablecoin Functions
Overview
A stablecoin is a blockchain-based financial instrument designed to maintain a price-stable and fungible unit of account while functioning simultaneously as a medium of exchange, credit, and value storage.
- Blockchain-based means the stablecoin is issued on a blockchain network, enabling open transferability, faster settlement, lower friction, borderless access, onchain transparency, and immutable ledger records.
- Fungibility means each unit of the stablecoin is interchangeable with any other unit.
- Unit of account means prices, debts, and financial contracts are denominated in the stablecoin, making it the reference unit for economic activity.
- Medium of exchange means the stablecoin can be used to make payments, settle trades, and transfer value.
- Medium of credit means the stablecoin can be lent and borrowed to create debt.
- Store of value means the stablecoin can preserve and/or grow its purchasing power over time through price stability and/or yield generation, either internally or externally.
Stablecoins are often pegged to and backed by a fiat currency like the US Dollar (USD), where direct 1:1 convertibility with the underlying reserve creates a hard peg, enabling market participants to perform arbitrage and support a soft peg in the secondary market.
Exchange vs. Credit vs. Store of Value
Stablecoins are good mediums of exchange and credit because they alone are not yield-bearing instruments. This allows stablecoins to be used freely without yield acting as a tax on borrowing or an opportunity cost on spending, which otherwise would distort credit pricing and reduce money velocity.
When someone borrows a yield-bearing instrument, they don’t benefit from that yield. On the contrary, they owe that yield to the lender, plus borrowing interest on top. This makes a yield-bearing stablecoin more expensive and inefficient for borrowers as a medium of credit.
Yield also psychologically anchors a financial instrument in consumers' heads as a store of value, not a medium of exchange. When money market funds (MMFs) gained popularity in the US during the 1980s, they eventually introduced cheque writing and debit features to provide savers with payment capability. MMFs typically pay higher yields than bank accounts and they are very liquid, with many offering same-day transfer. Despite this, most consumers still prefer using a non-yielding bank account for payments instead of MMFs.
For those actually looking to save, stablecoins can be deployed productively to earn yield in the secondary market through lending, liquidity provisioning (LP), or other strategies. Alternatively, float revenue or internally generated yield can be streamed from stablecoin issuers to user wallets via airdrops or rebasing mechanisms, without embedding yield directly into the stablecoin itself. This enables stablecoins to function effectively as mediums of exchange and credit, preserving money velocity from spenders and borrowers while still allowing savers to capture yields separately.
Yield helps offset inflation over time, enabling stablecoins to perform better as a long-term store of value. Without yield, stablecoins may experience the same inflationary effect as their fiat denomination. However, since most stablecoins are USD-denominated, they still provide a relatively better store of value compared to many local currencies around the world. This is especially true in emerging markets, where stablecoins act as a dollarization conduit to help users hedge against high inflation and weak local currencies.
Issuer Economics
Overview
Float revenue, or interest earned on reserves, remains the primary source of income for stablecoin issuers. In fact, the world’s largest issuers, Circle (USDC) and Tether (USDT), generate 95-99% of their revenue from reserve income. Issuers may also charge token minting, redemption, or wallet-to-wallet transfer fees, but in practice, competition and user demand for frictionless transactions keep these fees close to zero. As a result, float revenue continues to provide the most reliable source of income for stablecoin issuers.
Since current stablecoin regulations like the GENIUS Act only allow issuers to allocate reserves into permitted assets like cash and cash equivalents, including short-term government bonds like US T-Bills, their float revenue is effectively tied to the risk-free rate. During low interest rate environments, float revenue may decline significantly, threatening issuers whose economics depend heavily on interest income. Thus, future regulated stablecoin issuers will likely need to diversify into adjacent business models, such as payments processing, credit intermediation, or or ecosystem services, rather than relying solely on float revenue.
A Race to the Bottom
A stablecoin is like a bank cheque, but on blockchain rails, with much higher money velocity. However, banks don't monetize cheques directly; most even distribute them to customers for free. Stablecoins may eventually follow a similar path as competition increases, forcing issuers to incentivize adoption by sharing economics. Otherwise, they risk losing market share to those that do.
Circle has been doing just that since 2023 with Coinbase, its investor, strategic partner, and largest USDC distributor. According to public disclosures, Coinbase receives 50% of float revenue from USDC held on Coinbase and 50% of float revenue on USDC held elsewhere. Circle records this as distribution costs paid from reserve income (i.e., COGS).
In the future, more stablecoin issuers will need to externalize a large share of their float revenue to users, distribution partners, and ecosystem builders in order to scale supply and adoption. This dynamic resembles fee compression in mutual funds and ETFs, where competition and commoditization steadily shrank issuer margins since the arrival of indexed funds in the 1970s. Over time, the stablecoin industry may evolve toward a model favoring operationally efficient issuers with thin profitability, similar to modern mutual fund and ETF issuers who manage ~$80 trillion in global AUM today.
Still, stablecoins remain early in their lifecycle, and their long-term economics will most likely evolve over time in response to changing markets, technology, and regulations.
Stablecoin Regulations
Overview
UNDER CONSTRUCTION 🚧
Stablecoins vs. Tokenized Deposits vs. CBDCs
UNDER CONSTRUCTION 🚧
Stablecoin Adoption
Overview
Stablecoin adoption has accelerated rapidly since the COVID era, growing from a niche crypto primitive into a global market exceeding $300 billion in 2025 (+49% YoY growth). Jeremy Allaire, the CEO of Circle, estimated 40% annual growth for the stablecoin market in the coming years. Additionally, US Treasury Secretary Scott Bessent projected a $3 trillion stablecoin market by 2030.
Over 99% of stablecoins are denominated in USD, driven by global demand for digital dollars. As a result, more than 90% of stablecoins are directly backed by USD bank deposits, US T-Bills, and cash equivalents. 57% of stablecoins in circulation are issued on Ethereum, which is also the largest blockchain in terms of TVL (total value locked). Additionally, USDT and USDC dominate 90% of the stablecoin market as early incumbents, with 65% and 25% market shares, respectively.
USDT remains by far the largest and most popular stablecoin globally, with over $1 trillion in weekly trading volume compared to $100-150 billion for USDC, which is more common among Western countries and institutional use cases. While USDT leads adoption in developing economies, USDC finally surpassed USDT in total transfer volume in 2025, achieving $18.3 trillion versus $13.2 trillion, respectively.
TradFi Adoption
Stablecoins are increasingly being used as a settlement layer to replace inefficient banking rails in traditional finance (TradFi), improving payment costs, transaction speed, capital mobility, accessibility, and cross-border interoperability.
In 2025, stablecoins processed about $57.7 trillion in total transfer volume across 12.8 billion transactions, with more than 361 million total active unique addresses interacting with them. Retail usage remains a major driver of onchain activity, with retail-sized transfers making up about 57% of transaction count. However, most value is concentrated in larger transfers between businesses. In 2025, annualized B2B stablecoin payment volume crossed $220 billion, saving businesses globally billions in bank fees.
Traditional cross-border payments typically involve both a SWIFT wire transfer and FX conversion into local fiat currency, with FX spreads often representing the largest portion of total cost. SWIFT wires cost between $30-50 at major banks, with additional intermediary fees of $5-20 per bank. Total costs, including FX markups and receiving bank charges, can reach 6% or more, depending on the payment corridor and liquidity conditions. By contrast, stablecoins can be sent and received globally for less than $1 in network fees regardless of transaction size, without forced conversion into local fiat for settlement.
Stablecoin Transactions & Wallets
Stablecoin Payment Volumes (Annualized)
More individuals and businesses worldwide are also dollarizing via stablecoins, relying on them instead of local fiat as alternative payment and savings instruments to hedge against hyperinflation, currency devaluation, and banking risks. In Sub-Saharan Africa, stablecoins already account for ~43% of total crypto transaction volume. In Latin America, adoption is similarly driven by inflation and remittances, particularly in Argentina where 60–70% of crypto transactions involve stablecoins.
Demand for stablecoins can be reflected via the stablecoin premium, which tends to be highest in countries experiencing economic instability, high inflation, or capital controls. A stablecoin premium is the additional cost paid to acquire USD-pegged over the official exchange rate (i.e., above $1), indicating excess demand for digital dollars relative to available supply locally.
Stablecoin Premiums Across the World
DeFi Adoption
In decentralized finance (DeFi), stablecoins are deeply integrated with onchain financial infrastructure, including DEXs, liquidity pools, lending protocols, programmatic vaults, and yield marketplaces. Today, stablecoins make up ~40% of DeFi TVL and ~30% of all onchain transfers, reinforcing their role as a major unit of account and liquidity layer across onchain markets.
Stablecoins have a major presence in crypto exchanges, where they commonly serve as base-pair liquidity. While most stablecoin trading volume still occurs on centralized exchanges (CEXs), activity is shifting toward decentralized venues, where stablecoin pairs generate about half of total trading volume. In 2025, combined stablecoin spot trading volume across CEXs and DEXs exceeded $30 trillion, with DEXs capturing ~30% market share. Notably, USDT and USDC still dominate the market, with an ~80% share of total stablecoin trading volume.
Stablecoin Trading Volume (CEXs + DEXs)
Stablecoin Trading Volume (DEXs Only)
Stablecoin Trading Volume by Asset (CEXs + DEXs)
DEX-to-CEX Volume Share
Stablecoin are also a core driver of credit creation in DeFi, accounting for 60–80% of borrowing demand across major lending protocols. In 2025, onchain stablecoin lending activity generated approximately $241 billion in total volume across ~4.2 million loans, averaging $43,000 per loan.
Although most stablecoin loans today remain over-collateralized with digital assets like BTC and ETH, new underwriting models, onchain credit scoring, and real-world asset (RWA) integrations are beginning to enable under-collateralized and unsecured stablecoin lending markets. Over time, these innovations could make DeFi credit more practical for consumer financial products such as credit cards and revolving credit lines, allowing stablecoins to serve not only as a settlement layer, but also as a native unit of credit origination.
Onchain Stablecoin Lending Volume
Stablecoin Taxonomy
Overview
In addition to fiat-backed stablecoins, many of which are regulated, there are stablecoins backed by non-fiat assets, such as crypto, credit positions, yield-bearing assets, and delta-neutral strategies. These unregulated stablecoins are also referred to as “synthetic dollars.”
Stablecoins should be classified based on what actually backs them and how their pegs are enforced, not just surface-level labels. Historically, stablecoin implementations have been anchored by external assets (exogenous), protocol token reflexivity (endogenous), or a hybrid of the two, with each model exhibiting different properties, market dynamics, and risk profiles.
Exogenously-backed stablecoins further fall into 3 subcategories: reserve-backed, CDP-backed, and strategy-backed.
- Reserve-backed stablecoins are issued against a pool of liquid assets held in reserve, either offchain (e.g., cash, T-Bills) or onchain (e.g., yieldcoins, LP tokens). Their peg stability is enforced primarily through direct redemption and natural arbitrage forces.
- CDP-backed stablecoins are minted by locking onchain collateral into smart contracts, where minters/borrowers open collateralized debt positions (CDPs). Peg stability is enforced through over-collateralization, liquidation mechanisms, as well as arbitrage between debt repayment and market pricing.
- Strategy-backed stablecoins are supported by actively managed or programmatic yield-generating strategies, such as delta-neutral positions or basis trades, with either onchain or offchain custody. Peg stability depends on strategy solvency, collateral value, and redemption policy.
Stablecoin Classification
Exogenously-Backed | Endogenously-Backed | Hybrid | |
Issuance Model | Centralized & permissioned with on/offchain collateral
Decentralized & permissionless with onchain collateral only | Decentralized & permissionless with onchain collateral | Mixed implementations |
Collateral/Reserve | External assets with independent market value (e.g., bank deposits, T-bills, stablecoins, yieldcoins, crypto, RWA) or market-neutral strategies | Protocol-issued token backed by utility, governance demand, protocol revenue, and/or future growth potential | Mixed implementations |
Collateral/Reserve Ratio | At least 100% if reserve or strategy-backed
Typically 120-150% or more if CDP-backed | 100% backed by utility tokens | Mixed implementations |
Economic Anchor | Collateral, reserve, or strategy health, solvency & transparency | Market confidence in the protocol | Mixed implementations |
Peg Stability Mechanism | Hard peg via redemption (reserve/strategy)
Soft peg via liquidation (CDP) or arbitrage (all) | Mint/burn or supply adjustment against protocol token; relies on reflexive demand | Mixed implementations |
Open Market Operations | Capital-efficient liquidity & secondary peg defense mechanism on top of hard backing. Optional; not required | Short-term liquidity & peg defense mechanism; not sustainable for long-term peg defense. Often a core feature | Mixed implementations |
Key Failure Risk
(Non-Exhaustive) | Reserve, CDP, or strategy impairment | Reflexive death spiral of utility token price | Mixed risks depending implementation |
Examples | LFRAX (backed by FXS & other onchain collateral) |
Stablecoin Ecosystem Map
Stablecoins vs. Yieldcoins
Overview
Most stablecoins are built under the ERC-20 token standard on Ethereum and EVM networks, while yield strategies are often implemented as ERC-4626 vaults. These vaults allow users to deposit/stake assets like stablecoins and mint a composable ERC-20 receipt token—a tokenized vault share, or “yieldcoin.”
While the underlying concept of tokenized deposits has existed since the early days of DeFi, yieldcoins as a standardized and widely composable primitive are relatively new, with meaningful adoption accelerating in 2024 following the maturation of ERC-4626 infrastructure.
At the end of 2025, the total market capitalization of yieldcoins sits around $20 billion, only ~6.5% of the stablecoin market. Though still early, yieldcoins may eventually play a role in DeFi that’s similar to savings deposits in TradFi: expanding the monetary stack beyond transactional stablecoins into programmable savings and credit instruments.
Total Yielcoin Supply in Circulation
Total Yield Paid Out by Yieldcoins
Yieldcoin Mechanics
An ERC-4626 vault is designed to accumulate yield internally, which increases its NAV (net asset value) and allows users to redeem/unstake more underlying assets per receipt token over time. Vault earnings may come from issuers of the underlying assets and/or from deploying those assets directly into yield strategies, such as onchain lending. Every strategy has its own unique risk/reward profile. A vault's performance, solvency, and long-term viability ultimately depend on how well its strategy manages risk vs. yield opportunities across market cycles.
Some yieldcoins are implemented simply as ERC-20 tokens without vault structures. These tokens are typically tokenized RWAs, such as T-Bills and money market funds. Other yield-bearing RWAs could also be tokenized into ERC-20 yieldcoins, including fixed income, mortgages, private credit, etc.
A yieldcoin's market price adjusts over time due to arbitrage forces that soft-peg it to the unit NAV. How closely its market price tracks the underlying value depends on how efficiently arbitrageurs can mint/redeem the yieldcoin. The resulting market liquidity determines whether the yieldcoin trades at a discount or premium to NAV.
Since yieldcoins are tradable tokens, holders can sell them on exchanges to realize gains as the token's price gradually appreciates to reflect internal yield accrual. Yieldcoin holders can also supply them into DeFi protocols as collateral or liquidity to access additional leverage, yields, or utilities, enabling higher capital efficiency through composability.
Stablecoins may be used to mint yieldcoins, and yieldcoins may be redeemed for stablecoins, but yieldcoins are NOT stablecoins. They’re technically derivatives with different mechanics, properties, and risk profiles than stablecoins.
Yieldcoin APY Examples
Stablecoin & Yieldcoin Risks
Stablecoins are NOT risk-free. While they are designed to maintain price stability, a stablecoin's health ultimately depends on its economic design, core infrastructure, collateral integrity, redeemability, market liquidity, security, transparency, and many other important factors.
Yieldcoins carry even higher inherent risk than stablecoins. DeFi, in general, is still a relatively young industry and naturally contains more risks than TradFi. Investors typically demand more yield as compensation for exposure to these risks. As a result, higher yield implies higher underlying risk.
Stablecoin and yieldcoin risks may include, but are not limited to, smart contract risk, blockchain risk, collateral risk, credit risk, liquidity risk, de-peg risk, market contagion risk, counterparty risk, custodian risk, banking risk, sovereign risk, and regulatory risk, any of which could lead to loss of funds. Additional risks may arise in DeFi from composability, where failures can rapidly propagate across the ecosystem.
Consequently, users should conduct their own due diligence, fully understand these risks, and seek official advice from licensed professionals before interacting with DeFi protocols and digital assets, including stablecoins and yieldcoins. Past performance is not indicative of future results.
TerraUSD (UST), endogenously-backed by the LUNA token, was the largest stablecoin failure in history, wiping out over $40 billion in market value in 2022.
For additional risks, please refer to the Risk Disclaimer.
dUSD Money Supply
Overview
dUSD is classified as a decentralized and exogenously-backed stablecoin, with onchain reserves consisting of stablecoins, yieldcoins, and liquidity pool positions. Unlike fiat money, where both the monetary base and credit layer are endogenously created through balance sheet expansions and fractional-reserve lending, dUSD operates on an exogenous, full-reserve monetary base and credit creation mechanisms.- Fiat Money: Endogenous reserves → Bank balance sheet → Loans & spending → Bank deposits → More loans & spending → Money supply expansion → Politically unlimited → Inflation & systemic instability ♾️
- dUSD: Exogenous reserves → Stablecoin issuance → Lending deposits → Loans & spending → Arbitrage & redemptions → Money supply contraction → Reserve backstop → Price & systemic stability ☯️
Money Supply Classification
Fiat Money | Reserve-Backed Stablecoins | |
M0 - Monetary Base | Physical cash issued by the Fed + reserves created endogenously within the central banking system through balance sheet expansion mechanisms. Reserves are also held by commercial banks at the Fed | Underlying collateral supplied exogenously and held in reserve to fully back circulating stablecoins on a 1:1 basis. Yield-generating reserves also provide an inflationary hedge to the monetary base |
M1 - Narrow Money | M0 + spendable bank deposits (e.g., demand deposits), created and destroyed endogenously through bank lending and loan repayments | Transferable stablecoins in wallets, exchanges, and protocols that are redeemable 1:1 for underlying reserves |
M2 - Broad Money (Credit) | M1 + bank credit created through fractional-reserve lending, where new deposits are generated via balance sheet expansion, allowing the total money supply to grow beyond M0 | M1 + stablecoin credit created through lending protocols, where debt expansion contracts M0/M1 and is limited by base reserves as well as market liquidity |
Reserves & Narrow Money Supply
- Exogenous reserves (M0) form dUSD’s monetary base, collateralizing its circulating supply (M1) on a 1:1 basis while providing final settlement liquidity. Peg stability also depends on 1:1 convertibility and redemption capacity of underlying reserves.
- M1 includes all spendable or transferable dUSD in circulation across user wallets, exchanges, and decentralized protocols. This is considered the narrow money supply of dUSD.
- Unlike fiat money which is fungible across the money supply, dUSD is exogenously backed and full-reserve in nature, which means M0 and M1 for dUSD are convertible but not fungible with each other. Additionally, M1 cannot become greater than M0 due to dUSD’s 1:1 backing requirement. As a result, M1 cannot include M0 within its definition for dUSD’s money supply.
Liquidity & Peg Stability
- A stablecoin by itself has no market price unless it is paired against other assets as a medium of exchange. The total amount of assets actively paired against dUSD across exchanges such as Curve is what enables secondary market liquidity.
- dUSD’s market price is based on the total liquidity paired against its tradable supply across DEXs, where marginal order flows determine the prevailing exchange rate between dUSD and other assets. More dUSD vs. paired liquidity = downward peg pressure; less dUSD vs. paired liquidity = upward peg pressure.
- As long as 1:1 redemption is available, market makers will arbitrage dUSD to maintain its liquidity balance and peg stability. The protocol may also intervene directly via open market operations to optimize market liquidity, similar to the Fed.
Credit & Total Money Supply
- Today, most DeFi lending markets operate as onchain money markets that offer short-term, liquid, revolving credit. On Aave, the world's largest lending protocol, stablecoins deposits make up 48% of total supply, while stablecoin loans account for 78% of total debt (as of February 2026).
- dUSD can be supplied into lending markets as a medium of credit, where borrowers can take out loans and pay interest to lenders. Lenders cannot withdraw dUSD unless it is unutilized (not borrowed); borrowed funds must be repaid to enable lender withdrawals.
- DeFi interest rate models typically price credit based on utilization. Higher utilization = higher rates; lower utilization = lower rates. When utilization rises and withdrawals are constrained, interest rates increase, incentivizing borrowers to repay. This self-balancing mechanism eventually restores credit liquidity and enables lenders to withdraw.
- In DeFi, the majority of stablecoin loans is secured by collateral supplied by borrowers, with average LTV (loan-to-value) between 60-70%. When a borrower’s LTV reaches the liquidation threshold (typically less than 100%), their collateral is liquidated to repay debts and ensure lender solvency.
- When dUSD is borrowed, it usually gets redeemed for underlying reserves, either directly by borrowers or indirectly by market makers who exchanged with borrowers.
- dUSD credit expansion ultimately contracts both M0 and M1 when there is insufficient secondary market liquidity to absorb selling pressure from borrowers. Therefore, dUSD credit creation is similar to full-reserve lending, not fractional-reserve lending like in modern banks.
- When there is sufficient secondary market liquidity, dUSD credit expansion may not contract reserves and circulating supply. Liquidity for dUSD can expand across exchanges, allowing market makers and liquidity providers to absorb selling pressure from borrowers, diverting them from redemptions.
- Ultimately, dUSD credit velocity (total borrows + repayments) increases money velocity through trading volume, generating more fees and/or arbitrage profits for market makers and liquidity providers.
- If market makers and liquidity providers earn sufficient returns, they are incentivized to keep capital deployed, allowing the system to further expand credit and the broad money supply (M2).
- M2 for dUSD includes M1 within its definition because debts, i.e., utilized lending deposits (M2 - M1), are also based in dUSD and can only be repaid with dUSD.
Composability & Meta Money Supply
- In DeFi, composability allows some tokens and protocols to be combined like modular building blocks, or “money legos,” creating new products and applications permissionlessly. To enable composability, many DeFi protocols produce receipt tokens to function as redeemable shares of user deposits. For example:
- Stablecoin liquidity pools in DEXs produce LP tokens. The LP token represents a claim on one unit of liquidity, composed of the stablecoin and another paired asset(s). Holders can redeem the LP token to withdraw either asset that is available in the pool.
- ERC-4626 vaults can tokenize stablecoin deposits in onchain money markets, allowing lenders to mint yieldcoins. The yieldcoin represents a claim on one unit of lending supply. It is effectively backed by both utilized credit (debts) and unutilized stablecoins in the lending protocol, where debts are secured by collateral from borrowers. Holders can redeem the yieldcoin for stablecoins that still remain available to withdraw.
- Receipt tokens can also be supplied into other DeFi protocols to create additional derivatives of the original stablecoin. For example, yieldcoins can be supplied as liquidity in interest rate marketplaces such as Pendle to enable yield trading via PTs (principal tokens) and YTs (yield tokens).
- In dTRINITY, lenders can stake dUSD into the protocol’s ERC-4626 vault to mint sdUSD. The vault then deploys dUSD into dLEND to earn yield, keeping it productive while enabling higher capital efficiency for lenders via the sdUSD yieldcoin. Therefore, sdUSD represents debts (M2 - M1) plus idle dUSD (M1) that exist within dLEND.
- Both dUSD and sdUSD can be supplied into other DeFi protocols, and receipt tokens from those places may be supplied into other protocols as well. Every additional receipt token adds to the meta money supply (M3+) of dUSD, with further financial complexities and risks involved with each layer.
- M3+ assets may be convertible with dUSD or sdUSD, but they are not fungible with each other. Therefore, M3+ for dUSD does not include M1/M2 within its definition. Additionally, since M3+ represents composable derivatives built on top of M1/M2, it sits outside the core monetary aggregates of dUSD.
For more details, please refer to sdUSD.
dUSD Economics
Overview
dUSD is designed to be a non-yield-bearing stablecoin. By separating yield from the unit of account, dUSD avoids distorting the price of credit and compounding costs for borrowers. Instead, float revenue generated by dUSD’s reserve is redirected to users as interest rebates, further lowering its net borrowing cost to stimulate demand. This produces structurally higher utilization and yield for lenders (including sdUSD holders), allowing dUSD to function as a more efficient medium of credit across market cycles.
The dTRINITY economy is driven by natural credit expansion and contraction cycles of dUSD:
- In expansionary phases, increased leverage and velocity boost credit supply but dilute borrower subsidies, raising effective borrowing and lending rates.
- During contractions, deleveraging activity replenishes reserves and subsidies, lowering effective rates while preparing the system for its next expansionary phase.
Market Participants
There are 3 types of market participants in the dTRINITY economy: lenders, borrowers, and liquidity providers (LPs). LPs may also act as market makers or arbitrageurs who are naturally incentivized to support dUSD’s peg. Each type has its own risk/reward profile and economic role.
Lenders | Borrowers | LPs | Arbitrageurs | |
Motivations | Competitive yield
Capital preservation
Passively managed | Cheap leverage access
Speculation or hedging
Rate arbitrage
Actively managed | Competitive yield
Capital mobility
Actively managed | Peg arbitrage
1:1 convertibility
Actively managed |
Benefits | Structurally higher yield
Over-collateralization
Points/rewards | Subsidized credit
Capital efficiency
Less leverage | Velocity-driven fees
Flexible liquidity
Points/rewards | Market-neutral profits
Execution speed
Capital efficiency |
Key Risks
(Non-Exhaustive) | Reserve risk
Credit risk
Liquidity risk
Market risk
Security risk | Collateral risk
Liquidation risk
Interest rate risk
Market risk
Security risk | Reserve risk
Paired asset risk
Impermanent loss risk
Market risk
Security risk | Reserve risk
Execution risk
Market risk
Security risk |
Ecosystem Benefits | ↑ Base reserves
↑ Credit supply
↑ Float revenue
↑ Fee revenue
↑ Incentive funding | ↑ Utilization & debt
↑ Collateral supply
↑ Credit velocity
↑ Interest revenue
↑ Fee revenue | ↑ Base reserves
↑ Market liquidity
↑ Peg stability
↑ Money velocity
↑ Fee revenue | ↑ Market liquidity
↑ Peg stability
↑ Money velocity
↑ Fee revenue |
For additional risks, please refer to the Risk Disclaimer.
Peg Dynamics
dUSD is soft-pegged to $1 in the secondary market, supported by arbitrageurs and market makers who rely on permissionless minting/redemption to access 1:1 reserve convertibility.
- Credit Expansion Cycles: Selling pressure from borrowers may cause dUSD to trade below $1, as liquidity pools accumulate more dUSD relative to other paired assets. Market makers are then naturally incentivized to buy dUSD at a discount, redeem it at par, and capture arbitrage profits. This process restores price stability but also decreases reserves at the same time.
- Credit Contraction Cycles: Borrowers mint or buy back dUSD to repay debts, causing dUSD to trade closer to $1 as liquidity pools rebalance. If buying pressure from borrowers causes dUSD to trade above $1, market makers are naturally incentivized to mint dUSD at par, sell it at a premium, and capture arbitrage profits. This process maintains price stability and re-expands underlying reserves.
For more details, please refer to dUSD.
Interest Rate Dynamics
By subsidizing borrowing costs with float revenue-funded rebates, dTRINITY shifts the demand curve upward across integrated lending markets for dUSD, structurally increasing credit demand even at higher gross interest rates. This moves the market toward a new equilibrium that unlocks greater utilization and yields. Borrowers are able to pay lenders more in gross interest while still benefiting from competitive net borrowing costs after subsidies, creating a win-win dynamic for both sides of the market.
Even as float revenue declines during low-yield or contractionary periods, reduced subsidies still deliver materially better outcomes vs. no subsidies. The resulting increase in borrower participation and utilization unlocks a higher long-run equilibrium for dUSD, where lenders earn above-average yields while borrowers maintain below-average net costs across market cycles.
For more details, please refer to dLEND.
Market Cycle Dynamics
Bull Market → Credit Expansion → Rising Rates
- Leverage Demand: Rising asset prices and low dUSD borrowing costs increase monetary leverage, driving lending deposits and debts higher, expanding the M2 supply of dUSD.
- Increased Utilization: Growing debt pushes up utilization, tightening system-wide credit.
- Increased Velocity: Borrowers and arbitrageurs increase credit velocity and money velocity of dUSD across the entire market.
- Yields Rise: Higher utilization and velocity increase yields for lenders and LPs of dUSD.
- Credit Expansion: Higher yields attract more capital into the system, increasing the M0/M1 and M2 supply of dUSD.
- Reserve Contraction: Debt expansion and arbitrage activity raise the redemption rate of dUSD, reducing the M0/M1 supply at the same time.
- Subsidy Dilution: A higher debt-to-reserve ratio and lower float revenue reduce rebates per unit of debt, compressing dUSD borrower subsidies.
- Borrowing Costs Rise: Lower rebates raise dUSD net borrowing rates.
Bear Market → Credit Contraction → Falling Rates
- Deleverage Demand: Falling asset prices and high dUSD borrowing costs reduce monetary leverage, driving lending deposits and debts lower, contracting the M2 supply of dUSD.
- Decreased Utilization: Debt unwinds pull down utilization, loosening system-wide credit.
- Decreased Velocity: Lower debt and reduced activity decrease credit velocity and money velocity of dUSD across the entire market.
- Yields Fall: Lower utilization and velocity reduce yields for lenders and LPs of dUSD.
- Credit Contraction: Lower yields lead to capital outflows from the system, decreasing the M0/M1 and M2 supply of dUSD.
- Reserve Expansion: Debt repayments and arbitrage activity lower the redemption rate of dUSD, re-expanding the M0/M1 supply at the same time.
- Subsidy Regeneration: A lower debt-to-reserve ratio and higher float revenue increase rebates per unit of debt, boosting dUSD borrower subsidies.
- Borrowing Costs Fall: Higher rebates reduce dUSD net borrowing rates.
- Repeat from Step 1 ☯️
Key Metrics
Overview
The metrics below are key performance indicators of the dTRINITY economy. They provide a unified framework for understanding how value flows through the system: from base reserves, stablecoin issuance, and credit expansion, to market liquidity, money velocity, and protocol revenue. Due to dTRINITY’s chain-isolated architecture, these metrics are calculated on a per network basis, where Ethereum is expected to dominate most protocol economic activity.
Monetary Metrics
Description | Significance | |
Reserve TVL (M0) | Exogenous collateral backing of dUSD, including stablecoins, yieldcoins, and Curve LP positions | Total monetary base of dUSD, serving as final settlement money for redemptions while anchoring price stability to the underlying base reserves; analogous to the M0 money supply in TradFi
Note: Unlike M0 in TradFi, M0 for stablecoins is backed by exogenous reserves and cannot be endogenously created like fiat, making it a full-reserve monetary base |
Circulating Supply (M1) | Total Mints - Total Redeems
(including dUSD in Curve AMOs) | Total supply of dUSD tokens in circulation, fully backed by base reserves. This represents the narrow money supply, i.e., spendable/transferable dUSD used for transactions and liquidity across the entire market; analogous to M1 in TradFi
Note: M1 and M0 for stablecoins are separate, convertible but non-fungible layers, unlike fiat where M1 and M0 are the same instrument |
Credit Money Supply (M2) | M1 + Aggregate Debt | dUSD broad money supply, i.e., narrow money + credit expansion through lending activity; analogous to M2 in TradFi.
Note: Unlike M2 in TradFi which is created via bank credit and balance sheet expansion, M2 for stablecoins is constrained by base reserves and market liquidity, making it a full-reserve credit system |
Redemption Rate | Total Redeems / Total Mints | Average rate of demand for dUSD base reserves |
Money Velocity | Total Daily Transfers / M1 | Transactional velocity of dUSD across the entire market where tokens transfer between wallets or accounts (on/offchain), including P2P transfers, swaps/trades, staking, lending, borrowing, etc. |
Reserve Ratio | M0 / M1 | Also known as the “Collateral Ratio,” or the current level of collateralization for dUSD, which should be at least 100% |
Money Multiplier Ratio | M2 / M0 | dUSD credit amplification factor of the monetary base; analogous to the money multiplier ratio in TradFi |
Monetary Leverage Ratio | Aggregate Debt / M2 | Share of the total dUSD money supply actively deployed as credit across the entire market |
Debt-to-Reserve Ratio
(Debt Ratio) | Aggregate Debt / M0 | dUSD debt expansion relative to its monetary base. This ratio helps determine how much float revenue can be distributed as borrower rebates per unit of debt |
Lending-to-Reserve Ratio
(Lending Ratio) | Aggregate Lending TVL / M0 | dUSD credit supply relative to its monetary base. This ratio helps determine how much float revenue can be distributed as lender rewards per unit of TVL
Note: dTRINITY rebates borrowers by default. Some float revenue may be shared with lenders as rewards, depending on market conditions |
Liquidity-to-Reserve Ratio
(Liquidity Ratio) | Aggregate Liquidity TVL / M0 | dUSD + sdUSD secondary market liquidity relative to the monetary base. This ratio helps determine how much float revenue can be distributed as LP rewards per unit of TVL
Note: Some float revenue may also be shared with LPs as rewards, depending on market conditions |
Float APY | (Float Revenue - Retained Float Revenue) / M0 | Exogenous yield (float revenue) generated from M0 provides the core source of funding for dUSD user incentives, minus any protocol retentions |
Borrower Rebate APY | (Float APY / Debt Ratio) × Weight | Variable interest rebate rate for dUSD borrowers across the entire market, reducing their net cost per unit of debt |
Lender Reward APY | (Float APY / Lending Ratio) × Weight | Variable supply reward rate for dUSD lenders across the entire market, enhancing their net yield per unit of TVL |
LP Reward APY | (Float APY / Liquidity Ratio) × Weight | Variable supply reward rate for dUSD and/or sdUSD LPs across the entire market, enhancing their net yield per unit of TVL |
Liquidity Metrics
Description | Significance | |
Peg Stability | Average deviations from unit NAV (net asset value) for dUSD + sdUSD | Primary indicator of stability and credibility for dTRINITY. Peg stability is reinforced by open market operations and atomic redemptions of protocol-issued assets |
Aggregate Liquidity TVL | Total assets deposited into all integrated trading pairs and liquidity pools for dUSD + sdUSD | Measure of total liquidity depth for protocol-issued assets across the entire market
Note: dUSD + sdUSD pools are both included since cross-pool arbitrage activity mutually supports liquidity and peg stability for both assets |
Aggregate Liquidity Composition | Percentage of dUSD + sdUSD vs. other paired assets across all integrated trading pairs and liquidity pools | Deep liquidity from paired assets strengthen peg stability for protocol-issued assets, vice versa |
Aggregate Trading Volume | Total daily volume across all integrated trading pairs and liquidity pools for dUSD + sdUSD | A core component of money velocity for protocol-issued assets across the entire market |
Aggregate Liquidity Utilization | Aggregate Trading Volume / Aggregate Liquidity TVL | Measure of capital efficiency for liquidity pools of protocol-issued assets across the entire market |
Aggregate Base LP APY | Average LP earnings rate from trading fees + native yields via paired assets across all integrated trading pairs and liquidity pools for dUSD + sdUSD | Variable baseline yield for LPs of protocol-issued assets across the entire market (before rewards) |
Aggregate Net LP APY | Aggregate Base LP APY + LP Reward APY | Effective average yield for LPs of protocol-issued assets across the entire market (net of rewards)
Note: Rewards may be distributed directly to LPs or processed through veTokenomic mechanisms (e.g., Curve’s veCRV), potentially improving reward efficiency and LP returns |
Credit Metrics
dLEND Markets Only
Description | Significance | |
Vault TVL | Total assets in native lending vaults (sdUSD) and looping vaults (dLOOP). These vaults are also powered by dLEND | dTRINITY’s ERC-4626 strategy vaults mint redeemable receipt tokens that enable composability and secondary market liquidity potential for dLEND deposits |
Lending TVL | dUSD supplied by lenders and vaults into dLEND | Total dUSD credit supply within the dTRINITY protocol, enabling endogenous debt expansion |
Debt | Active dUSD loans in dLEND | Total dUSD debt within the dTRINITY protocol; cannot be greater than Lending TVL |
Collateral TVL | Collateral supplied by borrowers into dLEND | Total collateral securing dUSD debts within the dTRINITY protocol (separate from dUSD base reserves)
Note: dUSD is disabled as collateral in dLEND to prevent subsidy arbitrage by loopers |
Credit Utilization | Debt / Lending TVL | dUSD credit utilization level within the dTRINITY protocol |
LTV Ratio
(Loan-to-Value) | Debt / Collateral TVL | Primary indicator of average health and credit risk for dUSD loans within the dTRINITY protocol |
Leverage Ratio | Debt / (Collateral TVL - Debt) | Average level of leverage taken on by dUSD borrowers within the dTRINITY protocol |
Credit Velocity | (Total Borrows + Total Repayments) / Average Debt | Average turnover rate of dUSD credit within the dTRINITY protocol |
Gross Borrow APY | dUSD borrowing rate determined by dLEND’s dynamic interest rate model and utilization | Variable raw borrowing cost for dUSD in dLEND (before rebates); cannot be less than Base Supply APY |
Net Borrow APY | Gross Borrow APY - Borrower Rebate APY | Effective borrowing cost for dUSD in dLEND (net of rebates); may be less than Base Supply APY |
Base Supply APY | dUSD lending rate determined by dLEND’s dynamic interest rate model and utilization | Variable raw lending yield for dUSD in dLEND (before rewards); cannot be greater than Gross Borrow APY |
Net Supply APY | Base Supply APY + Reward APY | Effective lending yield for dUSD in dLEND (net of rewards); may be greater than Gross Borrow APY |
All Lending Markets
Description | Significance | |
Aggregate Lending TVL | dLEND Lending TVL + dUSD deposits in all externally integrated lending markets (e.g., Morpho) | Total dUSD credit supply across the entire market |
Aggregate Debt | dLEND Debt + all external lending markets | Total dUSD debt across the entire market; cannot be greater than Aggregate Lending TVL |
Aggregate Collateral TVL | dLEND Collateral TVL + collateral deposits in all externally integrated dUSD lending markets | Total collateral securing dUSD debt across the entire market (separate from dUSD base reserves)
Note: dUSD is disabled as collateral across all integrated lending markets to prevent subsidy arbitrage by loopers |
Aggregate Credit Utilization | Aggregate Debt / Aggregate Lending TVL | Average dUSD credit utilization level across the entire market |
Aggregate LTV Ratio | Aggregate Debt / Aggregate Collateral TVL | Primary indicator of average health and credit risk for dUSD loans across the entire market |
Aggregate Leverage Ratio | Aggregate Debt / (Aggregate Collateral TVL - Aggregate Debt) | Average level of leverage taken on by dUSD borrowers across the entire market |
Aggregate Credit Velocity | (Total Borrows + Total Repayments) / Average Aggregate Debt | Average turnover rate of dUSD credit across the entire market |
Aggregate Gross Borrow APY | Average dUSD borrowing rate determined by different interest rate models and utilization levels across integrated lending markets | Raw average borrowing cost for dUSD across the entire market (before rebates); cannot be less than Aggregate Base Supply APY |
Aggregate Net Borrow APY | Aggregate Gross Borrow APY - Borrower Rebate APY | Effective average borrowing cost for dUSD across the entire market (net of rebates); may be less than Aggregate Base Supply APY |
Aggregate Base Supply APY | Average dUSD lending rate determined by different interest rate models and utilization levels across integrated lending markets | Raw average lending yield for dUSD across the entire market (before rewards); cannot be greater than Aggregate Gross Borrow APY |
Aggregate Net Supply APY | Aggregate Base Supply APY + Reward APY | Effective average lending yield for dUSD across the entire market (net of rewards); may be greater than Aggregate Gross Borrow APY |
Protocol Metrics
Description | Significance | |
Protocol TVL | Reserve TVL + Lending TVL + Collateral TVL + Vault TVL | Total value locked within the dTRINITY protocol |
Aggregate TVL | Reserve TVL + Vault TVL + Aggregate Lending TVL + Aggregate Collateral TVL + Aggregate Liquidity TVL + Others | Total value locked globally across all integrated markets for protocol-issued assets |
Total Users | Total holders + lenders + borrowers + vault depositors + LPs + other users of protocol-issued assets | Protocol adoption headcount across the entire market |
Average User TVL | Aggregate TVL / Total Users | Average capital deployed per user across the entire market |
Total Revenue | Float revenue + dUSD fees + dLEND fees + vault fees + others | Total protocol revenue generated by dTRINITY across all sources |
Gross Income | Total Revenue - COGS | COGS include interest rebates, protocol emissions, liquidity incentives, etc. |
Gross Income-to-Reserve | Gross Income / Reserve TVL | dTRINITY’s gross income relative to base reserves |
Gross Income-to-TVL | Gross Income / Protocol TVL | dTRINITY’s gross income relative to Protocol TVL |
Live analytics dashboard coming soon.