The Ethereum Stablecoin Diversity Crisis is getting worse

96% of centralized stablecoins are now in control of the USDC/USDT duopoly

Today I'll explain why stablecoin diversity is a MASSIVE problem which poses a systemic risk to Ethereum that few people talk about

Buckle up🎢

Stablecoins have become essential ecosystem infrastructure

- Top tokens maintain a USDC/T liquidity pool by default
- 42% of DEX swaps are routed through or to USDC/T
- USDC depeg took down DEX liquidity for days
- USDC is #1 token in DAO treasuries

Duopoly control = BAD

Why is it bad for a duopoly to be in control? 3 reasons:

1. Single points of failure
2. Duopolies get lazy or greedy
3. Breaks censorship resistance

Let's dive into each 🤿

1/ Single points of failure

Due to codependencies when just one stablecoin fails, shit already hits the fan. During the USDC depeg last year:
1. FRAX DAI LUSD also depegged
2. Liquidity for many DEX pairs  evaporated
3. Aave had to pass an emergency proposal

2/ Duopolies get lazy or greedy

Comfort => complacency / overreach

1. Tether reserves make 8% APY — that's far beyond the risk-free rate without anyone knowing how
2. Pre-depeg USDC spread reserves across too few banks Circle and wasn’t transparent about it

2/ Duopolies get lazy or greedy

Comfort => complacency / overreach

1. Tether reserves make 8% APY — that's far beyond the risk-free rate without anyone knowing how
2. Pre-depeg USDC spread reserves across too few banks Circle and wasn’t transparent about it

https://twitter.com/mcarrica/status/1656850975246647303

3/ A duopoly breaks censorship resistance

Ethereum's last line of defense is hard forking

USDC/T's dominance mean they get to decide which hard fork the industry would respect

So regulators need to target just 2 companies to break Ethereum

@vitalik.eth agrees

USDC & USDT are now Too Big To Fail

This poses a systemic risk problem to the entire @ethereum ecosystem

So we NEED to start working towards Stablecoin Diversity

👇 continue reading below to learn how you can help solve the problem

USDC & USDT are now Too Big To Fail

This poses a systemic risk problem to the entire @ethereum ecosystem

So we NEED to start working towards Stablecoin Diversity

👇 continue reading below to learn how you can help solve the problem

https://stablecoindiversity.org/