Stablecoin Designs

Bridge two removes the company. Lock volatile crypto in a vault, then mint stable dollars against it, always fewer than the vault is worth. It is the pawnshop from the lending lesson in reverse: you manufacture your own dollar instead of borrowing one. The name: a CDP, a collateralized debt position. DAI, from MakerDAO, is the standing example.

What holds this peg? Machines you already know. Overcollateralization keeps every DAI backed by more than a dollar of value, and when a vault thins, the liquidation bounty hunters from last lesson hold the floor. Trustless-er than a bank account, and leaning on everything this act taught you.

Bridge three holds no bank dollars and locks no extra collateral. It holds crypto AND shorts the same crypto with perps, the instrument from Act 1. Price rises: the coins gain, the short loses. Price falls: the reverse. The two legs cancel each other, and what remains sits still, worth a dollar.

Where is the yield? Perps pay funding: when the crowd leans long, shorts collect it. This bridge IS the short, so that income can flow to holders. Elegant, and honest about its weather: its solvency inherits whatever the perp market is doing. Ethena runs the model everyone points to. The name: a synthetic dollar.

Bridge four held nothing at all except a promise: you could always swap one coin for one dollar's worth of a freshly printed sister token. The sister token absorbed all the volatility. The design's name: algorithmic. Terra's UST was the giant of this bridge, and this board is its story.

Read it as engineering, not villainy: a design carrying a load, then failing to. Tap the three markers to watch the load test.

You have walked all four bridges. Now the skill this lesson promised: hear a name, know the design. Four coins wait above the buckets. Start with the one whose warehouse you already toured.

Next, DAI. No headquarters holds dollars for it. It comes into existence when someone locks crypto in a MakerDAO vault and mints against it, and the liquidation machine keeps every coin covered by more than it is worth.

Two coins remain, and they are the pair people confuse at parties. Both promised something more interesting than a boring warehouse dollar. Only one of them held positions that actually canceled.

A new stablecoin appears, and holding it pays 15 percent. Nothing else disclosed. Our Web3 season, if you took it, put the rule bluntly once: if you do not know who pays, you are the yield. This course has been sharpening the same blade all along. So, what do you ask first?

Three questions sort every stablecoin ever launched: what is the reserve asset, what is the redemption path, and who earns the float. The answers name the bridge, and the bridge names the load limit. One test before we close: find the edge of this lesson's lens.

Step back and read the river. USDC and USDT: a warehouse of dollars and a redemption promise. DAI: a vault of crypto with a liquidation floor. Ethena's model: positions that cancel, paid by funding. UST: a promise that ran on belief, until May 2022. One load, four ways to carry it.

You now know the spot machines and the money machines. Next: the machines that trade the future on-chain, and the question every derivative must answer before you go near it: who is on the other side?