Stablecoins: The Future and Promising Projects in Cryptocurrency
Stablecoins are increasingly being recognized as pivotal components in the cryptocurrency landscape, with numerous projects demonstrating strong profitability. In a previous report on MKR/SKY, I posited that the reintroduction of buybacks would enhance its performance compared to other cryptocurrencies, taking into account risk factors. Following the announcement of the buyback initiative on February 20, MKR has surged by 46% relative to Bitcoin (BTC) and by 70% when compared to Ethereum (ETH). Notably, MKR stands out as one of the few cryptocurrencies to achieve a positive year-to-date price change, with an increase of 24%. In this update, I will outline three key factors that I believe will sustain this upward trend: the introduction of the SKY staking mechanism, the necessary migration of SKY tokens, and the forthcoming SPK token mining initiative.
Introducing the SKY Staking Mechanism
The MKR/SKY token operates by using all its protocol revenue for token buybacks. Currently, the protocol is repurchasing about $15 million each month, which translates to approximately $500,000 per day and represents about 1% of the circulating supply monthly—the highest among all crypto projects. On April 30, Rune put forth a proposal to establish a SKY staking mechanism, suggesting that 50% of the protocol revenue would be allocated to SKY stakers, distributed in USDS. This means around $250,000 would go toward daily buybacks, while another $250,000 would be allocated to stakers. If 33% of the SKY supply is staked, participants can anticipate a staking yield of 7-8%.
Mandatory Migration of SKY Tokens
Additionally, it was announced that a compulsory migration from MKR to SKY would occur. Being one of the initial ERC20 tokens launched in 2017, MKR has likely lost some tokens due to various factors, including unclaimed private keys and forgotten wallets. Through analysis of on-chain data, I identified “sleeping MKR tokens” that are expected to be permanently removed from circulation. For instance, considering that there are 23,349 MKR tokens that have remained untouched for 4-5 years, it is reasonable to assume that around 90% of these are irretrievably lost. Consequently, I project that approximately 100,000 MKR will be destroyed during the migration, equating to about 11.4% of the circulating supply. This estimation is conservative, drawing parallels with other cases of lost tokens, such as Aragon DAO, where a significant percentage of tokens were unclaimed during a migration process. It is anticipated that 10-20% of MKR will ultimately be eliminated, which could bolster the token’s price. Furthermore, this migration may incentivize more centralized exchanges to list SKY, offering additional advantages.
Launch of SPK Token
The Spark project is set to merge lending markets with on-chain asset management, achieving an impressive $40 million in revenue during the first quarter of 2023, even with minimal incentives. Users will be able to secure stablecoins for SKY at subsidized rates while managing capital on-chain. The SPK token will utilize a “fair launch/mining” model, allowing users to earn tokens exclusively by staking USDS or SKY, with detailed economic models available in the official documents. In the initial two years of issuance, 50% of $SPK incentives will be reserved for distribution. Assuming a fully diluted valuation of $500 million, $250 million will be designated for SKY/USDS stakers. This approach not only delivers staking rewards for the native token but also fosters the expansion of USDS, further enhancing future buybacks. Additionally, there are various upcoming subDAOs or “star” projects, such as Solana Star and RWA Star, which will provide further support for the buyback strategy.
Prospects of the Stablecoin Bill
The GENIUS ACT is anticipated to be signed into law by Trump around July or August. Although this legislation primarily focuses on centralized stablecoin issuers—with minimal implications for decentralized entities—it could nonetheless create a favorable market environment for MKR/SKY. Industry analysts expect the bill to be enacted in the summer months.
Conclusion
In conclusion, stablecoins are not only positioned as a foundational element of the cryptocurrency ecosystem but also represent some of the most lucrative projects within this domain.
