Destablecoins - A New Asset Class

Helio Protocol introduces the notion of “Destablecoins”, which is a new type of asset class within the crypto space that seek to more accurately represent a new model in the current stablecoin landscape. The term “destablecoins” helps to achieve the following purposes.

Firstly, and more purposefully, the prefix “de” in “destablecoins” stands for decentralized, and that is to clearly distinguish products such as HAY from other legacy stablecoin products such as BUSD and USDC, which is controlled by a centralized custodian. This also helps mark the progression of stablecoins from being centralized to decentralized, and the DeFi industry as a whole.

Secondly, destablecoins aims to achieve stability broadly without an absolute peg to the fiat currencies. All currencies are different and have varying reference rates, so price fluctuations should be considered a norm defined by the open market instead of aiming for a sense of absolute price stability at all cost. Similarly with destablecoins, it does not aim to achieve absolute price parity with US $1 as a primary objective nor rely on fiat assets as the backed collateral.

Lastly, the term “stablecoin” or even “algorithmic stablecoin” is generally a misnomer, as all stablecoins, including fiat-backed ones, have potential to de-peg, albeit to a much lower extent. The stablecoin industry is under constant scrutiny due to many retail investors over-investing under the allure of constant stability and becoming vulnerable to significant financial loss during such an event. Using the term “destablecoins” signals the underlying risk of stablecoins and encourages users to invest more responsibly, building a far healthier and more sustainable ecosystem of users.