Demystifying Stablecoin Products

What are DeFi strategies, vaults and how can you use them to build products to serve stablecoin-based customers?

In the below document, we aim to simplify the world of DeFi strategies and identify the key points users should pay attention to when interacting with DeFi or building stablecoin products with vaults or other infrastructure.

Traditional, or legacy, financial products, even when designed well, are generally opaque to their execution, difficult to combine or compose and rely on legal mechanisms to enforce rules and regulations.

Stablecoin-based products, when designed well, can offer transparent and fast execution, easy composability with other strategies and combine rule definition and enforcement in the same program.

Stablecoin-based finance broadly consists of two parts:

1. Strategies

2. Vaults

Strategies

We take a simplified view of strategies that are possible in crypto and reduce them to

1. Repo

2. Term

3. Carry

4. Looping

Vaults

Vaults are tools that simplify the user experience for the user looking to get exposure to one or more of the above strategies. The infrastructure these strategies can be executed in can be either

1. Modular

2. Integrated

The key features that will make a compelling product relative to traditional (or legacy) financial products are vaults that offer:

• Onchain net asset value (NAV) accounting

• Automated portfolio strategy

• Strict noncustodiality