Native USDT and AquaUSD: Partners or Competitors in the World of DeFi on TON?

Aqua Protocol (Stablecoin on TON)
7 min readNov 27, 2023

Introduction

As the TON blockchain gears up for the introduction of native USDT (Tether) in six months, a new dynamic is set to unfold in its DeFi ecosystem. This addition promises to broaden TON’s reach and liquidity, marking a significant milestone in its journey. Amidst this development, AquaUSD, TON’s own crypto-backed stablecoin, faces questions about its future role.

This article seeks to clarify that AquaUSD and USDT are complementary, not competitive forces within TON’s DeFi landscape. We will explore how each stablecoin serves unique purposes and how their coexistence can lead to a more robust and versatile financial ecosystem on the TON blockchain.

Understanding USDT and AquaUSD for Users in TON

Comparison of Features for Ordinary Stablecoin Users (Holders)

AquaUSD vs. USDT

When comparing AquaUSD and USDT on the TON blockchain, the main focus is on collateral yield, capital sources, restrictions, and target audience. AquaUSD, secured by at least 150% collateralized assets, relies on TON’s internal capital and prioritizes stability by pegging to $1, catering to TON users and DeFi participants. Additionally, AquaUSD is a decentralized stablecoin, ensuring unrestricted access to financial operations without censorship or control.

In contrast, USDT, widely accepted and stable, depends on external fiat reserves without generating additional income. It serves a broader audience across various blockchains but is subject to censorship and the risk of access restrictions. USDT is also a centralized stablecoin, potentially leading to limitations and interference from central authorities.

Thus, AquaUSD provides decentralized and secure financial access, attracting investors interested in profitability and decentralization principles. While USDT may appeal to those valuing stability, it is susceptible to censorship and access limitations.

Comparative Analysis of Aqua Protocol’s Lending Mechanism (for Minters) and EVAA Finance

Lending Features: Aqua Protocol (AquaUSD for Minters) vs. EVAA Finance

This table provides a comparative analysis of Aqua Protocol (AquaUSD for Minters) and EVAA Finance, two key lending platforms in the TON blockchain ecosystem. Both are tailored to meet the needs of Toncoin holders, yield farmers, and traders, with offerings of up to 2x leverage on Toncoin.

Aqua Protocol stands out by maintaining a higher collateral ratio to ensure stability. It also boasts low or even zero interest fees. Operating with internal TON capital, Aqua Protocol focuses on providing stable value and attractive yield generation opportunities.

EVAA Finance, in contrast, relies on external capital and navigates liquidity challenges. Its strength lies in providing a wider array of assets for borrowing and lending, albeit with higher interest fees. This makes it an appealing option for users looking for diverse lending and borrowing opportunities within the TON ecosystem.

While both platforms cater to the same core audience, their distinct approaches and benefits draw a parallel to the differentiation seen between platforms like AAVE and MakerDAO (DAI) in the Ethereum ecosystem. Each offers unique strategies and advantages, making them valuable in different aspects of the TON DeFi landscape.

AquaUSD vs USDT vs EVAA

The Vital Role of AquaUSD Post-USDT Introduction

Differentiating Target Audiences

  • AquaUSD: Appeals to DeFi enthusiasts in the TON ecosystem, ideal for users interested in decentralized finance and yield generation.
  • USDT: Targets a wider audience across various blockchains, suitable for those seeking stable, cross-chain liquidity.

Complementary Use Cases in the TON Ecosystem

  • AquaUSD: Fuels TON-specific DeFi activities and offers unique yield opportunities.
  • USDT: Acts as a bridge for cross-chain and payment transactions, enhancing liquidity and stability in TON.
  • Synergy: Together, they create a diverse stablecoin ecosystem; AquaUSD facilitates TON’s native applications, while USDT provides broad market access and stability.

Essential Role in Peg Maintenance and User Choice

  • AquaUSD-USDT Pool: Crucial for maintaining AquaUSD’s peg, enabling arbitrage, and ensuring price stability.
  • Enhanced User Choice: This liquidity pool offers users more flexibility and strategic options, augmenting the utility of both stablecoins in TON.

Risk Diversification Benefits

  • Balanced Portfolio: AquaUSD offers growth within TON, while USDT provides a hedge against broader market volatility.
  • Strategic Diversification: Users can leverage both stablecoins for risk management, utilizing AquaUSD’s yield potential and USDT’s stability.

Importance of Diversification in Asset Holdings

  • Crypto Fund Strategy: No crypto fund keeps all its assets in one stablecoin. Diversification is key to risk management, and the combination of AquaUSD and USDT in a portfolio mirrors this prudent approach, offering stability, risk mitigation, and growth potential.

In conclusion, the introduction of USDT to TON is a complementary development to AquaUSD. Both stablecoins together enrich TON’s DeFi ecosystem by catering to different needs, offering a mix of yield opportunities, stability, and flexibility. The AquaUSD-USDT pool plays a vital role in maintaining the peg and offering choices to users, while the diversity they bring is in line with the strategic diversification seen in savvy crypto fund portfolios.

Synergy in Liquidity and Market Stability

The simultaneous presence of AquaUSD and USDT on the TON blockchain significantly enhances the DeFi ecosystem, offering unique advantages in terms of liquidity and market stability.

Enhanced Liquidity through Dual Stablecoin Presence

  • Diverse Liquidity Sources: AquaUSD and USDT together attract varied liquidity sources, creating more robust and efficient market conditions.
  • Flexible Transaction Options: Users benefit from the choice between AquaUSD for TON-centric activities and globally recognized USDT, facilitating diverse transaction strategies.

Impact on TON’s DeFi Applications and Platforms

  • Wider DeFi Engagement: The availability of both stablecoins encourages broader participation in TON’s DeFi scene, appealing to users with different investment preferences.
  • Resilient DeFi Ecosystem: The diversity in stablecoin options lends resilience to TON’s DeFi platforms, allowing them to remain robust even in volatile market conditions.
  • Innovative DeFi Products: This dual stablecoin environment enables the development of varied and innovative financial products on TON, catering to the unique attributes of each stablecoin.

In essence, the synergy between AquaUSD and USDT on TON paves the way for a more dynamic, liquid, and stable DeFi ecosystem, driving growth and innovation across its platforms.

Case Studies: Synergistic Scenarios

The integration of USDT and AquaUSD on the TON blockchain facilitates various synergistic scenarios, enhancing trading, liquidity, and yield farming opportunities within the DeFi ecosystem.

Trading and Arbitrage with USDT and AquaUSD

  • Arbitrage Potential: Price differences between AquaUSD and USDT create arbitrage opportunities, promoting market efficiency.
  • Varied Trading Strategies: Traders can leverage the unique features of each stablecoin for optimized trading approaches.

Liquidity Provision in TON’s DEXs

  • Increased Market Depth: The presence of both stablecoins on DEXs leads to better market depth, reducing slippage.
  • Diverse Liquidity Pools: Liquidity providers can engage in a wider range of pools, balancing risks and potentially enhancing returns.

Diverse Strategies in Yield Farming

  • Yield Farming Flexibility: Users have the option to employ different strategies with AquaUSD and USDT, depending on their yield goals and risk appetite.
  • Innovative Farming Approaches: The dual stablecoin environment allows for creative yield farming techniques, such as cross-stablecoin pools.

These scenarios show how AquaUSD and USDT complement each other, collectively enriching the TON DeFi ecosystem with diverse and flexible financial opportunities.

We will explore more use cases for Aqua Protocol users in upcoming articles.

Community and Decentralization: AquaUSD’s Unique Value

Aligning with TON’s Decentralized Ethos

  • Foundation of Decentralized Finance: AquaUSD epitomizes the decentralized spirit of the TON blockchain, adhering to the principles of DeFi. It plays a crucial role in maintaining the ecosystem’s decentralized nature.
  • Community Focus: Built with the community in mind, AquaUSD promotes a participatory approach, aligning its objectives with the needs and interests of the TON users.

Engaging the TON Community

  • Encouraging Participation: AquaUSD involves the community in governance, enhancing user engagement and investment in the platform’s future.
  • Driven by Community Feedback: AquaUSD evolves through community input, ensuring it meets the users’ demands and contributes to innovative DeFi solutions.

Vitalizing the Ecosystem with AquaUSD

  • Revitalizing with Limited Current Stablecoins: Given the modest presence of stablecoins in TON (currently around $2.7 million), AquaUSD has the potential to significantly invigorate the ecosystem. By introducing a new stablecoin, it can enhance liquidity and provide more options for DeFi activities.
  • Preparing for USDT Integration: As TON anticipates the arrival of USDT, strengthening AquaUSD’s role and liquidity can set a robust stage for the future inclusion of USDT, ensuring a seamless integration into the existing financial landscape.

Interim Strategy Before USDT’s Arrival

  • Maximizing AquaUSD Usage: Users are encouraged to explore AquaUSD’s unique features, including its yield-generating potential, to boost the ecosystem’s vitality.
  • Fostering Liquidity and Trust: Strengthening AquaUSD’s liquidity and user trust will help build a solid foundation for a diversified stablecoin environment upon USDT’s arrival.
  • Community Education: Engaging with the community to educate them about AquaUSD’s benefits prepares users for USDT’s introduction, ensuring a well-informed and adaptable user base.

AquaUSD’s alignment with TON’s decentralized ethos and its ability to engage and vitalize the community are paramount. As TON prepares for the integration of USDT, leveraging AquaUSD’s capabilities will be essential in building a dynamic and robust DeFi environment.

Conclusion

Summary of Synergistic Roles

  • AquaUSD and USDT: The integration of both AquaUSD and USDT in the TON blockchain symbolizes a powerful synergy in the DeFi space. AquaUSD, with its focus on yield generation and TON ecosystem integration, complements USDT’s broad market stability and cross-chain liquidity. Together, they cater to a diverse range of financial needs and preferences, enhancing the TON ecosystem’s appeal and functionality.

Future Outlook for TON with USDT and AquaUSD

  • Robust Ecosystem Development: The concurrent presence of AquaUSD and USDT promises a more robust and dynamic DeFi ecosystem on TON. This dual stablecoin arrangement is poised to attract more users, foster innovative DeFi applications, and provide enhanced liquidity and market stability.
  • Continued Growth and Innovation: The synergistic relationship between AquaUSD and USDT is expected to drive continued growth and innovation within the TON blockchain. It will likely encourage the development of new financial products and strategies, further solidifying TON’s position in the DeFi landscape.

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Aqua Protocol (Stablecoin on TON)

AquaUSD is the first TON-native decentralised over-collaterized interest-bearing stablecoin backed by liquid-staked assets