First, let me remind you that a little less than all decentralized steblecoins work according to the CDP (Collateralized Debt Position) model, that is: ⁃Users bring their crypto (ETH/WBTC/USDC/etc.) to the protocol (MakerDAO/Frax/etc.) as collateral, and the protocol lends (with or without interest) the corresponding stablcoins (DAI/FRAX/etc.) — thus, the user has a decentralized stablcoin in his wallet and a collateralized (secured) debt position in the protocol; ⁃ Peg is supported through a system of rewards and penalties (interest rates, commissions, etc.) that should stimulate a certain behavior of users who have debt positions — ideally, when the price of a stabel is <$1, it should be profitable for users to buy from its market, closing their positions, in the opposite situation — to mine new stables, selling them into the market (for example, here (https://dirtroads.substack.com/p/48-liquity-a-glimpse-of-my-future) describes Liquity mechanics); ⁃ In addition, liquidators can intervene if the price of the pledged asset falls — if users do not want to pay off their debts by buying back the depreciated pledge, liquidators can do it (returning the stabelcoin instead of the user, receiving his pledged assets with additional interest on top); ⁃ In addition, protocols introduce mechanisms like PSM in MakerDAO, AMO in FRAX, etc.

This mechanics worked successfully (for the most part) during market crashes, and at first sight from protocol’s point of view there should be no difference between ETH and USDC price fluctuations (because the same mechanisms provide peg protection in both cases). But then why did the USDC depeg negatively affect the price of other steibles? And why did the stables that do not have a direct exposure to the USDC get depegged?

DAI by MakerDAO ⁃ The exposer in the USDC is 48%; ⁃ minimum price for the last two days (source here and below (https://www.coinbase.com/ru/price/usdc)) — $0,86; ⁃ initially MakerDAO used CDP model (users received DAI against a pledge of crypto in MakerDAO vaults), then D3M (Direct-Derposi Modules — printing DAI through third-party protocols) and PSM (Peg-Stability Modules — printing DAI through MakerDAO contracts in exchange for USDC/GUSD/USDP) appeared, see more about them here (https://twitter.com/MakerDAO/status/1625563331992948746). As a result, DAI became 50+% secured by centralized USDC (something similar to wrapped-USDC (https://tokeninsight.medium.com/understanding-dai-dont-let-it-be-wrapped-usdc-anymore-f54f936df8b0)) instead of a decentralized stablecoin secured by volatile assets; ⁃ In other words, more than half of DAI is backed by USDC without any overcollateralization — basically, the PSM risks that have been written about repeatedly (https://dirtroads.substack.com/p/-45-yodo-you-only-depeg-once) before, materialized yesterday; ⁃ the community suggests (https://forum.makerdao.com/t/emergency-proposal-risk-and-governance-parameter-changes-11-march-2023/20125?u=monet-supply) urgent measures to adjust PSM parameters and disable D3M modules, but hardly expect the DAI peg to return to $1 while it is more than half secured by USDC (see statistics on DAI here (https://daistats.com/#/overview), here (https://tracker-) and here (https://makerburn.com/#/rundown)).

FRAX by Frax. The ⁃ exporter in USDC is 92%; ⁃ minimum price in the last two days is $0.89; ⁃ originally worked on the CDP model, taking stabelcoins as collateral, but since the full launch of AMO and printing huge amounts of FRAX into pools on Curve (2 of the top 3 pools on Curve (https://curve.fi/#/ethereum/pools) are now FRAX pools) the exposure in USDC is over 90%, and Curve pools act as a sort of PSM for MakerDAO for FRAX; ⁃ Sam admits (https://t.me/fraxfinance/258233) that FRAX is totally dependent on USDC, and that the peg returns are only possible when the USDC price returns to $1.

LUSD by Liquity. ⁃ The exporter in the USDC is 0%; ⁃ The minimum price for the last two days is $0.93; ⁃ works on CDP model, only ETH is accepted as collateral; ⁃ The reason for the temporary depreciation (besides the panic based on nothing) lies in redemption fees, see here (https://discord.com/channels/700620821198143498/700620821646934056/1084091822248304690) and here (https://www.liquity.org/blog/understanding-liquitys-redemption-mechanism) and here (https://twitter.com/m0xt_/status/1634826639866736640?s=20).

sUSD by Synthetix ⁃ exporter in USDC — $40m DAI via DAI-wrapper (https://wrappers.synthetix.io/), that is about $20m USDC for a total sUSD issue of $130m (it is worth considering that the total collateral — SNX, DAI and ETN — is about $500m); ⁃ the lowest price in the last two days is $0.94; ⁃ works on the CDP model (SNX is taken as collateral), there is also a wrapper for DAI, LUSD and WETH (something like MakerDAO’s PSM); ⁃ a small exponent in USDC, given the overall size of the collateral, can hardly adversely affect the price of sUSD.

MAI (MIMATIC) by QiDAO ⁃ Exposure in USDC is 16% (according to the team in Discord (https://discord.com/channels/829965540084285450/854369799214596122/1084182736786444399) — 8%); ⁃ the minimum price for the last two days is $0.89; ⁃ works on the CDP model (everything is accepted as collateral, stats here (https://app.mai.finance/analytics)); ⁃ the MAI price has replicated the USDC price during the day, with no mechanisms for MAI to support the peg — according to the team’s statement (https://discord.com/channels/829965540084285450/829965540444602374/1084386931816800287) the MAI peg is supported by other stablcoins (USDC, DAI), and the main goal of the protocol (at the moment) is to ensure the solvency of the protocol by the correct operation of the liquidation mechanism.

agEUR by Angle The ⁃ exporter in USDC is 72%; ⁃ minimum price for the last two days — $0.95; ⁃ works on CDP model (MAI, USDC, wBTC, wETH, wMATIC are accepted as collateral), also agEUR can be printed through AMO (https://docs.angle.money/stablecoins-side-modules/amo#angle-amos); ⁃ according to the team’s statement (https://discord.com/channels/835066439891157012/858011452099264562/1084107233224306820), the protocol will remain solvent up to the USDC price of $0.7, at the same time the commission (https://twitter.com/AngleProtocol/status/1634511221943840770) for exchanging agEUR to USDC was increased for the period of depeg USDC, which caused a negative reaction from the community (because this measure does not contribute to the peg return, rather the opposite).

What conclusions can we draw from this? ⁃ In fact, all decentralized stabelcoins lost at least 7% in value in the moment; FRAX and DAI have nothing much to say about the situation (all risks with their exposition to USDC were known before), LUSD quickly returned the peg, the community declares that everything worked as planned (the temporary depg — not a bug, but a feature, QiDAO doesn’t consider Peg support their responsibility, and Angle decided to earn money on their users by suggesting the community to accept agEUR temporary depeg as a fait accompli (and still is); ⁃ The amount of exposure in USDC is not the only factor influencing the peg — it is also the presence of mechanisms for insentivizing desired behavior from the holders of the stablecoin that matters; ⁃ The level of collateralization (e.g., MakerDAO currently has (https://twitter.com/MakerDAO/status/1634410047592620034) 154%), which the protocols refer to as evidence of their solvency, does not always correlate with the ability to maintain a peg; ⁃ I think in the coming months we’ll see a lot of discussion from the stabelcoin protocols about how to get rid of dependence on centralized stables and how to provide peg.