Reflex indexes for more stable collateral assets in DeFi

Despite the success of stablecoins, with a total supply of $32.8 billion today — up from $5.8 billion a year ago — the market is still searching for trust-minimized and scalable solutions. To date, DAI, the most successful “decentralized” stablecoin, has a total supply of $1.3 billion while USDT is at $24.3 billion, and USDC at $4.8 billion. Additionally, struggles for MakerDAO to scale the collateral base have led to 40% of minted DAI coming from sources that rely on trusted third-parties.

Custodial stablecoins that are backed 1-to-1 are a simple way to maintain a peg between synthetic USD issued on blockchains, and the over-collateralized model tends to maintain the peg except in extreme circumstances where the liquidation process of under-collateralized debt fails. However, reliance on trusted third parties to manage the supply (or as a part of the collateral base) increases the required trust-assumptions.