How to build a stablecoin protocol from funding rate arbitrage

Stablecoins are a use case in blockchain that has reached a level of product-market fit. The total supply of stablecoins is now $27.3 billion — up 362% year-over-year. Despite this success, there are some question marks with the long-term viability of current stablecoins. There may also be successful stablecoin constructions in the future that are quite different from the options available today.

The current stablecoin designs can be grouped into the following three categories: