Self-collateralized stablecoins

Bel2433

"Unlike CDP-based stablecoins, self-collateralized stablecoin systems allow borrowers to use protocol tokens as collateral for their debt positions. For example, in Synthetix, the collateral used is its token, SNX. The rationale behind self-collateralized stablecoin systems is that when users collateralize protocol tokens, the system mints stablecoins.

Example: BitShares
Collateralization Ratio: 175%
Collateral: Bitshares
Pegged Currency: Any other currency or asset
BitShares is a blockchain and decentralized exchange established in 2013, where users can generate stablecoins by purchasing Bitshares.

BitShares' SmartCoins
BitShares users create various cryptocurrencies pegged in value to another currency or asset. Over the years, BitShares has developed various SmartCoins, including BitUSD, BitCNY, BitEUR, and BitGold.

BitShares is the first self-collateralized stablecoin, and unlike Dai, it does not charge users interest in the form of stability fees, nor does it charge liquidation fees. BitShares sets a minimum collateral-to-debt ratio of 175%. For instance, to create 100 BitUSD, a user would need to collateralize Bitshares worth $175. If the collateral-to-debt ratio falls below 175%, Bitshares are forcibly liquidated and sold.

Weaknesses
Because of the higher collateralization ratio, most self-collateralized stablecoins tend to have lower collateral efficiency compared to CDPs. For example, Synthetix has a default minimum collateral-to-debt ratio of 500% (subject to governance changes).

A more significant concern with self-collateralized stablecoins is the potential for panic selling. Since leveraged positions are backed only by their respective protocol tokens, users may be prone to panic sell when the value of these tokens decreases—they are highly sensitive to downturns. Ultimately, the losses in collateral value could be greater than the collateral value losses in the multi-collateral CDP model.

However, the nature of self-collateralized stablecoin systems is primarily aimed at increasing the value of their respective protocol tokens. It's essential to understand that collateralization ratios and collateral efficiency have an inverse relationship—the higher the collateralization ratio, the less likely it is to be affected by panic selling."

Isha000

Stablecoins are valuable and can be used as collateral.