"BUSD proves the need for decentralized and censorship-resistant stablecoins. This is indeed the mission of Maker and Liquity's LUSD. Maker's Endgame Plan foresees a regulatory crackdown on crypto and RWAs, so it's preparing to make DAI censorship resistant. The same mission drives LUSD stablecoin, but its approach is focused on minimal governance and ETH as the only collateral," pseudonymous DeFi researcher Ignas told CoinDesk.
The protocol runs a two-token model like MakerDAO. The difference, however, is that Liquity doesn't have a governance system. Therefore, large holders of LQTY cannot influence decision-making. The fully-decentralized setup also means the protocol's original design cannot be altered to introduce centralized stablecoins, which have recently come under regulatory scrutiny, as new collateral.
"LUSD backed by ETH collateral is being perceived as more defensible against regulatory pressure by the market," Lewis Harland, portfolio manager at Decentral Park Capital, said. While LQTY surged over 40% on Monday, MKR rose 12% and Tron's TRX rose 3%. Tron, a smart contract platform supposedly maintaining true decentralization and censorship resistance, unveiled a decentralized dollar-pegged stablecoin USDD last year.
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