IOTA Holders May Soon Use Tokens as Stablecoin Collateral – Here’s What It Means

The co-founder of IOTA, Dominik Schiener, has alluded to a ‘friendly fork’ on the network, hinting that it is just weeks away. With this fork, another blockchain could take IOTA’s functionality into its own and turn it into collateral for a multi-collateral stablecoin. But if all goes well in this initiative, IOTA could open the doors to a lot more in the DeFi space.

A prominent X user, Salima, speculates that IOTA holders may soon be able to use their tokens as collateral for DeFi trades. It could lead to less transaction volatility in DeFi, providing holders with a reliable way to lock their IOTA assets into smart contracts. ‘However, I feel compelled to clarify that all these statements I made are based on discussions happening in our Discord community and are not yet confirmed from official sources.’

https://twitter.com/Salimasbegum/status/1850956861476126964

If it does go ahead, it could dramatically raise the Total Value Locked TVL on IOTA, particularly in comparison to other DeFi sectors. There is clear growth potential with an increase in IOTA’s TVL from around $5 million in early September to over $20 million recently. This suggests that increasing users might lock their IOTA assets and likely increase the ecosystem’s liquidity and overall usage.

IOTA EVM DeFi Gains Boost from Tangle DAO

Ahead of the expected fork nearing completion, the Tangle Treasury Grant Committee has planned to reinvest in digital assets like IOTA, SMR, and USDT. Tangle DAO LLC has decided to reinvest assets after realizing that idle assets that would have been held for grants and operations can instead be put to work. The committee invests strategically in the IOTA EVM DeFi protocol, where assets are utilized to receive a return.

This renewed investment program aligns with Tangle DAO LLC’s mission of increasing asset use by the Shimmer and IOTA communities. Thus, with the help of DeFi liquidity pools, the committee intends to lift Tangle’s financial standing at the expense of Tangle trading fees and staking rewards. It is a way to provide IOTA DeFi markets with liquidity growth at a low risk, fortifying DAO’s financial base.

This reactivation also complements the parallel work on the liquidity part of the IOTA EVM ecosystem underway, including a targeted campaign to increase the liquidity within it. Tangle DAO LLC actively supports liquidity campaigns to improve the quality and stability of liquidity on IOTA’s EVM protocol as much as possible. The strategy of this committee is to achieve resource liquidity pool balance to maximize resource usage while simultaneously doing with Tangle’s market presence.

Multi-Collateral Stablecoin Could Boost IOTA’s TVL

Introducing IOTA as collateral for a multi-collateral stablecoin would allow DeFi within the IOTA ecosystem. If even more IOTA holders choose to lock their assets in smart contracts, TVL could rise to at least, if not exceed, current levels. This growth could reinforce IOTA’s place in DeFi and attract increased user numbers interested in low-volatility transactions.

However, the success of this initiative also relies on the user’s willingness to put their assets as collateral, which could push TVL through the roof. By pulling in more TVL, IOTA’s ecosystem would promote liquidity and greater resilience, attracting new and previously existing DeFi projects and users. The goals align with this current growth trajectory of the EVM ecosystem, which includes a liquidity campaign and promotion with Tangle DAO.

Despite IOTA’s potential to feature in a multi-collateral stable coin, industry observers already believe in its future role as part of DeFi. While this potential transformation remains unconfirmed, it’s a significant milestone that could fuel long-term growth in the ecosystem. Upcoming developments promise to revolutionize how IOTA stands in the DeFi arena and how users and investors will participate in the project.