Fiat-Backed Stablecoins

USDC, USDT, BUSD, these are the giants of stablecoin liquidity. They’re fast, trusted (by most), and deeply integrated across every major exchange and blockchain.

But they come with a structural tradeoff: they aren’t built for users. They’re built for custodians, issuers, and regulatory optics. They prioritize solvency and access: not transparency, decentralization, or yield.

Tharwa doesn’t compete on custody. It competes on capital design.

How Fiat-Backed Stablecoins Work

These stablecoins are fully backed 1:1 by fiat held in off-chain bank accounts, money market funds, or short-term government debt.

The issuer:

• Receives user deposits

• Issues an equivalent amount of stablecoins

• Keeps the fiat in reserve (earning interest)

• Offers redemption at par (usually through KYC-gated channels)

Examples:

• USDC (by Circle) — backed by cash and T-bills, fully reserved

• USDT (by Tether) — backed by a mix of reserves, with limited transparency

• FDUSD, GUSD, PYUSD — variations with different jurisdictions or regulatory wrappers

Why They Fall Short

1. Centralized Custody

User funds are held by private institutions. If those entities freeze, deplatform, or go bankrupt: users are exposed. There's no on-chain collateral visibility beyond what the issuer discloses.

2. Opaque Yield

Stablecoin issuers earn billions in interest on reserves (mostly from T-bills). But users holding those stablecoins earn nothing. That value flows entirely to the issuer, not the ecosystem.

3. Redemption Barriers

Redeeming at $1 is usually limited to institutions. Retail users often can't redeem directly, especially during stress events: leaving them reliant on secondary markets or DEX arbitrage.

4. No Capital Efficiency

Fiat-backed stables are static. You can’t stake them, route them into vaults, or automate them for real yield. They’re a placeholder, not a tool.

5. Regulatory Surface Area

These stablecoins are exposed to U.S. and global regulatory changes including freezes, blacklists, or forced depegs. If regulatory risk increases, users may lose access without warning.

Why Tharwa Is Different

thUSD is:

• Fully collateralized on-chain by real assets

• Non-custodial, with transparent vault deployment

• Designed for composability — users can stake, deposit, earn, and move yield through smart contracts

• Neutral in structure, without centralized blacklists or redemption friction

• Backed by a diversified basket of RWAs, not a single banking counterparty

Yield flows to users, not to custodians. And capital stays active — not locked in cash equivalents that only benefit the issuer.