Cake Wallet has integrated dEURO, a decentralized stablecoin, into its platform, providing users with more options for euro-denominated digital assets. This addition, announced on Tuesday, allows users to earn a 10% yield on their crypto holdings used as collateral, all while retaining custody of their funds.

dEURO is an overcollateralized stablecoin, meaning users must deposit other cryptocurrencies, such as Bitcoin, Ether, and Monero, as collateral to mint dEURO. This overcollateralization acts as a buffer against potential de-pegging events, according to the dEURO team. The system also features automatic liquidations if the loan-to-value ratio falls below a specific threshold, further ensuring the stablecoin's stability.

The 10% yield is generated from stability fees paid by users minting the dEURO stablecoin. These fees are deposited into an equity reserve pool, which then distributes the yield to those providing the collateral. According to a dEURO spokesperson, this mechanism helps maintain the stablecoin's stability and adds liquidity to the user's crypto holdings. It allows users to generate a euro-pegged token without needing to sell their cryptocurrency.

dEURO's integration into Cake Wallet arrives amid ongoing discussions about the role and risks of decentralized and algorithmic stablecoins. These types of stablecoins, while innovative, have faced criticism due to a history of de-pegging events and collapses. A notable example is the Terra-LUNA ecosystem's collapse and the de-pegging of UST. Despite these concerns, proponents of decentralized stablecoins argue that they align with the original cypherpunk ethos of the cryptocurrency community.