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UST is a stablecoin in name only


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Terra Network (LUNA) Collapses and Industry Comments: UST is a stablecoin in name onlyWhile the cryptocurrency industry is summarizing the collapse of the TerraUSD (UST) project, the makers of the alternative stablecoin are trying to highlight the fact that these instruments are not equal and that there are significant differences between them.

  • Algorithmic stablecoin in terrestrial vaults fell from $1 to just 5 cents over the course of a week
  • When the collapse of a coin could negatively affect the entire stablecoin industry, its representatives warn that you should not throw all projects in the same bag.
  • TerraUSD, Tether and, for example, USDC are completely different initiatives
  • More similar and interesting articles can be found on the main page of Comparic.pl

TerraUSD (UST) and USDC are two different assets, Circle . director says

Dante Disparte, chief strategist and global policy director at Circle, the maker of the USDC stablecoin, said the message did not go out loud enough. For many people outside the cryptocurrency industry, this is not clear, and this may include regulators and politicians who will now focus their attention on the industry.

– I think this is a topic for discussion. The term stablecoin has now been severely distorted. Do algorithmic stablecoins even belong to the category of instruments that are subject to current regulations? Whether they belong to an area that deals with real consumers and real payments? – asked Disparte rhetorically on Money Reimagined.

According to CoinMarketCap, Circle, which is a custodian of BNY Mellon and which recently received capital backing from BlackRock, the world’s largest asset manager, is worth $49 billion.

Tether, the largest stablecoin backed by physical assets (including the dollar) with a market capitalization of $79.3 billion at the time of writing, has remained stable this week, although the strong mark has been shaken against the dollar for a while.

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The stablecoins are divided into several categories

Speaking of Tera problem During the discussion on TwitterTether Chief Technology Officer Paolo Arduino reiterated Disparte’s call for a clearer classification of stablecoins.

We would like to see the stablecoin rating, where we see the central stablecoins and Tether the largest, and arithmetic stablecoins. I think it’s really important to put some guidelines in place to protect customers Arduino commented.

Disparte said while regulators have so far paid a lot of attention to asset-backed stablecoins like USDC, stable algorithms have been a bureaucratic “dark spot” thus far.

– They are the ones who lose, which is why I think it’s a problem with a certain type of asset. This is a stablecoin problem in name only. The danger that emerged is precisely the reason to talk about politics on these kinds of issues – he added.

Currently, it is assumed that there are three types of stablecoins: fiat-locked (USDT, USDC), crypto-secured (DAI, sUSD) and algorithm-secured (UST, IRON).

Despite the hazy ratings, some lawmakers are discriminating, as Republican Senator Pat Toomey of Pennsylvania did earlier this week when the floor cabinets appeared in testimony before Congress.

Algorithmic stablecoins are not created equal. DAI and Maker defended themselves when the underground tank collapsed

When it comes to algorithmic stablecoins, there is an extra spectrum within this category, said Fernando Martinelli, CEO of Balancer Labs, an automated market maker in the decentralized finance (DeFi) sector.

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There has always been a question mark in this third category of algorithmic stablecoins. It is not possible to determine whether the algorithmic stablecoin is worthless or not well designed. There are algorithms that are very secure but not overly secured – claimed.

Since Terra started to oscillate below, DAI, a five-year security stablecoin overseen by the MakerDAO community, has held out and implemented a side shutdown in an orderly fashion, which was “a great test of the system,” said Luca Prosperi, Lead Monitoring Loans at MakerDAO.

Prosbury said MakerDAO’s DAI is stable because it is conservative and has an abundance of security. The current protection factor is 175.59%, which means that each DAI is insured at $1.7558. USDC currently accounts for 41% of the collateral used to instrument new DAIs, according to chain data compiled by Dai Stats.

Maker’s autofill has begun winding down collateral to protect itself and has shrunk accordingly, bringing its market capitalization to $6.4 billion.

The Creator did exactly what He should have done. It’s shrinking because the economy is shrinking and the currency base is shrinking – Prosperi said in an interview.

The system is stable because it is built in a very conservative way and this requires a lot of effort from the team members because the community is very impatient. As Terra grew, many people accused us of being too conservative. But we keep our currency – added.

On the issue of Circle terminology and what the regulators would look like, Prosperi said calling something “stable coin” is a great marketing tool. However, beware of simple classification.

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At one end of the spectrum is USDC, “a very simple and secure currency, not very innovative, but a great bridge,” Prosbury said. On the other end is UST and DAI somewhere in the middle.

– I think we’ll see an increasing variety of this term into terms that better reflect the individual use cases of each of these projects, and I think some of the best projects will work together. I think USDC can be a great guarantee for a Maker that can create a conservative leverage overlay with DAI – It is to explain.

Regarding the regulatory control of algorithmic stablecoins following the collapse of terrestrial treasuries, Prosperi stated that MakerDAO is a “weird animal” because it is a decentralized community that cannot be shut down.

– I think there will definitely be some pressure from the organizers. But I think Sly is probably not on the front lines. USDT and USDC are in the forefront and other services that allow liquidity to enter the chain will be examined Prosperi summarized.

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