Price of algorithmic stablecoin UST drops 2% below dollar peg

https://www.theblockcrypto.com/post/145828/price-of-algorithmic-stablecoin-ust-drops-2-below-dollar-peg

by tobltobs • 4 years ago

11 12 4 years ago

Such is the risk of algorithmic stablecoins. The only ones that seem to work well have actual full collateral backing them (either some cryptocurrency, or actual dollars in a bank.)

thebean112• 4 years ago

DAI has worked pretty well though

chizhik-pyzhik2• 4 years ago

Yeah, exactly. DAI is fully collateralized. I guess what I mean is non-fully-backed algostables like ust and frax

Traster3• 4 years ago

I don't understand how you can use cryptocurrency as backing for a stable coin. Just as a matter of definition, if your stable coin is meant to be worth $1USD then your backing fluctuates with the price of the crypto that backs your stable coin. And to make matters worse, when BTC drops in value that's likely because there's a net outflow from BTC back into fiat, which is going to occur at the exact time that people want to redeem their USDT for their actual USD. So at the time that you're most in need of liquid collateral, you're least well collateralized. The only way I see this working is if you're not net long crypto, which I guess is possible but gives you heaps of market risk.

omegalulw• 4 years ago

How is backing for stablecoins not regulated to kingdom come yet? Seems so asinine?

linschn• 4 years ago

See for example : https://docs.synthetix.io/synopsis

Basically you mint only a fraction of your collateral (typically 15%), so even a huge downturn of the price won't leave anybody hanging, and you provide a set of incentives for the owners of the collateral to adjust their staking depending on the price you are trying to follow.

It's not too complex, and seems to me way better than trusting tether and Co.

lgats• 4 years ago

official twitter update from terra https://twitter.com/terra_money/status/1523749536379793408

Price of algorithmic stablecoin UST drops 2% below dollar peg

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