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Author Topic: How do you feel about algorithmic stablecoin staking?  (Read 195 times)
kojektea
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May 11, 2022, 12:08:48 PM
 #21

Seeing stable coins with high interest rates is certain risk and their bankruptcy is also very fast. The high interest rates forced the project to look for quick backups, but if they still do backups on cryptocurrency I'm not even sure they can last up to a year. Didn't we see how UST and LUNA are today? they used to be great for staking, one mistake they made completely ruined their project.
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May 11, 2022, 04:08:25 PM
 #22

...Honestly, if I've got a lot of money and I want to stake, I'll simply put it into stable coins and stake it. I'd like it much than the other staking coins because it gives stable amount for its percentage and the coins itself.

Today's problems with UST clearly show that there is no guarantee that you will get a profit, stablecoin staking. And trying to get an increased percentage for staking, which exceeds the bank several times, you can lose your deposit. And as we can see, the UST dump case is not an isolated one, we recently observed something similar with another algorithmic Neutrino USD (USD) stablecoin.

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May 11, 2022, 05:39:07 PM
 #23

In the longer term, algorithmic stablecoins appear to be a safer bet with less risk. Typically, higher interest rates are accompanied by higher risk and higher volatility of the underlying asset. If you are looking to diversify your portfolio, the ones you mentioned above may be interesting but if you want to use staking stablecoins as an additional source of income, then Algorithmic stablecoins are better suited for this purpose.


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jostorres
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May 11, 2022, 09:42:43 PM
 #24

Stablecoins like UST, USN, USDD have a very tricky link to the dollar and the collateral pool, in the form of a native token of a particular blockchain, be it LUNA, NEAR, TRON, etc. Such projects offer or are about to offer 20-30% per annum in staking these stablecoins. Not a bad interest rate, is it? But will these projects be able to provide such a high interest rate all the time, and won't that provoke a cascading collapse of both the stablecoins, with the loss of the peg and a cascading collapse of the native tokens that act as reserve collateral?

After all, such high payouts to stakers must be accompanied by constant replenishment of these projects reserve funds. But what will happen if the money stops flowing in the right amount?
This post aged ... poorly. LOL. Over the course of two weeks.

Algorithmic stablecoins backed by cryptocurrency are all done now.
They were gone for a long time now. I have seen plenty of them try to make it work and none of them works, it will never work. It trusts that people will do the right thing to make money and it ended up not being reasonable to assume people will do the thing that will make them money.

I remember making a great return from SBDO last year for example and then it crashed hard, I got out in time with zero loss, but I remember it clearly that it was a very difficult thing to do, because when it was crashing, they tried their best but the bonds weren't getting sold and now they are screwed. If you can't make people do what you want them to do, then what stops it from going down?

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May 13, 2022, 04:26:37 PM
 #25

Stablecoins like UST, USN, USDD have a very tricky link to the dollar and the collateral pool, in the form of a native token of a particular blockchain, be it LUNA, NEAR, TRON, etc. Such projects offer or are about to offer 20-30% per annum in staking these stablecoins. Not a bad interest rate, is it? But will these projects be able to provide such a high interest rate all the time, and won't that provoke a cascading collapse of both the stablecoins, with the loss of the peg and a cascading collapse of the native tokens that act as reserve collateral?

After all, such high payouts to stakers must be accompanied by constant replenishment of these projects reserve funds. But what will happen if the money stops flowing in the right amount?
To be fair, the NEAR stablecoin is fractionally reserved, and not fully algorithmic like the others. This means that it is safer and most of the staking rewards don't come from NEAR, but from partner trading and lending platforms. We'll see if fractional stablecoins can work well long term but consider this... The USD is only going to lose value. Is that the boat you want to ride on or do you want something that is going to change your life in a few years. If that's the case, then I suggest investing in NEAR directly or a competitor even, like Fantom or ICP. ICP for example has a hackathon going on RN, which will bring DeFi usecases to the chain. There's never been a better time to ride that to the top.

Investing in stablecoins is hardly something that can change someone's life in a few years, simply because stablecoins aren't made for big earnings. It's about saving money. I've been looking at ways to keep funds in cryptocurrency that would still generate a small income from stablecoins. I was looking at stablecoins as something suitable for this purpose, but I was confused by some of the nuances that have proven to be great with UST. This is exactly what I was afraid of.

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May 13, 2022, 04:29:43 PM
 #26

After all, such high payouts to stakers must be accompanied by constant replenishment of these projects reserve funds. But what will happen if the money stops flowing in the right amount?
Exactly what happened on Luna. This incident showcase vulnerabilities of the idea of stable backed pegged with not stable cryptocurrency and also the reserved fund can be attacked by whales especially there is a leverage trading that could lower the funds or depleted once hit a threshold.

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May 14, 2022, 06:57:47 PM
 #27

After all, such high payouts to stakers must be accompanied by constant replenishment of these projects reserve funds. But what will happen if the money stops flowing in the right amount?
Exactly what happened on Luna. This incident showcase vulnerabilities of the idea of stable backed pegged with not stable cryptocurrency and also the reserved fund can be attacked by whales especially there is a leverage trading that could lower the funds or depleted once hit a threshold.

Even bitcoin, which historically seems to be always rising, tends to be very volatile in the short term. Funds are also someone's investments and they are not blocked funds, that is, they can be withdrawn by the holders at any moment. LUNA did a great job of showing that the size of the fund doesn't matter, they bought over 45,000 BTC, but those bitcoins were emptied in an instant. I think that if we are talking about a reserve fund that is supposed to hold the exchange rate, then those funds should be blocked by some kind of smart contract or something like that.

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May 16, 2022, 02:55:16 AM
 #28

I think that if we are talking about a reserve fund that is supposed to hold the exchange rate, then those funds should be blocked by some kind of smart contract or something like that.
It is blocked or on hold. They have also avax tokens as reserved but didnt able to withdraw it as it locked in the smart contract, unlike bitcoin reserved. They did used it to somehow get back on its pegged but werent succesful as liquidity is continously being eaten by market. Somehow the balance didnt achieved unless they still have deeper pockets to sustained.

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takngantuk
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May 16, 2022, 06:03:59 AM
 #29

Stablecoins like UST, USN, USDD have a very tricky link to the dollar and the collateral pool, in the form of a native token of a particular blockchain, be it LUNA, NEAR, TRON, etc. Such projects offer or are about to offer 20-30% per annum in staking these stablecoins. Not a bad interest rate, is it? But will these projects be able to provide such a high interest rate all the time, and won't that provoke a cascading collapse of both the stablecoins, with the loss of the peg and a cascading collapse of the native tokens that act as reserve collateral?

After all, such high payouts to stakers must be accompanied by constant replenishment of these projects reserve funds. But what will happen if the money stops flowing in the right amount?

the answer is what is happening to UST today. it is difficult to recover the peg and the price keeps falling. which is why algorithmic stablecoins are a flop in the crypto space. this mechanism only works when the market is good, but when the trend is bearish everything will collapse. and this failure could have happened in other stablecoins.
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May 16, 2022, 06:59:00 PM
 #30

Stablecoins like UST, USN, USDD have a very tricky link to the dollar and the collateral pool, in the form of a native token of a particular blockchain, be it LUNA, NEAR, TRON, etc. Such projects offer or are about to offer 20-30% per annum in staking these stablecoins. Not a bad interest rate, is it? But will these projects be able to provide such a high interest rate all the time, and won't that provoke a cascading collapse of both the stablecoins, with the loss of the peg and a cascading collapse of the native tokens that act as reserve collateral?

After all, such high payouts to stakers must be accompanied by constant replenishment of these projects reserve funds. But what will happen if the money stops flowing in the right amount?

the answer is what is happening to UST today. it is difficult to recover the peg and the price keeps falling. which is why algorithmic stablecoins are a flop in the crypto space. this mechanism only works when the market is good, but when the trend is bearish everything will collapse. and this failure could have happened in other stablecoins.

At the time, even centralized stablecoins like USDT also lost their anchor during market turmoil. I would say that now, in its current form, any stablecoin is unsustainable to one degree or another. I also think the problem with algorithmic stablecoins is that such systems need constant feeding, there needs to be constant demand. But constant demand in crypto space is a relatively rare thing, only bitcoin has this property, but unlike algorithmic stablecoin, it has limited supply. So now all these algorithmic schemes remind financial pyramids, where the scheme works as long as there is an inflow of money, as soon as the outflow begins, the scheme folds like a house of cards.

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