Will algorithmic stablecoins have a future?

[Abiky]

The rise and fall of TerraUSD (UST) has shown us that algorithmic stablecoins aren't as ready for the world as we've thought they would be. If the UST collapse didn't happen, people would've still trusted algorithmic stablecoins with their money. Now that things are different, developers may need to re-think their strategy in order to make such stablecoins shine once again. If done right, algorithmic stablecoins could prove to be the "holy grail" of decentralized finance. It would mean having a stablecoin that's not backed by real world reserves (in Fiat) whatsoever. I think algorithmic stablecoins will prove to be even more decentralized than collaterized stablecoins such as DAI or USDJ.

What are your thoughts? Will algorithmic stablecoins have a future? If not, why? What do you think will be governments' response against stablecoins that are decentralized by design? Will they make them illegal for mainstream use? Or will they embrace them? Your input will be greatly appreciated. Thanks.

[shinratensei_]

I think algorithmic stablecoins will prove to be even more decentralized than collaterized stablecoins such as DAI or USDJ.

Decentralized from what? This is even worst compared with the collaterized stable token like DAI or USDJ. The only stable token that has been making even millionaires lose whole of their money in one night. This is the worst stable token in the crypto history, this is also triggering a huge dump to the market.

What are your thoughts? Will algorithmic stablecoins have a future? If not, why? What do you think will be governments' response against stablecoins that are decentralized by design? Will they make them illegal for mainstream use? Or will they embrace them? Your input will be greatly appreciated. Thanks.

This kind of stable token will have no future. UST has proven that if algorithmic stable token was a failed experiment. Should we revive it again? this is just another disaster for anyone.

[Abiky]

Decentralized from what? This is even worst compared with the collaterized stable token like DAI or USDJ. The only stable token that has been making even millionaires lose whole of their money in one night. This is the worst stable token in the crypto history, this is also triggering a huge dump to the market.

Decentralized in the sense that's entirely driven by algorithms. It isn't based on real world reserves, making it the perfect "tool" for decentralized finance. Trusting a collaterized stablecoin (even if it's claimed to be decentralized by the issuer) is no different than trusting a third party (someone correct me if I'm wrong). Algorithmic stablecoins are practically new to the industry, so it's going to take some time before they're perfected. With the UST collapse, I'm confident developers will improve other algorithmic stablecoins for the better.

This kind of stable token will have no future. UST has proven that if algorithmic stable token was a failed experiment. Should we revive it again? this is just another disaster for anyone.

I think it's still too early to tell that algorithmic stablecoins are a complete failure. After all, they're just starting to blossom. There's high hopes developers will continue working on such coins in order to improve them for the better. With better algorithmic stablecoins, decentralized finance apps will take the world by storm. The possibilities are endless. Who knows what the future holds for these new kinds of stablecoins? Just my thoughts

[DapanasFruit]

I think that maybe not for now...in the next coming few years people will always remember the UST debacle which really affected many people and have shaken the faith and trust of numerous investors and holders most especially with algorithmic stablecoins. I am sure that soon there can be some creative people who can devise ways and means to avoid the historic collapse of UST but am sure that they may not be getting the support they can be looking for...as of now we are all doubting any other stablecoins in the same category. This can be a very sad story but there is nothing we can do about it...but to move on and start to rise from the ashes.

[Coin_trader]

It has a future with a proper risk control and liquidity to maintain the pegged.

In the case of the Luna attack. The CEO sell too much discounted UST which is the reason for the vulnerability. The reserve funds that maintaining the algorithmic pegging is not sufficient to absorb all the cheap UST that being dump by the attacker. I think this scenario can happened too on other stable coin with same idea.

[Moeda]

Stablecoin is one of the cryptocurrencies that is believed to be equivalent in value to Fiat. But it was able to run smoothly because of the confidence of investors to hold the stablecoin. The bad image of stablecoins has been shown by TerraUSD with a value not equivalent to USD. And USDT has added very high supply, but we can't confirm that Tether has USD reserves according to USDT supply. If investors throw it away, of course this will happen the same thing as TerraUSD. Tether to maintain a good position in CMC simply by adding USDT supply. If we look at the current value of min $0.0006 of USD. Even though it's a small number, it shows the inequality between USDT and USD.
Not to mention we are talking about market cap with supply circulation which has different numbers. If the value is equal, then the market cap must of course be the same as the circulating supply. Of course this cannot be the same, because the buy order must of course be below the sell order. As I said in a post on another topic, USDT should not be paired with USD to maintain equal value.
Perhaps we rarely highlight stablecoins that have a country's Fiat equivalent in value. That's worse than USDT or USDC or dollar stablecoins.

[Dave1]

Terra has already tainted 'algorithmic' stable coins, so I doubt that it will have a future. Nevertheless projects can start with this new take on this and then see how it goes. Just maybe a few tweaks here and there and we it might evolved to a new trend in the market. So let's give hope for them, if another project fails, then it could really be the end and it will not work and really be unstable. And they should really be back 1:1 by fiat, a collateral, to ensure it will not de-pegged.

[qzl9899]

Algorithmic stablecoins are a false concept. In fact, the value of currency fluctuates tidalally, and this tide comes from people's approval and veto. Even gold cannot escape this law. Therefore, rather than using "algorithms" for "stabilization", it is more about attracting "herds" for "stabilization". So, how to attract the "herd"? We can see that whether it is UST or USDD, they are attracting people's convergence with high interest payments.

https://bitcointalk.org/index.php?topic=5400154.msg60220935#msg60220935As I said in this post, the biggest mistake of UST is the 20% super high interest rate of the anchor. But when we look back, maybe, it wasn't a mistake, it was probably DK's intention. He knew the pattern he had created would not last, and he looked forward to rug.

In fact, if we stick to the current model of algorithmic stablecoins, we're going to be in a ridiculous cycle. On the one hand, we entered the crypto world because of our natural distrust of the real-world financial system. On the other hand, we are still expecting the real-world financial system to firmly accommodate stablecoins in the crypto-world.


This leads to another larger question, and that is the definition of cryptocurrencies: Are they currencies or securities? Except for Bitcoin, I think all cryptocurrencies will be afraid to answer this question. Because this question points to the nature of the crypto world, which is them, is it a giant bubble?

Currently, I am rewriting an article based on the last discussion on algorithmic stablecoins, and I look forward to having more discussions with you.

[dwminer1]

Currently, the TRON-based USDD is gaining more and more popularity. If they don't make mistakes of UST, there might be something of it. USDD has a guaranteed collateral ratio of at least 130%, higher than the 120% set by DAI, which is considered a paragon of the industry. The real-time collateral ratio of USDD is published on the TRON DAO Reserve’s website, publicly available 24/7: https://tdr.org/#/

More info here: https://medium.com/@usddio/usdd-upgrades-into-the-first-over-collateralized-decentralized-stablecoin-20907b81aec9

[Oshosondy]

Currently, the TRON-based USDD is gaining more and more popularity. If they don't make mistakes of UST, there might be something of it. USDD has a guaranteed collateral ratio of at least 130%, higher than the 120% set by DAI, which is considered a paragon of the industry. The real-time collateral ratio of USDD is published on the TRON DAO Reserve’s website, publicly available 24/7: https://tdr.org/#/

More info here: https://medium.com/@usddio/usdd-upgrades-into-the-first-over-collateralized-decentralized-stablecoin-20907b81aec9

Algorithmic stable coin are doomed to fail, all of them of that type failed to maintain their stable price peg, I do not see future in algorithmic stable coin, it is good not to buy this type of stable coin.

According to the link, USDD is not said to be algorithmic stable coin, or am I getting something wrong about it?

[mindrust]

Nope. They are systematically flawed by default. We have already seen what happened to terraluna and ust. People will find a way to abuse the others too. It is wise to stay away from them.

Do not invest any stable coin just to be sure. Only invest in decentralized projects like bitcoin imo. The rest isn’t as good.

[tvplus006]

...What are your thoughts? ..

What we see now on the example of algorithmic stablecoins indicates that the algorithm is not perfect. Currently, we see that with a decrease in the price of an algorithmic stablecoin, the algorithm releases more and more native coins of the ecosystem.  And the lower the cost of a stablecoin, the more such coins are issued, which in turn leads to an even greater decrease in price.

[crwth]

The rise and fall of TerraUSD (UST) has shown us that algorithmic stablecoins aren't as ready for the world as we've thought they would be. If the UST collapse didn't happen, people would've still trusted algorithmic stablecoins with their money.

There are a lot of people who have trusted it and I have read some of the cases that people actually support it to the max that they have it tattooed on themselves. That's how much it has affected people and I do hope they had been addressed when the collapse happened.

What are your thoughts? Will algorithmic stablecoins have a future? If not, why?

They have a future for sure, it's just like how it happened to USDT. It's still best to be comfortable with what you are investing in and know that there's no certainty with crypto.

What do you think will be governments' response against stablecoins that are decentralized by design?

They would probably find a way to regulate it and just become somewhat centralized or become known to it. There's always going to be that "governing" factor when it comes to things especially if they have no complete control. Anyway, that's just how they are protecting people.

[barbara44]

No they won't. I have said this before, and I will say it again; algorithmic stablecoins do not work. We need to realize that the "algo" they claim to have is one that doesn't work at all, it requires participation by everyone. So by logic, it should be "if things start to go down, you could make a profit from recovering it" and that makes sense right? Like you would be profiting for recovering it so why shouldn't it recover?

There is money to be made from making it going back to 1 dollar, so on paper it makes sense. But in reality, people do not help out even if they could make a profit from it and let it die instead. Which is why it doesn't work at all.

[zasad@]

Algorithmic stablecoins need good collateral assets.
DAI uses the most top cryptocurrencies and stablecoins.
https://daistats.com/#/
The UST stablecoin was backed only by the Terra coin, and the price of Terra rose because the Tera coins had to be burned to obtain the UST stablecoin.

[sana54210]

The rise and fall of TerraUSD (UST) has shown us that algorithmic stablecoins aren't as ready for the world as we've thought they would be. If the UST collapse didn't happen, people would've still trusted algorithmic stablecoins with their money.

There are a lot of people who have trusted it and I have read some of the cases that people actually support it to the max that they have it tattooed on themselves. That's how much it has affected people and I do hope they had been addressed when the collapse happened.

I never understood people who are so hyped about one project in cryptocurrency that they would have a tattoo of it. I have been a full-time crypto person for over 6 years now, and I would still not get even bitcoin tattooed on me.

I mean maybe that is because I am a person who never had any tattoos so far, but I am willing to tattoo like my spouse's name or something, or a cool shape stuff, I am not against it and I really would love to have one. UST was a big problem, so was Luna, and the type of community it built, shows itself even after the fall where there are thousands of people who believe that the new one could recover it and make it better.

[crwth]

I never understood people who are so hyped about one project in cryptocurrency that they would have a tattoo of it.

That's what they have wanted probably, and they want to show how much of a dedication they have for the project, and that's a way to show that you support the project. I don't know what he has done, but that's just from what I have read.

I have been a full-time crypto person for over 6 years now, and I would still not get even bitcoin tattooed on me. I mean maybe that is because I am a person who never had any tattoos so far, but I am willing to tattoo like my spouse's name or something, or a cool shape stuff, I am not against it and I really would love to have one.

Maybe you don't have that kind of dedication to anything. Not enough to get tattooed too. Some people are using their bodies as canvasses, which is why they did it too.


I hope those people have found a way to cope with what they are experiencing and experienced the financial trauma it could've caused.

[cryptoaddictchie]

What are your thoughts? Will algorithmic stablecoins have a future? If not, why? What do you think will be governments' response against stablecoins that are decentralized by design? Will they make them illegal for mainstream use? Or will they embrace them? Your input will be greatly appreciated. Thanks.

I think it can as long as thet can planned out the best action and model for it not to fall like what Terra did. Its not a perfect system but its not a bad one too. Its just needed to be improved in terms of a lot of factors especially on security.

Government cant comment hard on this, as they knew the idea of decentralized but surely they are againsr on everything that arent fair and works best for community.

[bittraffic]

I think more of the Ancor protocol of Luna to be more at fault because of that 20%.
Other algorithmic stablecoin didn't drop below $0.50 and had not back to its pegged price already. There must be something to be done to avoid it from happening again not just overcollaterized it as suggested. One suggestion was to just pegged the stablecoin itself like USDC as reserved dollar for platforms.

[Ojengonggu]

I think that algorithmic stablecoins might survive now and for some time to come because they still hold themselves to the price of $1 and algorithmic stablecoins also use arbitrage mechanisms instead of fiat reserves to keep their market prices stable.
And they also rely on many assumptions for operational stability.
But to survive for a long time I'm still not sure because it's as fast as Luna used to be.