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?