The collapse of LUNA and UST has turned the spotlight on other cryptocurrencies running decentralized stablecoins, such as NEAR’s USN. The latter is one of the fastest growing blockchain networks. However, many investors seem to be wondering if this growth trajectory would have the same fate as Terra?
Let’s evaluate the differences and similarities between the two blockchain projects. Both projects are similar in that they need to balance the connection through stablecoin offering. They also use their native blockchain cryptocurrency to cut their stablecoin. While Terra used a mint and burning mechanism, NEAR uses a treasury to maintain the dollar bond.
Is the NEAR approach safer?
NEAR is locked in the vault to interrupt USN and is unlocked when USN burns. It is also worth noting that NEAR has a fixed supply and this is one of the solutions implemented to avoid oversupply that can fuel a death spiral.
NEAR also goes one step further by ensuring that the bond is highly secured and supported by NEAR and USDT. This is ensured through a REF funding group, as well as through centralized group exchanges.
Is there a risk to the NEAR approach?
Although NEAR’s USN approach seems more secure than Terra’s UST, it is still not as secure as fiat-backed central stablecoins. The USN has shown significant volatility recently, but is still able to regain its bond. There are also fears that the USDT is part of the overinsurance mechanism. There is a potential possibility that a USDT disconnection will most likely destabilize the USN connection.
NEAR peaked at $ 20.59 in January 2022, but declining market conditions have led to a significant decline in recent months. It was trading at $ 5.87 at the time of writing. And, at the time of writing, it was going to form a death cross, suggesting more possible disadvantages.
A look at its price reveals that the total NEAR supply held by whales has been falling over the last 30 days. However, it shows signs of whale accumulation over the last three days, indicating that NEAR may be ready to experience more upside.
In terms of its long-term performance, NEAR may not be in danger of a death spiral and has also expanded its offerings to Metaverse and NFT. In fact, it has recorded significant NFT trading volumes in the last 30 days and remarkable developer activity.