The founder of the FTX cryptocurrency exchange, Sam Bankman-Fried, is considering the future of stablecoin after two top cryptocurrencies suffered astonishing losses this week.
Bankman-Fried recently uploaded to Twitter about how so-called stablecoins should have separate and more sophisticated definitions after the Luna Foundation Guard TerraUSD (UST) that lost its bond in US dollars (USD) and destroyed the Terra (LUNA).
“One good thing I mentioned recently: ‘stablecoin’ is really used to mean a lot of different things.
One thing that can mean “stablecoin supported 1: 1 by one US dollar in a US bank account”.
“This is what they seek to license the current draft US regulations as a first step.”
The CEO of FTX at the time reports other stablecoin levels that are prone to volatility and risk because they are not strictly backed by dollar reserves but by a mix of assets and debt.
Another is “stablecoin supported> = 1: 1 by liquid securities, bonds and USD”. Non-zero price risk, but generally remain very close to $ 1 because they can be redeemed.
For example [Tether] The USDT remained within a few% of $ 1 during this crash and [I’m] hearing $ 1b + redeemed successfully.
A third is ‘stablecoin supported> = 1: 1 by a very volatile asset.’
These are “algorithmic” fixed currencies. If the underlying crashes, they can fall down. Very. e.g. UST. “
When it comes to solutions, Bankman-Fried suggests applying distinct definitions to different versions of what currently falls under the broader stablecoin terminology umbrella.
“We really should not use the same word for all these things. What we call “algorithmically stablecoins” are not really as stable as fiat-backed stablecoins.
They look more like structured products and need an upward mood if they want to justify the risk.
This may not seem so important to people in encryption, because we already know that stablecoins algorithms are quite different from those supported by fiat. But in politics, that message is often lost. “We have to be clear about that.”
Asked if FTX could help LUNA with Bankman-Fried access to the management keys of the SushiSwap Decentralized Exchange (SUSHI) in September 2020, the CEO says Its amazing.
“This can be difficult – the real, honest answer is that probably either UST or LUNA should go to 0 (or both).
There is no way to save both. (And it’s not clear from now on that there is any way to save the UST peg even if you sacrifice LUNA.) “
At the time of writing, TerraUSD has fallen 41.7% and is currently valued at $ 0.49.
Terra, meanwhile, has collapsed, falling from more than $ 80 a week ago to a dollar by May 11. The LUNA decreased by 99.03% per day and its price was $ 0.006645 at the time of writing.
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