Emin Gün Sirer Got Some Strong Thoughts on TerraUSD
Due to the censorship vulnerability of fiat-backed stablecoins, according to Emin Gün Sirer, the founder of Ava Labs, can see the need for decentralized algorithmic stablecoins in the ecosystem. Emin Gün Sirer has expressed his thoughts on Terra’s algorithmic stablecoin, UST, collapsing.
With UST (TerraUSD), an algorithmic stablecoin nominally tied to the US dollar, shedding its one-to-one valuation, there has been some panic and a lot of controversy. TerraUSD is currently trading about $0.4323, while it was trading around $0.69 just 24 hours ago – an astounding amount of lost revenues. It appears that there was a bank run. USDT (Tether) and USDC are the most popular stablecoins, both of which are pegged to dollar reserves.
Gün Sirer stated, “A decentralized ecosystem requires a decentralized stablecoin that’s also resistant to censorship and seizure.” He does not believe, however, that there is room for much more than one decentralized stablecoin. He believes that t here’s not enough demand for a dozen, half-dozen, or even two algorithmic stablecoins on the market. He added that t his is a system in which the biggest player wins and everyone else loses.
Only one algorithmic stablecoin, according to Gun Sirer, can succeed, and it will most probably be the one of the most highly experienced and the most value for users. T he founder of Avalanche believes this is why imitation projects fail.
For him, effectively leading an algorithmic stablecoin program will require more than simply a technical team. It must be a team with the most successful open market operations.
“We just weathered a substantial bank run. Had this happened in TradFi, there would have been talk of doom and bailouts galore. One thing we know though, the bankers’ bonuses would still be paid.”-Emin Gün Sirer
It still stands, however, that since Saturday, TerraUSD (UST) has been trading considerably below its dollar peg, but the first loss to 98 cents was only the beginning of a much larger slide. The issue on everyone’s mind as Do Kwon’s Terraform Labs and the Luna Foundation Guard attempt to restore regularly scheduled programming is: Can the project be saved? What’s more, how?
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