In this article, Cyril Sabbagh delves into the Terra LUNA saga, explaining how and why it unfolded, and shares his perspective on stablecoins in a broader sense.
Explore the fascinating world of stablecoins, a category of cryptocurrencies designed to maintain a stable value, often pegged to traditional currencies such as the dollar or euro, with the aim of replicating their value.
In a broad sense, there are two types of stablecoins: non-algorithmic ones that use a reserve system to maintain parity with the reference currency, and algorithmic ones that rely on algorithmic mechanisms to ensure stability.
However, the recent collapse of the cryptocurrency LUNA and the UST stablecoin has highlighted the risks associated with such projects.
This episode underscores the importance of designing robust projects and considering hidden arbitrage opportunities.
Despite this, certain stablecoins like Circle’s USDC and Maker’s DAI continue to inspire confidence due to their collateralization mechanisms.
Ultimately, contemplating the future of stablecoins leads us to consider the challenge of maintaining stability while preserving the decentralized principles inherent in the crypto ecosystem.