USDN, algo-stablecoin of Waves ecosystem, lost its peg once again. It is the 4th time this year. The USDN hodlers have heart attacks because of the depegged "stablecoin". Before this time, the major problem of the token was the FUD that governed the whole crypto market and stablecoins.
I'm not going to talk about the well-known cases that most of the stablecoins experienced so far. As an algorithmic stablecoin, USDN had more or less the same features as the others. Yet, it has been one of the most updated stablecoins though it has not succeeded yet.
When Community Trust Disappears
I think these two factors are enough to destroy any cryptocurrency without an extra reason. Trust of community matters a lot as, in most cases, they are the seed investors of an idea and they are the ones who spread the information and put their money. Unfortunately, many community members have already lost their trust in the developers to bring a sustainable solution.
Each "solution" that they served was based on locking your money for an uncertain time and giving you a new token in return! I've been an investor in Waves since 2018 but it is the first time I felt that I also lost my hope. The balance cannot be sustained by creating new tokens with a different narrative.
I invested in Pluto, a reserve token for USDN, and tried to help USDN scaffold its system once again. Did I succeed? A quarter of my investment has melted in 2 months... I have another token but less money in return. 🙃
Lower Liquidity More Threats
USDN is not the only stablecoin that lost its peg recently. aUSD and HUSD (Huobi's stablecoin) due to the liquidity problems that they had. While Ethereum Merge is approaching, many people move their liquidity to Ethereum's side as the special day approaches. So, the drained liquidity in crypto is a well-known threat.
The update has been live for less than 24 hours; therefore, time may be needed for the updates to affect the network. CryptoSlate chatted to Waves founder Sasha Ivanov last week and spoke directly about the strategies used to defend the peg. -CryptoSlate
Sasha, the founder of Waves, still thinks that creating new tokens as the reserve of USDN can help them keep the peg stable. Sad to say but even UST with Billions of dollar market cap melted due to this illusion. When you do not overcollateralize or create x-y-z tokens for reserve, you are an open target for smart money.
- No Liquidity ❌
- Newly Created Tokens for Reserves (Surf, Pluto, etc.) ❌
- Decreasing Community Trust ❌
- Lowering Reputation in Crypto ❌
I suffer while writing all these things but no real solutions have been put forward so far. I still believe that the core team is hard-working but they lost the track of reality. Eventually, the realm collapsed.
BR: 10% Collateralised!
What comes to your mind when you see this Backing Ratio? I flashback to UST's first depeg times.
As the price of Waves decreased, the BR rate tanked drastically. The low liquidity; less valuable reserve money and rising FUD may create another hard time for the Waves ecosystem.
the community also approved another update to “implement new BR protection mechanics, so that BR cannot go lower than 10%.” This update is to implement immediate measures to stabilize the protocol and ensure the security of its reserves - CryptoTimes
With the recent update, the Backing Rate rate is set a minimum level of 10 percent to back the USDN in circulation. The good side is that there is still some work to improve the project but the reality is that it is not enough at this point.
A Solid Example: HBD Stablecoin
Every time I visit Ausbit's website, I monitor the percentage of HBD Marketcap compared to Hive. Proud to say that it is the best example of overcollateralized stablecoin that is backed by a real reserve and community.
In addition to HBD reserves and community, pHBD and bHBD bridges by LeoBridge help community keep its peg stable. Last but not least, HBDstabilizer by HDF works 7/24! Meanwhile Hive Savings generate 20% APR in staking 🔥
After seeing the way HBD is supported, I cannot accept the actions taken for USDN! It was the last time I invested in Waves. My 4 years of journey ends at this point.