"As the crypto community tries to navigate the bear market and recover from the onslaught brought about by stablecoin incidents like the Terra crash, another algorithmic stablecoin shows signs of struggle as it falls below its dollar peg" [Reguerra, E. Waves-backed stablecoin USDN breaks peg again amid protocol upgrade. (Accessed August 26, 2022)].
Neutrino Dollar (USDN), the Waves-backed algorithmic stable coin, lost its peg and deviated from the dollar for the fourth time in approximately the past six months. After falling as low as $0.9068 in the past 24 hours, USDN has recovered somewhat but is still trading below peg at $0.9628 as of August 26, 2022 at 07:48 ET. The one year price chart for Neutrino Dollar follows:
"In April, USDN crashed to $0.78 as price manipulation accusations began to float. The stablecoin recovered within a few days after its first crash. However, in the following months, the digital asset once again showed signs of weakness. In May, it fell to $0.82 and dropped once more in June as it traded at around $0.93 per token" [Id].
Because of this price instability, Neutrino sought the community vote to implement four changes to it's protocol parameters. These changes as well as the result of the vote are as follows:
- Change Max Swap Amount (Yes - 97.15%)
- Increase protocol fee for USDN>WAVES swaps (No - 67.47%)
- Add BR protection (Yes - 95%)
- Improve gNSBT rewards distribution (Yes - 94.84%)
[See, Neutrino.Protocol. Vote for Neutrino updates. (Accessed August 26, 2022].
Within three days following the results of the vote, Neutrino " added new mechanics to improve the economics behind the protocol. This includes changes in the maximum swap amount, backing ratio protection mechanics and improving rewards distribution" [Reguerra, supra].
"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. In the interview, Ivanov stated that he believed the peg would remain relatively stable throughout the coming months before restoring its peg to $1. However, he did not rule out the occasional bout of volatility" [Wright, L. USDN loses peg again as Neutrino upgrade to “stabilize protocol” goes live. (Accessed August 26, 2022)].
But "[a]dding protection to the backing ratio to ensure it cannot go outside a set range is part of the strategy to defend the peg. However, given the stablecoin has not recovered from its 4% drop, questions have to be raised about the update’s effectiveness" [Id].
So this situation becomes one of 'only time will tell' if Neutrino's updates are successful in stabilizing the price of this stablecoin.
And just for an interesting aside, please ponder this tweet from @BareNakedCrypto:
Interesting, huh? Let's all wait and see what happens.