Community members expressed their concerns over a new algorithmic stablecoin project, with some bringing up the collapse of Terra USD in the conversation.
). According to the community member, algorithmic stablecoins already proved that they are not stable.UST aftermath: Is there any future for algorithmic stablecoins?
With concerns spurred by the advent of Djed coming out, Cointelegraph asked some of the major stablecoin projects if algorithmic stablecoin projects still have the potential to succeed despite the example shown by Terra USD. In a statement, Tether told Cointelegraph that stablecoin projects like Terra had mechanisms designed to achieve stability, but failed in the end. The team explained that:
“Unlike collateralized stablecoins where each coin is fully backed by collateral, algorithmic stablecoins attempt to maintain their value via various market operations that have frequently been broken down dramatically.” Meanwhile, USD Coin issuer Circle told Cointelegraph in a statement that algorithmic stablecoins with complex collateralization structures and technological stabilization mechanisms do not have the same utility value as full-reserve, regulated dollar assets. “The collapse of Terra earlier this year underscored that not all stablecoins are created equal,” they said.
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