Algorithmic stabilization is the key to effective crypto-finance

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Terraform Labs failed miserably, but stablecoins can still succeed in the future with fractional reserve-based algorithmic stabilization.

) have values tied close to that of USD, which means they can be used as a store of value almost as reliably as an ordinary bank account. For people already doing business in the crypto world, there is utility in having wealth stored in a stable form within one’s crypto wallet, so one can easily shift it back and forth between the stable form and various other crypto products.

Some stablecoins are fractionally backed, meaning that if, say, $100 million in stablecoins have been issued, there may be only $70 million in the corresponding treasury backing it up. In that case, if 70% of the stablecoin holders redeemed their tokens, things would be fine. But if 80% redeemed their tokens, it would become a problem. For FRAX and other similar stablecoins, algorithmic stabilization methods are used to “maintain the peg.

While LUNA did use algorithmic stabilization, the core problem with their set-up was not this — it was the presence of vicious circularities in their tokenomics, such as the use of their own governance token as a backing reserve. Like most other flexible financial mechanisms, algorithmic stabilization can be manipulated.

The answer to all these issues is a relatively simple one: Utilize the flexibility of blockchain-based smart-contract infrastructure to create new financial instruments that achieve useful forms of stability without pegging to fiat.“Stability” does not intrinsically mean correlation with fiat currency value.

 

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Fuck that no ty

No it CANNOT! ASK THE FED:

After the collapse of Terraform Labs’ cryptocurrency, Terra (LUNA), and its stablecoin, Terra (UST), the notion of “algorithmic stabilization” has fallen to a low point in popularity, both in the cryptocurrency world and among mainstream observers.

We should move forward yeah. And I’m gonna do it with USDT in my portfolio

Fortunately, crypto has USDT.

Algorithmic stablecoins treat investors and their money as unthinking bots. Too bad humans are much more complicated than an if--else statement. Algorithmic stablecoins will loop themselves into zero.

As for me fiat backed stablecoins sound safer. That’s why I use $USDT.

Wait till we go live on We are better than algorithmic.

1. Whether directly or indirectly, as long as perception of value is fiat-determinative, a Stablecoin is fundamentally fiat-dependent (as too, are all other crypto’s). The “failure” of crypto is its inability to deliver value on its own terms (ie, independent of fiat valuation)!

Sir plz tell what is this happen

It’s an arbitrage-derivative scam unless the liabilities are 1:1 with reserves of the base layer bearer asset (bitcoin). Otherwise they are ponzis. 💥 All Alts are ponzis - is a ponzi purveyor (i.e. thief). GM.

theyve been saying this for years and, rightfully, we still dont believe them

In such a setting, transparency is key and cogitoprotocol will be maximally transparent. This is how trust is built in the industry that recently had a crisis of trust.

Are you sure about this? 👀😬 mikojava

nah

Wait till you learn about BitBayofficial Just weeks away from launch

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