Altcoins Talks - Cryptocurrency Forum
Further Discussions => General Discussion => Topic started by: rick666 on December 05, 2022, 10:21:50 AM
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Cardano recently announced plans to launch an algorithmic stablecoin (DJED) in 2023. Since Terra's demise in May of this year, the crypto community has expressed concern.
According to a CoinTelegraph report, the project's developers - DJED will be pegged to the US dollar and backed by Cardano (ADA). Does the relationship between ADA and stablecoin sound familiar to you? In addition, it will use another token as a reserve token. It is worth noting that the project will be overcollateralized and will use proof-of-reserves on the blockchain.
Although the new project's highlights are impressive, some members of the crypto community are concerned, comparing it to the collapse of Terra stablecoin UST earlier this year. On Twitter, one community member stated:
I thought we already figured this out, algorithmic stable coins, not the best option. Have we already forgotten the Terra Luna debacle? Or are we looking for more Black Swans?
I agree with this member; algorithmic stablecoins have been shown to be unstable! The Terra failure has already cost the crypto community dearly. Other members of the community stated that they would still prefer to use Tether (USDT) or USD Coin (USDC).
Why is this the case? In contrast to collateralized stablecoins, where each coin is fully backed by collateral, algorithmic stablecoins keep the value stable by using a variety of market operations that have regularly seen significant fluctuation. Which one do you think is safer? Furthermore, USDC issuer Circle stated that algorithmic stablecoins "do not have the same utility value as full-reserve, regulated dollar assets."