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The Sonic blockchain is working on the implementation of its yield-generating, algorithmic stablecoin despite fears over a potential collapse similar to the Terra-Luna meltdown that led to the industry’s longest crypto winter.
Algorithmic stablecoins employ code-based mechanisms to ensure their price stability, as opposed to fiat stablecoins pegged directly to the value of the underlying currency.
The Sonic blockchain is working on the implementation of an algorithmic stablecoin with up to 23% annual percentage rate (APR), according to Andre Cronje, co-founder of Sonic Labs and founder of Yearn.finance.
Cronje wrote in a March 22 X post:
The announcement came a day after Cronje admitted to experiencing Post-traumatic stress disorder (PTSD) related to algorithmic stablecoin due to previous cycles:
In May 2022, the $40 billion Terra ecosystem collapsed, erasing tens of billions of dollars of value in a matter of days. Terra’s algorithmic stablecoin, TerraUSD (UST), was yielding an over 20% annual percentage yield (APY) on Anchor Protocol.
As UST lost its dollar peg, crashing to a low of around $0.30, Terraform Labs co-founder Do Kwon took to X to share his rescue plan. At the same time, the value of sister token LUNA, once a top-10 crypto project by market capitalization, plunged over 98% to $0.84. For reference: LUNA was trading north of $120 in early April.
Related: Sonic TVL rises 66% to $253M since rebranding from Fantom
Sonic claims to be the world’s fastest Ethereum Virtual Machine (EVM) chain, with a “true” 720 milliseconds (ms) finality — the assurance that a transaction is irreversible, which happens after it is added to a block on the blockchain ledger.
Sonic has garnered attention in the crypto industry since its testnet achieved a 720 ms finality on Sept. 8, 2024.
Related: FTX liquidated $1.5B in 3AC assets 2 weeks before hedge fund’s collapse
Investors are still buying collapsed LUNA token years after Terra crash
The Terra (LUNA) token is down over 98% from its all-time high of 19.54 recorded on May 28, 2022, nearly three years ago, CoinMarketCap data shows.
Despite the collapse, the token saw over $21 million worth of trading volume over the past 24 hours, which shows that “people are still buying it even though it’s dead,” noted popular technical analyst Optimus KevTron.
The collapse of the algorithmic stablecoin issuer created shockwaves among both crypto investors and lawmakers.
To create more stability, the European Union’s Markets in Crypto-Assets Regulation (MiCA) bill will prohibit the issuance of algorithmic stablecoins to avoid another collapse similar to the Terra ecosystem’s.
Magazine: ‘Hong Kong’s FTX’ victims win lawsuit, bankers bash stablecoins: Asia Express
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