A lot of things are taking shape when it comes to cryptocurrencies, the stablecoin growth and impact is one of them. While the indecision on which is better or best, a couple of projects have been diving in to try and win the spotlight, even previously non-crypto related companies are developing this digital currency.
A stablecoin is quite a huge part of this ecosystem, because when you look at price volatility, it doesn't go so well with savings thus there's no sustainability in full fold without this piece of the puzzle, so the need to have it around is a necessity.
UST is an algorithm stablecoin which places it in some sort of amazing position in terms of regulatory resistance, and always a grand unit of savings account. It's pooling yeild is 20% if I'm not mistaken, and that quite places it above all savings account interest rates across all banking system, plus, it's a decentralised where one needs not go worry about some dumb shitloads of rules and stuff, the financial decisions are therein self managed.
The Economic Effects Of Algorithm Stablecoins…
Algorithm stablecoins are quite big, when you look at how it's value is sustained through market changes, that is it acts upon demand to curb it's supply thereby attaining a said value by design. This gives it the ability to inflate the currency when overpriced through printing more, and respectively, the ability to burn tokens when prices are low. This is automated and places this innovation one step ahead, because with human intervention out of the picture, decentralised finance is being built and given an atmosphere to materialise.
This is the idea of Web 3.0 operations, and as much as the developments surrounding web 3.0 is concerned, algorithm stablecoins play a major role in sustaining the network. We're talking about the next phase of the internet, and while things will slowly gain digital identities, there's currently an economic impactful development flying across the industry.
Bitcoin-Backed Stablecoin
I've always talked about the idea of having a stable asset backed by bitcoin, I recall weighing in on Wrapped BTC (WBTC) and renBTC, but they didn't exactly best play this role. When you look at the physical property markets, how prices change from time to time, this gives room for either inflation or deflation depending on the situation, so when you bring it into the crypto space, comparing cryptocurrencies to physical assets, the prices change almost every minute, so the key to developing a good stablecoin is finding its reserve with a less correlated asset right?
The idea with this is to ensure UST keeps it's peg to $1 of it's reserve currencies no matter the situation, and the current $1 billion bitcoin backed reverse is one of many moves towards achieving that.
If I understand this clearly, why bitcoin reserve isn't such a bad idea is that, regardless of its nature of having its own atmosphere of price volatility, bitcoin is less affected by the price changes of other cryptocurrencies, but other cryptocurrencies are affected by its price changes. So in that case, we realized bitcoin is less correlated, while basically every other crypto is highly correlated, even though quite a few sometimes are resistant to a huge price retracement.
I've always envisioned a bitcoin backed stablecoin because that's absolutely the best nature of currency reserve and Luna foundation looks to have this spotlight. With algorithm stablecoins making more and more impact, there's no way this industry will be sitting on its current user rate, the numbers are inevitably going up.
With its design of managing price changes, it's difficult to believe these currencies can ever hit null because that would require the entire industry going extinct, and it's already been more than 13 years and that didn't happen, yet developments have spinned tables and now, it's no longer only about a currency with a big B with strokes, protected in a yellow circumference, nah, it's way bigger and more are yet to come…
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This is amazing news. I hope it encourages Bitcoin backing of other algorithmic stablecoins.
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It may or may not, the good thing is, someone is doing it, that's enough to get people to understand there's value built into this system...
Ah that's very nice. I've been thinking about it ever since I learned about stablecoins.
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BTC as a reserve, why didn't I think of that? Oh wait, I did :)
It's fascinating watching how this whole area of crypto is evolving and it makes you wonder what other developments will come along in future. Let's hope there are more good ones than bad!
Why wonder when you could just live through it?
It's already going on a bull run! massive news.
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Yep, it is...
I like what's happening in BTC now many new project are happening in BTC.
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Cool!
K
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This is so awesome
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Wow, this post was full of information completely new to me.
And quite frankly, I feel pretty stupid after reading this post.
But one reason I am here is to expose myself to knowledge I don't have, and learn.
Every so often I am so ignorant of the subject material at hand that it goes right over my head.
This is one of those times.
Thanks for the haircut.
Perhaps I shouldn't say that out loud.
But it is what it is... none are experts at all things and this is an area I know nothing about.
But this post has stimulated me to learn about algorythmic stable coins ( I can't even spell it..LOL) and study how Bitcoin backing them up would work. It sounds like a great idea.
Thank you for the education.
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