In mild of latest market results because of the collapse of the TerraUSD (UST) stablecoin, a number of questions ought to be answered about what makes a stablecoin usable because the crypto market expands.
Co-founder of crypto monetary service supplier VegaX Holdings Sang Lee favors decentralized stablecoins over their centralized counterparts however thinks they have to be cash that folks can belief, which poses a dilemma for the trade.
In a dialog with Cointelegraph on Friday, Lee identified that the vital utility stablecoins serve within the crypto ecosystem was providing merchants a uniform unit of account, like the US greenback does for the worldwide markets. Nonetheless, he famous that “the best way by which these items are maintained is vital, too:”
“Crucial factor is that it holds its peg as a result of then that single unit of account begins to be unreliable and unusable.”
Lee believes that for stablecoins to be really usable, individuals should belief them. This creates a dilemma as a result of, he mentioned, “you may solely use a foreign money when you belief it, however you belief it as a result of different individuals use it.” In his view, that dilemma may be nipped within the bud by making certain there’s a broad use case earlier than constructing as a result of the “use case is infinitely extra vital than collateral.”
The problems of belief and design are on the forefront of the dialogue surrounding the UST stablecoin, which misplaced its peg and drove down the worth of Terra (LUNA) and Bitcoin (BTC), its collateral. As belief quickly light within the stablecoin, so did its utility, forcing its worth and the worth of LUNA to evaporate.
There are no less than 97 stablecoins throughout the crypto trade in the present day, according to CoinGecko, most of that are pegged to the USD. Whereas that quantity could seem excessive, Lee contests that there ought to be “greater than a handful” of them, and they need to purpose to be decentralized:
“We will’t have ‘one to rule all of them’ as a result of that’s what we’re making an attempt to cease within the first place.”
Among the many prime 5 stablecoins by market cap, simply Dai (DAI) and Magical Web Cash (MIM) are aiming to be decentralized.
Lee acknowledges that it’s unrealistic to anticipate the main stablecoins to be decentralized straight away however feels they “ought to be on a path to it sooner or later.” This concept stems from his notion that the only level of failure that cryptocurrency is making an attempt to unravel is “an absence of transparency and accountability” in centralized currencies.
Associated: SEC’s Hester Peirce says new stablecoin regs want to permit room for failure
In pushing crypto right into a extra decentralized panorama, Lee warns these within the trade to maneuver away from a combative stance and extra right into a pleasant, collaborative one. He mentioned:
“We will transfer the world ahead right into a blockchain-based ecosystem, which is general a very good factor. However, it’s higher to speak about what we in blockchain assume is vital somewhat than shouting that our tech is best.”
