Algorithmic stablecoin unveils new ways to preserve its peg to US dollar
UST's dramatic collapse sent shockwaves through the crypto markets — and led to probing questions on whether algorithmic stablecoins can, and should, have a place in the world of DeFi.
But now, one project says it is tackling the major issues that have led to these digital assets to fail in "violent, public events" — causing selloffs to the tune of billions of dollars and decimating the life savings of countless investors.
The Balance Ecosystem brings together a suite of products that aim to ensure algorithmic stablecoins can be used in a safer way. The supply of USDB is said to be heavily controlled in order to avoid a “depeg” from the U.S. dollar. If you recall, much of UST's woes began when the value of this digital asset fell below $1 — subsequently causing a bank run on LUNA, its sister token.
Those behind the project say they are working slowly and carefully to ensure testing of USDB's resiliency takes place on a small scale. It's hoped these stress tests will iron out weaknesses in the system and enhance robustness by the time this algorithmic stablecoin is used more widely by consumers.
Leaders also stress that USDB will not be paired with FHM, another cryptocurrency within the ecosystem — nor will this algorithmic stablecoin be built solely on a treasury of value-storing assets, a technique that's commonly used by rivals.
The crypto markets are volatile right now, and a blend of geopolitical tensions and economic uncertainty has meant these fluctuations are being replicated across a number of asset classes. Overall, the goal is simple: to ensure the Balance Ecosystem's core tokens thrive even when real-world economics are factored in.
In a recent Medium article, those involved in Fantohm explained how they're working
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