Tether CTO Paolo Ardoino compared the algorithmic stablecoin TerraUSD (UST) to a “card lock” that should have collapsed at any moment. According to him, the product is simply “poorly designed”.
“It’s all fun and games until you are a 10 billion stablecoin. And then it becomes much harder the faster you grow, the more you grow, right, because if you are a stablecoin, especially an algorithmic stablecoin..” https://t.co/UNuvNhZoP9
— REIMAGINE — Web3 Events and Media (@REIMAGINE_2021) May 18, 2022
“I don’t know Do Kwon. But let’s give him the benefit of the doubt. He created this project with arrogance and the thought that he was right, and many supported him, of course, for economic reasons. However, the project itself was not correct. It was poorly designed, like so many others,” he said on the Reimagine podcast.
According to Ardoino, he and many other specialists understood that launching UST was a “bad idea.” The technical director emphasized that Kwon himself was aware that this “card lock” could collapse at any time, but he did not have the opportunity to publicly declare this.
Earlier, CTO Tether said that algorithmic stablecoins like TerraUSD are dangerous for the market. In the podcast, he echoed this idea.
According to Ardoino, UST was unable to maintain parity with the US dollar due to its high capitalization, as collateral was not enough to correct the situation in a volatile market.
However, the sale of BTC from the Luna Foundation Guard reserve fund put enough pressure on the price of bitcoin for “the market to crash even more.”
“Essentially, they found themselves in a cascade situation where the need to protect parity forced them to sell collateral, which provoked additional collapses. [котировок]which forced them to sell even more collateral and so on,” Ardoino explained.
He emphasized that the collapse of UST would attract even more attention from regulators to the segment. However, in his opinion, politicians should first classify assets correctly, since stablecoins like USDT are fully backed by reserves.
Recall that in the first quarter of 2022, the issuer of the stablecoin USDT – Tether Holdings Limited – reduced reserves in commercial securities by 17%. By the end of the second quarter, the company intends to reduce the amount of collateral in these assets by another 20%.
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