Decentralization is the cornerstone attribute that separates cryptocurrencies from fiat. Stable coins are the cornerstone for conducting Defi. UST is both, which will help in diversifying the type of stable coins currently in use, ensuring a more robust environment to nurture the growing Defi space.
1 Like
Very much in favour - have been researching and involved with Terra and UST for the majority of the year and I can second the stability of UST, the dynamism of the community and the unique properties UST can offer to Aave.
@Anjan-ParaFi thank you for completing the risk assessment. It is exceedingly helpful in understanding the proposal.
I am interested in understanding how you arrived at a B for the market risk element and perhaps you and the rest of the community can help me. Perhaps if I provide some questions it will explain
You say a little about the market risk which is “The peg mechanism does have a possibility of failure”, “UST has generally stayed within an acceptable range”, “outside of three past outlier events … UST has almost always been within a very close range”. That sounds kind of negative. You know a bit like “All went well except when it didn’t”. So is a B grade appropriate?
The risk parameters are very strong, which I think is sensible. The reasons given are because of the high risk. This seems to acknowledge that the market risk is perhaps quite significantly high: “To mitigate concerns, a 0% collateral factor will allow UST to be supplied or borrowed”. Does this sentiment match up to the B grade?
In the event of a regulatory crackdown on centralized and asset backed stablecoins, are we sure that algorithmically backed stablecoins will be in a better position? The reason I ask is because I suspect some regulators will not make a distinction and so I’d see a crackdown on all stablecoins at the same time to be likely if such a crackdown were to happen. So I don’t really see how using an algorithmic coin would be protection against a crackdown on stablecoins. In fact I suspect that said crackdown on asset backed coins is the kind of event that may lead to a run on all stablecoins whether asset backed, fractional reserved, algorithmic etc.
The stabilizing mechanism used in Terra seems to be similar to the Iron Finance one. There is a great video explaining why this collapsed resulting in the loss of all the money here BANK RUN in DEFI - Lessons Learned From The Iron Finance Collapse - YouTube. In Iron Finance IRON was like UST and TITAN was like LUNA. It used the theoretical feedback of the price of IRON dropping making it worthwhile to burn for TITAN and vice-a-versa. Sounds like Luna and Terra. When both started dropping it led to a feedback loop that created a death spiral. Iron finance seemed to work fine and then collapsed when it went mainstream. What is different about Terra that I am missing?
About 60% of UST has been minted in the past 15 days, around $4,500,000,000 ($4.5bn) worth. I know this is partially related to funding Ozone, although from what I could read that seems to only around $1m. This is significant printing which makes a large supply of an asset that gains value through delicate balancing of supply and demand. Are there any concerns that utilization of this cash could cause the price to unpeg?
2 Likes
A global crackdown on centralized stable coins it’s coming and we should be prepared for this. DEFI needs a decentralized stable coin, so adding Terra UST it’s a must. Here are some articles that will help us understand why we need this:
Hey @Alex_BertoG,
Thank you for your reply.
Wormhole V2 Token bridge has processed over 31,000 transactions. There are more in-depth details available here too:
Wormhole stats - Wormhole Token Bridge
Wormhole explorer - https://wormholenetwork.com/en/explorer
It is embarrassing to see the kind of replies in this thread. Everyone in favor of these proposals essentially contributed to the furtherance of a pyramid scheme that defrauded thousands of people with lies and deception.
Within the AAVE community, there has to be a reckoning for all those who furthered the UST/Luna a scam.
3 Likes
Seems like even entities like Delphi Digital overlooked some of the worrysome points
Although there were delegators like @monet-supply that didn’t do 100% Nod but still
But it opens up as a Learning that we must not forget .
But as long as we have Users that are aware of such situation . They will keep the protocol out of danger …