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May 10, 2022

Only One Arithmetic Stablecoin Can Succeed?

Emin Gün Sirer, the creator of Ava Labs, has shared his thoughts on Terra’s algorithmic stablecoin, UST.

Due to the censorship risk of fiat-backed stablecoins, Gün Sirer believes there is a need for decentralized algorithmic stablecoins in the ecosystem.

Gün Sirer went on to say that a decentralized ecosystem requires a decentralized stablecoin that is resistant to censorship and seizure. He does not believe, however, that there is enough room for more than one decentralized stablecoin.

Only one algorithmic stablecoin, in his opinion, can succeed, and it will most likely be the one with the most experienced team and the most value for consumers. According to the founder of Avalanche, this is why copycat projects fail.

To him, successfully leading an algorithmic stablecoin project will require more than simply a technical team. It must be a team with the most successful open market operations.

Gün Sirer also made the surprise claim that a team based in the United States would be unable to succeed with an algorithmic project due to the country’s legislative environment. Singapore, Switzerland, and South Korea, he claims, are the only three countries with the necessary legislative framework for an algorithmic stablecoin team.

The crypto CEO also claimed that any algorithmic must have a huge capacity and be very resilient under high load in order to flourish. Only a few chains can claim this at the moment.

He believes that UST will rebound as a result of these factors, and that it will eventually become the dominant algorithmic stablecoin.

Sirer asserted that every stablecoin, even fiat-backed stables, had been de-pegged at some point due to UST’s failure to defend its peg.

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However, his viewpoints are not shared by the entire crypto community, which feels that the ecosystem can support more than one algorithmic stablecoin.

After losing its peg to the dollar, UST was trading at $0.92 as of press time.