- Segregation between centralized stablecoin and algorithm stablecoin.
- Stablecoins become harder to manage as they grow larger.
Paolo Ardoino, CTO of Tether and Bitfinex, participated in a podcast by Reimagine, Web3 events & Media company,on May 17th, where he made few comments about stablecoins. Especially about Terra UST, the initiation behind the coin was rug pull rather it was just poorly designed as many other projects.
Ardoino mentions that algorithmic stablecoins are similar castles of cards, which have high risk of falling down and are sure to fall down at some point of time. He states that stablecoins have to be backed by fiat currencies as solid assets rather than another crypto or there has to be differentiation among these categories.
Ardoino podcast clip:
He also compares UST with Tether USDT, USDT is a centralized stablecoin while UST is an algorithmic stablecoin, both are in two different poles with two variant backing. According to CMC, USDT ranks 3 and price is $0.9993, UST ranks 61 and price is $0.07613, at the time of writing.
Criticism on Terra
Creation and management of stablecoin by Ardoino’s view is “all fun and games upto 10 billion, the harder it becomes the faster it grows “. What went wrong according to him is DoKwon’s rash self belief, which can be connected with another stalled stablecoin project- Basis cash.
Ardoino statement on DoKwon:
“He created this project with arrogance and with thinking that he was right and many were supporting him, of course, probably for economic reasons, but was not per se, a rug pull right, it was a project that was poorly designed as many projects are poorly designed.”
The planning behind the Bitcoin reserve went wrong, despite being collateral for the UST, it pulled its market furthermore. And UST users were not able to gain the pegged value that was promised to them.