NEWS BRIEF: Do Kwon Shares His Rescue Plan for UST
By now, all of the troubles surrounding the inability of UST to maintain peg is well known. Now enter Do Kwon with a new plan to save the day.
In a nutshell, the “decentralized” stablecoin protocol UST has come up with a preliminary solution to its disastrous situation where its peg to the U.S. dollar has broken. The process should reinforce the burning of UST, which so far, has been ineffective in achieving dollar parity for the stablecoin. In the above Tweet thread, Kwon suggested that his team will increase basepool from 50M to 100M SDR, and decrease PoolRecoveryBlock from 36 to 18. This will increase minting capacity from $293 million to around $1200 million. In essence, the team will mint four times more UST than usual. The process of creating value out of thin air has already coined a new crypto term–“Kwontative easing”–or money printing.
[Hall, J. Terra founder Do Kwon shares plan to save the UST stablecoin peg. (Accessed May 11, 2022)].
Terra is down 90% from its ATH and UST is 75% below dollar parity. So the question becomes: will Kwon's 'money printing' remediation be enough to save the billions of dollars wiped out by the fall?
Head of Portfolio Management for Securitize Capital, Adil Abdulali, reminds all that "UST is an ‘algorithmic’ stablecoin and is not backed by cash reserves” and warns:
Unlike other stablecoins such as USDC and Tether, UST is an ‘algorithmic’ stablecoin and is not backed by cash reserves. Comparatively, Circle ensures USDC stability with each USDCoin backed by one US Dollar, highlighting the importance of choosing the right stablecoin.
[Id].
However, despite this warning, Kwon remains patently optimistic, tweeting:
Needless to say, if the rescue is successful and Terra returns to its ATH and UST reaches and maintains dollar parity, we will have witnessed a herculean event within the cryptoverse.
Posted Using LeoFinance Beta
