Enthusiasts And Defenders Of The Decentralized Financial Mechanism Are Not Willing To Give Up Algorithmic Stablecoins Even After The Terrible Collapse Of Terrausd And Believe That This Financial Mechanism Is Necessary To Bypass The Intermediation, Centralized Banking System, And Active Brokers In The Stock Exchanges. 

In this regard, Hassan Basiri, the portfolio manager of Arca Institute, who was one of the investors in Terra, believes that an efficient and sustainable model will emerge in the next five to seven years.

DeFi has been one of the fastest-growing segments of the cryptocurrency space over the past few years. DeFi relies on enough transactions, like most crypto projects, to keep blockchain networks functioning.

Terra suddenly collapsed in early June after the software tried to keep UST in a stable state. The mechanism that was supposed to protect the cryptocurrency from fluctuations and crashes became the factor that destroyed Terra and Luna’s cryptocurrency in just two days.

The successful architecture, in practice, failed to properly manage the increase and decrease in demand for the Luna token. While it was the largest stablecoin with a market capitalization of around $18 billion, it was only one of the dozens that failed to maintain its value of $1.

Among the handful of stablecoins that have survived, the USDD token launched by controversial crypto entrepreneur Justin Sun on the Tron network has its approach. In an interview with Bloomberg, Sun defended the project, saying there was a need for an independent stablecoin.

“If tomorrow the regulators decide to ban stablecoins, there will be huge risks for the whole cryptosystem,” Sun said. We need a stablecoin not controlled by a third party outside of crypto.”

USDD was activated on the Tron blockchain in early May and can be used on Ethereum and Binance Smart Chain blockchains. This stablecoin uses the exact arbitrage mechanism that Terra used to maintain performance. The arbitrage mechanism returns the price of USDD to one dollar. For example, when a USDD falls below $1, traders can receive an instant profit by sending one USDD to the Tron blockchain for $1 Tron, the network’s primary token.

Terra showed that integrating such algorithmic programming to keep a token stable is simple but complex in the real world, as stablecoins require investors to believe the digital currency is still valuable.

Tarun Chitra, founder, and CEO of Gauntlet, a financial modeling platform for digital currencies, says this: “If you want to build these infrastructures, you need to have a certain technical ability and understanding and be able to predict future events. You have to believe that you can overcome all the failures that have happened throughout history.”

Sun acknowledged that the failure of Project Terra highlighted the shortcomings of algorithmic stablecoins but added that he has plans for other projects. In this regard, it plans to raise $10 billion through the Tron DAO Reserve to preserve the value of the USD. This development and launch process is similar to Terra’s original developer, Do Kwon, did.

What do the elders of the technology world say about cryptocurrencies?

“Our definition of an algorithmic stablecoin is not one without people,” Sun says. But we will try to create infrastructure without dependence on banks or any stablecoin related to assets managed by banks.”

As you can see, the digital currency market is lucrative, and people who have technical and financial knowledge in this field are trying to find a way to get maximum profit from this market by defining digital currencies and implementing blockchains. One of the points to think about that has a place for discussion, and even extensive research, is whether cryptocurrencies are decentralized or not, as it is said.

Some security experts say that because blockchain is always said to be decentralized and immutable, everyone assumes that such a thing exists entirely. However, the reality is that the value and authority of digital currencies rest in the hands of individuals and organizations with more money.

A similar approach can be seen in abundance in the capitalist world.

The issue that has attracted the attention of some organizations these days is that the blockchain may be managed under the title of unwanted centralization. An approach in which a person, institution, or organization exerts influence on this seemingly decentralized structure. In such a way, a person may be able to manipulate his records.

One of the biggest problems faced by blockchain infrastructure is instability. It doesn’t take a hacker attack to destabilize the operation of a blockchain. A disruption by someone with more access to the infrastructure will cause severe trouble to its function.

With this description, we must say that perhaps detailed research is needed about the concept of infrastructure decentralization to determine whether blockchain infrastructures have decentralized importance or not correctly.