The co-founder of Tether thinks that the collapse of TerraUSD could mean the end of algorithmic stablecoins

Is Terra’s algorithmic stablecoin UST’s demise, which occurred last month, the end of automated stablecoins as we know them? That’s what Reeve Collins thinks.

Due to TerraUSD’s meltdown, DeFi’s financial procedures have been subjected to unprecedented scrutiny, raising doubts about the viability of algorithmic stablecoins. Tether co-founder and co-founder of BLOCKv believes that the UST fiasco will “probably be the end” of so-called algorithmic stablecoins.

Reeves told CNBC at the World Economic Forum in Davos, Switzerland, that Terra’s stablecoin’s demise isn’t shocking. That’s not all, he said. Stablecoins based on algorithms is unlikely to succeed.

As a matter of fact, it’s not surprising that the money was lost. Stablecoins are supported by algorithms. In other words, it’s basically a bunch of brilliant people attempting to find out the most accurate way to value something in relation to the dollar.

In the previous several months, a lot of individuals withdrew their money from the system because they knew it was unsustainable. As a result, the collision had a domino effect. The demise of most algo stablecoins is almost certainly on the horizon.

After Terra’s demise, many speculated that other stablecoins might follow, however, these fears are unfounded. Both Tether (USDT) and the USD Coin have had their share of criticism, but they are both well-known and frequently utilised.

The principles and reserves that each stablecoin is constructed on vary widely. There is a general consensus, therefore, that this will have very minimal effects on the centralised stablecoin environment.

The Opinion of the Experts

TerraUSD’s demise has been predicted by a large number of specialists in the past. Circulation of USDC is backed by Circle’s USDC stablecoin, which is issued by Jeremy Allaire, CEO and co-founder of Circle.

The exec was astonished to observe the swift death spiral and the consequent violent loss of value despite the high-profile backing for Terra and UST. The “holy grail” of decentralised digital currencies, according to Allaire, is this group of stablecoins.

Ethereum co-founder Vitalik Buterin, on the other hand, does not think algorithmic stablecoins are flawed by design. “He said,” I replied.

Although many automated stablecoin designs are fundamentally flawed and doomed to failure, there are also many more that can survive theoretically but are extremely risky, and many more stablecoins that are highly robust in theory and have survived extreme tests of the crypto market conditions in practice,” says a cryptocurrency expert.

Also Read: Ethereum takes the lead and sells over $25 billion worth of NFTs in a single day