Time to call algorithmic stablecoins something else, says FTX Crypto Exchange CEO Sam Bankman-Fried

Sam Bankman-Fred, founder of crypto exchange FTX, is considering the future of stablecoins after two of the biggest cryptocurrencies suffered massive losses this week.

Bankman Fried recently chirp On how the so-called stablecoins should have distinct and more accurate definitions after the loss of TerraUSD (UST) from the Luna Foundation Guard (UST) to peg to the US Dollar (USD) and the fall of Terra (LUNA).

“A good point someone made recently: ‘stablecoin’ is really used to refer to a few different things.

One thing it could mean is “a stable currency backed 1:1 by US dollars in a US bank account”.

This is what current US draft regulations seek to allow, as a first step.

The CEO of FTX went to Mentionsed Other levels of stablecoins are sensitive to volatility and risk because they are not strictly backed by dollar reserves, but by a mixture of assets and liabilities.

The other is “stablecoin backed >=1:1 by liquid debt assets, Treasuries, and US dollars.” Non-zero price risk, but it usually remains very close to $1 because it can be redeemed.

for example [Tether] USDT remained within a few percent of a dollar during this crash, and [I’m] Hear $1 billion+ successfully recovered.

The third is “backed stablecoins >= 1:1 with a highly volatile asset.”

These are “arithmetic” stablecoins. If the foundation goes down, it may go down. Many. Previous. UST. »

When it comes to solutions, Bankman-Fried suggest Apply separate definitions to different versions of what currently falls within the broader stablecoin terminology.

“Really, we shouldn’t be using the same word for all of this stuff. What we call “algorithmic stablecoins” isn’t really stable in the same way we call fiat-backed stablecoins.

It’s a lot like structured products, and it needs more edge if it’s to justify the risks.

This may not seem important to crypto users, because we already know that algorithmic stablecoins are very different from crypto-backed currencies. But in the political space, this message is often lost. We need to be frank about this.

Asked if FTX could help LUNA in light of Bankman-Fried gaining access to the management keys of the Decentralized Exchange (DEX) SushiSwap (SUSHI) in September 2020, the CEO said She said it’s improbably.

“This can be deceptive – the real honest answer is that either the ground tank or the LUNA will probably go to zero (or both).

There is no way to save them both. (It is not clear at this time that there is a way to save the ankle of a ground tank even if you sacrifice a LUNA.) “

At the time of writing, TerraUSD is down 41.7% and is currently worth $0.49.

Meanwhile, Terra exploded from over $80 last week to $1 on May 11. LUNA is down 99.03% on the day and is worth $0.006645 at the time of writing.

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