Topic: How do you feel about algorithmic stablecoin staking? (Read 249 times)

At the time, even centralized stablecoins like USDT also lost their anchor during market turmoil. I would say that now, in its current form, any stablecoin is unsustainable to one degree or another. I also think the problem with algorithmic stablecoins is that such systems need constant feeding, there needs to be constant demand. But constant demand in crypto space is a relatively rare thing, only bitcoin has this property, but unlike algorithmic stablecoin, it has limited supply. So now all these algorithmic schemes remind financial pyramids, where the scheme works as long as there is an inflow of money, as soon as the outflow begins, the scheme folds like a house of cards.

the answer is what is happening to UST today. it is difficult to recover the peg and the price keeps falling. which is why algorithmic stablecoins are a flop in the crypto space. this mechanism only works when the market is good, but when the trend is bearish everything will collapse. and this failure could have happened in other stablecoins.

It is blocked or on hold. They have also avax tokens as reserved but didnt able to withdraw it as it locked in the smart contract, unlike bitcoin reserved. They did used it to somehow get back on its pegged but werent succesful as liquidity is continously being eaten by market. Somehow the balance didnt achieved unless they still have deeper pockets to sustained.

Even bitcoin, which historically seems to be always rising, tends to be very volatile in the short term. Funds are also someone's investments and they are not blocked funds, that is, they can be withdrawn by the holders at any moment. LUNA did a great job of showing that the size of the fund doesn't matter, they bought over 45,000 BTC, but those bitcoins were emptied in an instant. I think that if we are talking about a reserve fund that is supposed to hold the exchange rate, then those funds should be blocked by some kind of smart contract or something like that.

Exactly what happened on Luna. This incident showcase vulnerabilities of the idea of stable backed pegged with not stable cryptocurrency and also the reserved fund can be attacked by whales especially there is a leverage trading that could lower the funds or depleted once hit a threshold.

Investing in stablecoins is hardly something that can change someone's life in a few years, simply because stablecoins aren't made for big earnings. It's about saving money. I've been looking at ways to keep funds in cryptocurrency that would still generate a small income from stablecoins. I was looking at stablecoins as something suitable for this purpose, but I was confused by some of the nuances that have proven to be great with UST. This is exactly what I was afraid of.

They were gone for a long time now. I have seen plenty of them try to make it work and none of them works, it will never work. It trusts that people will do the right thing to make money and it ended up not being reasonable to assume people will do the thing that will make them money.

I remember making a great return from SBDO last year for example and then it crashed hard, I got out in time with zero loss, but I remember it clearly that it was a very difficult thing to do, because when it was crashing, they tried their best but the bonds weren't getting sold and now they are screwed. If you can't make people do what you want them to do, then what stops it from going down?

In the longer term, algorithmic stablecoins appear to be a safer bet with less risk. Typically, higher interest rates are accompanied by higher risk and higher volatility of the underlying asset. If you are looking to diversify your portfolio, the ones you mentioned above may be interesting but if you want to use staking stablecoins as an additional source of income, then Algorithmic stablecoins are better suited for this purpose.

Today's problems with UST clearly show that there is no guarantee that you will get a profit, stablecoin staking. And trying to get an increased percentage for staking, which exceeds the bank several times, you can lose your deposit. And as we can see, the UST dump case is not an isolated one, we recently observed something similar with another algorithmic Neutrino USD (USD) stablecoin.

Seeing stable coins with high interest rates is certain risk and their bankruptcy is also very fast. The high interest rates forced the project to look for quick backups, but if they still do backups on cryptocurrency I'm not even sure they can last up to a year. Didn't we see how UST and LUNA are today? they used to be great for staking, one mistake they made completely ruined their project.

To be fair, the NEAR stablecoin is fractionally reserved, and not fully algorithmic like the others. This means that it is safer and most of the staking rewards don't come from NEAR, but from partner trading and lending platforms. We'll see if fractional stablecoins can work well long term but consider this... The USD is only going to lose value. Is that the boat you want to ride on or do you want something that is going to change your life in a few years. If that's the case, then I suggest investing in NEAR directly or a competitor even, like Fantom or ICP. ICP for example has a hackathon going on RN, which will bring DeFi usecases to the chain. There's never been a better time to ride that to the top.

if you think the economic model isn’t really sustaining in the long run, I do have the same thinking as yours.
for safety purpose i’d definitely invest in a more traditional stablecoins like USDT despite offering rather low APY it’s more or less significantly safer than these algorithmic stablecoins that you mentioned.
right now we have massive value plummeting of all these algorithmic stablecoins and it seems as if algorithmic stablecoins has finally come to an end with its ineffective economic model, the slight bearish market already puts them into doomsday.

the plunge in price is really a warning signal for other users to consider getting into this algo-based stablecoin. though every project has their own ups and downs, but much better if you will go to a much solid project if you want to stake your funds.
UST may recover their price very soon, but what is the chance that it will happen again?

I guess what recently happened to  UST and USDD should more than enough proof to confirm that algorithmic stablecoin staking is highly risk and not worth it. USN could probably follow the same path soon.

I wouldn't risk staking even for a 30% per annum. It's a trap.

Is sad that it had gone this way but that is how it looks in the bear that prevent many from investing early until the bull market is ripe because of the fear. Take your loss irrespective and hold, the market might have a small bounce soon but thats how we get the lower high until we get to the dip of the bear. Another way is to never sell and hold into the next bull but it might take a longer time than you envisaged.

This post aged ... poorly. LOL. Over the course of two weeks.

Algorithmic stablecoins backed by cryptocurrency are all done now.

At first, I am really happy about the APY especially on Anchor staking UST stable coin from Terra Luna. But look what happened now, already lost 15%. I thought during a bear market, it is safe to be in stablecoin but looks what happened on UST right now, it's still below on peg price which is really frustrating. I am still positive it will become stable soon, I am considering the recent dumps as the reason why we experiencing this.

This is exactly the weakness of these algorithmic stablecoins. They are very dependent on their native coins. The more complex all these collateral schemes are, the more fragile the stablecoin becomes. As soon as native blockchain tokens start to lose a lot of value, the stablecoin's link to the dollar disappears and it is no longer a stablecoin, but a rapidly declining altcoin, which can sometimes lose 20-30% of its value.

It looks attractive in the bear market for anyone planning a long time hold in stable but I dont know if the 30% reward for staking will be after a year or gradually with every passing month. For such asset that the coin is attached to this present market, what is the guarantee that they can bring profit in the bear.

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After the pump of Waves to over 50$ a few weeks ago i sold my waves (i did only have a few sadly) and now i have some USDN sitting in my waves wallet that are doing nothing. My first plan was to trade those USDN into USDC or USDT and then put those into the algorithmic trading pools of the waves wallet, but i could not do that because Waves was crashing very hard after that pump and even took USDN with it to a price of around 0,70 USD which was pretty crazy as USDN should be a stable coin after all. This pretty much has made me lose some trust into the whole waves platform and i am not so sure anymore if i should really invest my stablecoins there.

The fears are confirmed. Algorithmic stablecoins look too fragile and can lose their link to the dollar very quickly. Anchor lowered the percentage on staking, instead of 20% it is already less than 18%.

Looking at the charts at https://terra.smartstake.io/anc, you can see that a lot of USTs are being withdrawn from the protocol now, more than 2 billion tokens have been withdrawn in the last few days, and this has led to a short-term detachment from the dollar. What happens when withdrawals exceed 5 or 10 billion? Staking rates will continue to decline massively.

That's what I was afraid of in staking these algorithmic stabelcoins, and that's the reduction of the interest rate. The initial 20% offered by Anchor was too tempting, but alas, it did not last long. Today the interest rate is lower, 18%, by the end of the month their interest will be even lower, around 15-16%. I assume it won't stop there and the rate will continue to drop to ~10%.



It has become clear that to maintain such a high rate for a long time will not work, as it is already becoming similar to a HYIP. As soon as there is less money and there is an outflow of funds, it is primarily reflected in the staking. It is common for all pools offering initially high interest rates.

Most likely, the same will apply to stablecoin USN and USDD staking.

But stablecoin staking has a bad side as well. It's certainly a good thing that they're not subject to volatility. But on the other hand, if you have invested in staking, and you earn new coins that you plan to sell in the long run (because such coins can, in addition to profits from staking, also bring more profit from holding), then even a much lower annual return, compared to stabelcoins, can be a much more profitable investment. But for risk diversification, staking stablecoins is also justified.

Not gonna stay long.

Most of the interest will go down in around 1-5%, Is already a base interest for any stable-coin from my perspective. Higher interest from my perspective only because the pair staking just open and still nobody use it or stunt program.

Some, project want to add more interest to attract more people.

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Good question, I don't think that they can sustain that huge returns per annum. It was obvious that they got that numbers to attract investors. So they have to somewhat bring it down to a minimum and not exaggerate otherwise if might affect the market negatively as you have said. Maybe the high payout will not bring any good and on the contrary they could have been running on reserves already.

If there's the sign that there's no money flowing in anymore for these stable coins, I think the first thing that we'll see is the decrease of the rate that they're giving.
Honestly, if I've got a lot of money and I want to stake, I'll simply put it into stable coins and stake it. I'd like it much than the other staking coins because it gives stable amount for its percentage and the coins itself.

Thirty percent returns per annual is not bad at all, I prefer staking stable coins because there is no need to be worried about volatility, either bull or bear market it's not of your business, I have only staked USDT before on the Binance exchange but the return isn't up to 30%, projects that offers this range of rewards for staking annually are safe, there is nothing to worry about here.

Stablecoins like UST, USN, USDD have a very tricky link to the dollar and the collateral pool, in the form of a native token of a particular blockchain, be it LUNA, NEAR, TRON, etc. Such projects offer or are about to offer 20-30% per annum in staking these stablecoins. Not a bad interest rate, is it? But will these projects be able to provide such a high interest rate all the time, and won't that provoke a cascading collapse of both the stablecoins, with the loss of the peg and a cascading collapse of the native tokens that act as reserve collateral?

After all, such high payouts to stakers must be accompanied by constant replenishment of these projects reserve funds. But what will happen if the money stops flowing in the right amount?