Vitalik Buterin Shares His Take on Algorithmic Stablecoins and Their Future

Ethereum founder and crypto enthusiast Vitalik Buterin recently shared his two cents on algorithmic stablecoins and their future adding that they should be scrutinised on the basis of how they fare under extreme market conditions, and whether they can safely wind down when hype falls away. Despite the recent collapse of UST and LUNA, which knocked UST from its $1 (roughly Rs. 77) peg and wiped billions from the market, Buterin argued in an essay that automated stablecoins can make sense while criticising exorbitant returns offered by those “doomed to collapse eventually.”

Buterin points out in his thought piece that although the UST debacle over the past month has led traders to form an opinion that algorithmic stablecoins are fundamentally flawed, some algorithmic stablecoin models are feasible and sets out his thinking as to why.

Citing an example, Buterin pointed to MakerDAO’s stable token DAI and Reflexer’s RAI, both of which have survived extreme market conditions as successful automated stablecoins.

Algorithmic stablecoins are inherently supported by another crypto and use baked-in formulas to regulate the price. This is different from, for example, USDC, which is a fiat-backed stablecoin supported by real dollars in the bank. The big challenge for all dollar-pegged stablecoins is finding ways to maintain their peg.

As per Buterin’s blog post, the first question for investors to ask about a stablecoin is “can the stablecoin safely wind down to zero users?” For Buterin, the event of market activity for a stablecoin dropping to zero should not be a fatal blow for investors. Instead, users should be able to get a fair value for their assets.

Buterin notes that this was not the case with Terra as the network relies on LUNA, which he calls a “volcoin” or volume coin to maintain the asset’s peg. Buterin painted Terra’s tragedy as caused by hyperinflation from printing lots of volcoins.

“First, the volcoin price drops,” writes Buterin. “Then, the stablecoin starts to shake. The system attempts to shore up stablecoin demand by issuing more volcoins. With confidence in the system low, there are a few buyers, so the volcoin price rapidly falls. Finally, once the volcoin price is near-zero, the stablecoin to collapses.”

Another issue highlighted by Buterin was that Terra’s Anchor protocol promised a 20 percent annual percentage yield (APY) on UST. Some investors converted their savings into UST to earn the high APY without fully understanding the risks involved. This is one reason Buterin welcomes the greater level of scrutiny on decentralised finance (DeFi).

The well-known developer says when stablecoins attempt to generate these types of returns, they can instead turn into ponzi schemes. “Obviously, there is no genuine investment that can get anywhere close to 20 percent returns per year,” he says. “In general, the crypto space needs to move away from the attitude that it’s okay to achieve safety by relying on endless growth.”

Buterin concludes the essay by stating that even if a stablecoin passes the said parameters test, there might still be underlying issues like bugs, and governance issues that threaten the survival of the project. However, “steady-state and extreme-case soundness should always be one of the things that we check for,” he concludes.


India Finalising Consultation Paper on Cryptocurrencies, Says DEA Secretary Ajay Seth

The government will soon finalise a consultation paper on cryptocurrencies with inputs from various stakeholders and institutions, including the World Bank and the IMF, Economic Affairs Secretary Ajay Seth said on Monday. He also underlined the need for a global response to deal with issues concerning cryptocurrencies as these operate in the virtual world. The Reserve Bank of India (RBI) on many occasions has expressed its reservation about such virtual currencies citing a threat to macroeconomic stability.

Speaking on the sidelines of the curtain raiser event of ‘Iconic Week’ as part of Azadi Ka Amrit Mahotsav to be celebrated by the Finance Ministry, Seth said the consultation paper is fairly ready.

“We have consulted not just the domestic institutional stakeholders but also organisations like the World Bank and the IMF. So, we hope that we will soon be in a position to finalise our consultation paper,” he said.

Simultaneously, he said, India has also started work on some sort of global regulations.

“Countries which have prohibited, they can’t success unless there is a global consensus around that. There has to be a broad framework of participation. Digital assets, whatever way we want to deal with those assets, there has to be a broad framework on which all economies have to be together. No country can choose to either of the position. We need a global consensus on crypto regulation,” he said.

If you recall, Seth said, the Prime Minister has made this observation time and again.

Expressing hope, he said, India is poised to become the fastest growing among large economies in the world despite global challenges.

“We can overcome the current challenges as well as the challenges that will come to us in the coming years in the Amrit Kal. There are strong global headwinds which have impacted the global economy, … Even despite all those, India is poised to grow the fastest among all large countries in the world. That was the position six months back and that will be our assessment even today,” he said.

Seth also assured that inflation should be moderating with the help of both and fiscal and monetary measures.

When asked what more measures are being envisaged to cool down prices, he said, it is evolving situation and difficult to say what future steps are likely.

Whatever the current challenges are they are being responded to in a timely manner, he added.

Earlier this month, the government had announced several measures, including a cut in excise duty on petrol and diesel prices by Rs. 8 per litre and Rs. 6 per litre, respectively.

With moderation in commodity prices, he said, “We do expect in the coming months the inflation should be moderating, and for that whatever steps that were needed from the fiscal side have been taken, and the RBI is also taking those measures.” When asked if the geopolitical tension can impact growth, he said, “when headwinds are there obviously things slow down.” At the time of the budget, he said, “one estimate was Indian economy will grow at 8-8.5 percent, the budget assumed 7.5 percent, at that point in time…I have not seen any rating agency talking about a number lower than this. This is a dynamic situation…please understand we are fairly integrated with the global economy.” As per the Economic Survey, India’s economy is expected to grow by 8-8.5 percent in the fiscal beginning April 1.

The International Monetary Fund recently lowered its growth forecast to 8.2 percent which is higher than 7.2 percent by the Reserve Bank of India.


Nike’s Web3 Arm ‘RTFKT’ Adds Tenth Ethereum Name Service Domain in Its Kitty

The Web3 arm of Nike, named ‘RTFKT’, has purchased a new Ethereum Name Service (ENS) domain for ETH 19.72 (roughly Rs. 29 lakh). This brings the total tally of RTFKT’s ENS holdings has risen to ten. The ENS is a distributed, open, and extensible naming system based on the Ethereum blockchain. It is capable of mapping human-readable names like ‘xyz.eth’ to machine-readable identifiers. For its fresh purchase, Nike has chosen a dotswoosh.eth domain.

In addition to dotswoosh.eth, RTFKT also has possession of artifacts.eth, rtfkt.eth, skinvial.eth, drmos.eth, mintvial.eth, dreamos.eth, spacedrip.eth, dripcoin.eth, and m2tekno.eth as ENS domains, said a report by Decrypt.

While Nike has not given a reason to its new ENS addition, speculations are reportedly pointing towards a possibility for the footwear giant to use it for issuing ENS subdomains, that are monitored and controlled by the holder of the main domain.

With Nike getting active in the NFT space, it could be planning to allow its NFT holders to register for ENS subdomains under the dotswoosh.eth main domain.

Any individual or company that owns an ENS becomes able to receive cryptocurrency, token, and blockchain-based assets. Nike’s ENS domain purchases could also be hinting at a potential plan to enable crypto payments for its high-end sports shoes.

“Our findings suggest that ENS is showing gradually popularity during its four years’ evolution, mainly due to its distributed and open nature that ENS domain names can be set to any kinds of records, even censored and malicious contents. We have identified several security issues and misbehaviors including traditional DNS security issues and new issues introduced by ENS smart contracts,” a report by Cornell University claims.

Well, for now it’s only a matter of time before Nike finally gives a clarification on its ENS purchases with future announcements.

Meanwhile, Nike is not the only footwear mammoth that is exploring the ENS sector.

Back in February, Puma had purchased a decentralised domain and changed its name to ‘Puma.eth’ on Twitter.


Terra 2.0 Launches as Planned by Do Kwon but Its Value Has Already Begun Tanking Heavily

The recovery plan following the collapse of Terraform Labs’ stablecoin TerraUSD (UST) and its native token Terra (LUNA) began on a rocky path after the LUNA 2.0 cryptocurrency suffered a significant price correction hours after its launch on May 28. Rumored to be value around $30-50 (roughly Rs. 2,325- 3,875) by members of the Terra community prior to launch, the new governance token quickly shot up to an all-time-high of $18.87 (roughly Rs. 1,462) shortly after launch, only to crash to a low of $4.08 (roughly Rs. 316) by early Sunday.

The drop came shortly after Terraform Labs successfully distributed the LUNA 2.0 tokens to investors who held LUNA Classic (LUNC) and TerraUSD (UST).

What is Terra 2.0?

Terraform Labs, the core development firm behind Terra, had proposed a new blockchain. It took only a few days after that proposal was approved for Kwon to deploy another chain, the one that’s open for use today. Several applications have now migrated to the new chain, including Astroport, Prism, RandomEarth, Spectrum, Nebula, Terraswap, Edge Protocol, and others.

Before today’s launch, the governance voted to change the name of the original network to “Terra Classic,” whose tokens are now called LUNA Classic (LUNC), in order to position the newly launched Terra 2.0 as the main network. Unlike its predecessor, the new Terra chain exists without an algorithmic stablecoin and comes only with LUNA that has a fixed total supply of 1 billion tokens.

These LUNA 2.0 tokens will trade separately from the original LUNA Classic tokens, whose supply amounts to more than 6.5 trillion.

The main reason behind the airdrop of new LUNA coins on May 28, was to compensate Terra stakeholders on the Classic chain. They have been earmarked to receive 70 percent or (700 million) of the total LUNA 2.0 token supply. The amount of LUNA 2.0 airdrop each person gets varies depending on whether those tokens were held before or after UST’s depeg, according to an official announcement.

The airdrop is expected to be claimed shortly after launch, either through centralised exchanges or Terra’s own website. Several central crypto exchanges including Binance, Huobi, Kraken, Bitfinex, Bitrue, Kucoin, and Bybit said they are letting Terra supporters receive their allotted tokens from within their platforms.

Still, not all of the airdropped tokens are claimable at launch; only 30 percent of the initial supply can be immediately claimed. The remaining 70 percent of the airdrop amount has been staked directly with validators to ensure network security and those will vest in as long as two years.

Besides 700 million LUNA tokens divided among the two above investor categories, Terra’s community pool, an on-chain treasury fund, is set to receive 30 percent (300 million) of LUNA on the Terra 2.0 chain. The community pool is controlled by Terra governance to fund development activities. Of the total pool amount, 30 million are assigned for developers who have decided to remain and rebuild on the new Terra chain, according to an earlier announcement.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.


Elon Musk to ‘Soon’ Open DOGE Payment Option for SpaceX Merchandise

Elon Musk, the CEO of Tesla and SpaceX has set a new benchmark backing his support for meme-based Dogecoin. Musk has said SpaceX would soon start accepting DOGE payments for the sale of its merchandise. The development comes just four months after Musk’s electric vehicle (EV)-company, Tesla, also began accepting payments in the meme cryptocurrency last December. The tech mogul has been an avid supporter of Dogecoin, and has often said that DOGE would make for a better daily-payment alternative as opposed to other altcoins such as BTC or ETH.

Musk, 50, posted a tweet for his 95.7 million followers announcing SpaceX’s plans of selling merch from his space exploration company, in exchange for Dogecoins.

Despite Musk’s constant support, DOGE lost over 55 percent in value between May 8 and May 13, data from TradingView shows.

Back in December, when Musk had revealed that select Tesla merch were available for sale in DOGE, the memecoin had rose in value by 25 percent.

This time however, Musk’s fresh announcement failed to add value to Dogecoin prices.

At the time of writing, Dogecoin was trading at $0.000012 (roughly Rs. 0.000950) after opening with minor gains of around three percent on Monday, May 30.

Replying to a comment on his tweet, Musk also hinted that DOGE payments could become a payment alternative for the subscription of Starlink, which claims to provide “high-speed broadband internet to locations where access has been unreliable or completely unavailable”.

After acquiring a 9.2 percent stake in Twitter this April, the multi-billionaire had revealed his plans of allowing DOGE to become a payment option for Twitter Blue services in the times to come.

Musk touted Dogecoin as “the people’s crypto” in the past, citing a survey that claimed nearly 33 percent of cryptocurrency owners in the US own DOGE assets.

“Even though it was created as a silly joke, Dogecoin is better suited for transactions. The total transaction flow that you do with Dogecoin, like transactions per day, has much higher potential than Bitcoin,” Musk had said in December 2021.


BTC, ETH See Gains as Majority Cryptocurrencies Set to Bid Profit-Laden Adieu to May 2022

Crypto investors may heave a sigh of relief, as majority cryptocurrencies have begun seeing more gains than losses again, as May draws closer to its end. Bitcoin saw a growth of 3.56 percent to reach a price of $31, 727 (roughly Rs. 24.5 lakh) on Monday, May 30, as per Indian exchange CoinSwitch Kuber. In a rather unconventional behaviour, Bitcoin roped-in even bigger gains on international exchanges. Binance and Coinbase recorded BTC growth of up to 4.70 percent. The oldest cryptocurrency is currently trading at around $30,337 (roughly Rs. 23.5 lakh) on a global level.

Ethereum recorded a similar upward movement towards profit on crypto charts. With a gain of 4.33 percent, ETH value hovered around a relatively low point of $1,962 (roughly Rs. 1.50 lakh), showed the crypto price tracker of Gadgets 360.

Binance Coin, Cardano, Solana, Polkadot, and Avalanche joined BTC and ETH on the gain-trail.

Shiba Inu and Dogecoin rose in value by 8.58 percent and 2.77 percent respectively. While each DOGE is priced $0.088 (roughly Rs. 6.85), each SHIB token is trading at $0.000012 (roughly Rs. 0.000950).

Despite the significant profits that majority cryptocurrencies opened trading with today, several of them are not soaring as high as they have in the past in the market.

“Global growth concerns spurred by rising interest rates and supply chain disruptions were the dominant themes within investor narratives, with many leaning towards capital preservation during these volatile times. Appetite for risk assets continued to fall with Asia-based tech stocks seeing a capital flight of $63 billion (roughly Rs. 4,88,404 crore) this year. Crypto assets which typically have a high correlation with tech stocks also plummeted,” the research team at CoinDCX crypto exchange told Gadgets 360.

At the time of writing, stablecoins pegged to the US dollar such as Tether, USD Coin, and Binance USD were trading in losses.

The total market cap of the crypto sector currently stands at $1.25 trillion (roughly Rs. 97,50,067 crore), as per CoinMarketCap.

“We remain optimistic on crypto’s longer term growth trajectory, and the immense potential it has to revolutionise the way we live, work, and play,” the CoinDCX team added.

Meanwhile, the Terraform Labs launched its new blockchain over the weekend called Terra Classic. Due to the de-pegging of the former Terra blockchain, LUNA, its native token, is currently witnessing extreme fluctuations.

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Tether Expands Into Latin America With Peso-Pegged Stablecoin Launch

Tether, the firm behind the most popular stablecoin linked to the US dollar, USDT, has debuted a new stablecoin pegged to the Mexican peso marking the company’s entrance into the Latin American crypto market. The company operating the blockchain-enabled platform announced that the new stablecoin would get added to Tether’s expanding product range, which now includes four fiat currency-backed assets. The new token will trade under the ticker MXNT with initial support including Ethereum, Tron, and Polygon with support for additional networks expected to be launched at a future date.

The announcement follows on from the firm’s previous stablecoins USDT, EURT, and CNHT, which got pegged to the US dollar, Euro, and Chinese Yuan, respectively. MXNT was built by the same team of developers who created Tether USDT and is backed by the

Tether has both Euro and Yuan-pegged stablecoins, but its USD-pegged stablecoin, USDT, is more popular. The present total quantity of USDT is greater than $77 billion (roughly Rs. 5,97,370 crore). However, Tether’s supply has decreased by over 15 billion during the LUNA crash over the last month.

“We have seen a rise in cryptocurrency usage in Latin America over the last year that has made it apparent that we need to expand our offerings,” said Paolo Ardoino, CTO of Tether.

“Introducing a Peso-pegged stablecoin will provide a store of value for those in the emerging markets and in particular Mexico. MXNT can minimize volatility for those looking to convert their assets and investments from fiat to digital currencies. Tether customers in this entirely new market will be able to benefit from the same transparent customer experience.”

The entrance into Mexico has been met with enthusiasm and support from cryptocurrency investors. The news provides some comfort in a market that currently holds a negative view of stablecoins. When the crypto market panicked over LUNA and UST, Tether broke below its $1 (roughly Rs. 77.5) peg.


Binance Says It Has Registered With Italy Regulator, Seeks to Gain Traction in Europe

Binance said on Friday its legal entity in Italy had registered with the regulator in the country, as the major cryptocurrency exchange seeks to gain traction in Europe.

The registration of Binance Italy, which was established in recent months, could potentially make the company more accountable and reduce the prospects for money laundering.

Binance said it could now open offices in Italy and expand the local team. The company is one of the 14 virtual asset operators to be registered with the Organismo degli Agenti e dei Mediatori (OAM), which regulates the crypto industry in Italy.

The move comes almost a year after Binance was forced to dial back on its product offerings across Europe after coming under scrutiny from regulators. In Italy, the company had to wind down its futures and derivatives business.

Earlier this month, Binance’s Chief Executive Officer Changpeng Zhao said the company had also registered with France’s market regulator. Binance is also seeking registration in Switzerland, Sweden, Spain, Netherlands, Portugal and Austria.

© Thomson Reuters 2022

Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.


Bitcoin Drops to $29,000 Territory Even Though Stock Markets See Signs of Minor Recovery

Losses for the global crypto market have compounded as investors continue to move away from assets considered riskier options. The losses for the market have affected the performance of the majority of the coins and Bitcoin is no exception. The price of the largest cryptocurrency by market capitalisation saw yet another dip on Thursday and is on course to lose ground for eight consecutive weeks for the first time in history. In terms of numbers, BTC continues to hover around the $29,000 (roughly Rs. 22.5 lakh) mark across global exchanges while Indian exchange CoinSwitch Kuber values BTC at $30,736 (roughly Rs. 24 lakh), down by 1.82 percent in the past 24 hours.

On global exchanges like CoinMarketCap, Coinbase, and Binance the price of Bitcoin stands at $28,918 (roughly Rs. 22.5 lakh) slipping by 2.78 percent in value over the past 24 hours. As per CoinGecko data, BTC’s value has fallen well below the point where it stood last week, down by 5.1 percent week-to-day.

While Bitcoin continues to consolidate, Ether has fared far worse this week. At the time of publishing, Ether is valued at $1,855 (roughly Rs. 1.4 lakh) on CoinSwitch Kuber while values on global exchanges see the crypto’s value at $1,748 (roughly Rs. 1.35 lakh), where the cryptocurrency has dropped by an eye-watering 9.01 percent over the past 24 hours.

Ether’s drop in value over the past 24 hours means that the cryptocurrency’s value has now fallen 14.3 percent over the week, as per CoinGecko data.

Gadgets 360’s cryptocurrency price tracker reveals that the bearish wind has had quite an impact on the price altcoins as the global crypto market cap dropped by 5.55 percent over the last day. BNB, Polkadot, TRON, Polygon, and Chainlink all suffered dips, while Solana, Cardano, and Avalanche dropped the most.

Memecoins Shiba Inu and Dogecoin joined the majority, suffering considerable dips in value. Dogecoin is currently valued at $0.08 (roughly Rs. 6.5) after losing 4.02 percent in value over the last 24 hours, while, Shiba Inu is valued at $0.000011 (roughly Rs. 0.000851), down by 9.28 percent over the past day.

“Amidst market uncertainties, the US Federal Reserve’s Vice Chair, Lael Brainard has reinvigorated confidence in crypto, seeing the necessity of a central bank digital currency of the US dollar and its position to coexist with stablecoins. Even going so far as to put a 5-year timeframe to the digital dollar’s launch, Brainard expounds on the criticality of embracing digital currency and the risks of not engaging with the future digital financial system. Despite the bearish crypto market, the backing and belief in the value and importance of digital assets from the world’s largest economy attest to the central role that crypto will continue to play in the future of finance,” the research team at CoinDCX tells Gadgets 360.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.


China’s Huobi Acquires Latin American Exchange Bitex to Expand Footprint

Chinese crypto exchange Huobi has acquired Latin American crypto exchange Bitex to expand its presence in the region. Though terms of the deal have not been disclosed, Huobi said it plans to integrate Bitex’s operations with its platform even as the Latin American crypto exchange will retain its branding and continue to be run independently. Bitex operates in a host of South American nations like Argentina, Chile, Paraguay and Uruguay and the integration with Huobi will enable Latin Americans to access a widee range of digital assets going forward.

Founded in 2014, Bitex’ exchange supports at least 15 cryptocurrencies, including stablecoins Tether (USDT), DAI, and USD Coin (USDC). It supports on-ramps from several fiat currencies, including US dollars; Argentine, Chilean and Uruguayan pesos; the Paraguayan guaraní, and Peruvian sol.

“Bitex was founded to protect the value of our users’ money, in the wake of major financial crises in Latin America,” Bitex CEO Francisco Buero said in a press release. “Having grown rapidly after eight years of successful operations, we believe our partnership with Huobi Global will not only support our expansion but also help us better serve our customers, enabling them to access a broader range of digital assets on Huobi Global’s platform. Additionally, Huobi Global’s strong track record in security will help safeguard our important mission as we continue to operate as a borderless exchange.”

Huobi has been interested in stepping up its Latin American presence since 2019 when it launched Huobi Argentina. The company notes that from 2019 to 2021, Latin America saw crypto usage rise by 1,370 percent, with Venezuela and Argentina ranking seventh and tenth, respectively, in the 2021 Global Crypto Adoption Index published by Chainalysis.

As of now, Huobi Global is the fourth largest exchange by crypto trade volume, and in terms of crypto reserves, Huobi is the third largest with $11.7 billion (roughly Rs. 90,845 crore) in assets under management (AUM).

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.