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Beware Of Stablecoins - Stability Does Not Exist

By Cryptofab | Cointune | 4 Jan 2023

Stablecoins look like a safer option than other cryptos. However, the real stability does not exist, as shown by TerraUSD (UST), which is now USD 0.02...

Apart from TerraUSD, there have been a number of stablecoins that have failed or have otherwise not been successful. Here are a few examples:

  • Basis: Basis Cash was a stablecoin (of which Do Kwon, creator of TerraUSD, was also a co-founder...) which attempted to maintain its peg to the US dollar using a complex system of smart contracts. However, the project was unable to maintain the peg and eventually shut down.

  • e-gold: e-gold was a digital currency that was backed by physical gold. The project was launched in 1996 (12 years before Bitcoin!) and gained significant popularity, but it eventually shut down in 2009 due to legal and regulatory issues.

  • DigiCash: DigiCash was a digital currency that was developed in the 1990s. The company behind DigiCash filed for bankruptcy in 1998 and the project was eventually shut down.

  • Ternio: Ternio was a stablecoin that was issued on the Stellar blockchain. The project was unable to gain significant adoption and eventually shut down.

These are just a few examples of stablecoins that have failed. It is worth noting that some of the existing stablecoins have already shown vulnerabilities:

  • Neutrino USD (USDN): this stablecoin, which is based on Waves blockchain, has significantly depegged since its price is currently around USD 0.5. 
  • Tron USD (USDD): this stablecoin, created by Justin Sun, has already depegged twice down to USD 0.97 and is currently ranging around USD 0.98.
  • HUSD, also called "The Safe and Secure Stablecoin", which was said to have been created by Huobi Exchange as an ERC-20 and TRC-20 token, totally collapsed, to reach a price around USD 0.14 currently, when Huobi finally declared that they were not the creators of this stablecoin... According to their website, HUSD is still supposed to be a safe and secure stablecoin - see below


Although it looks like a joke now that the HUSD price is only USD 0.14, it is worth noting that some other stablecoins which also look safe and secure could also depeg, collapse or fail for various reasons. As mentioned above, e-gold, which was created in 1996, only shut down 13 years later in 2009 due to legal and regulatory issues. As major stablecoins like USDT, USDC or BUSD were created only a few years ago, in 2015, 2018 and 2019 respectively, they have not yet lived long enough to provide the same guarantees as regulated fiats like USD. We can also wonder if it makes sense to buy stablecoins. Bitcoin (BTC) was initially created as an alternative to fiats, as well as most of the other coins which followed, like Litecoin (LTC) or Bitcoin Cash (BCH). Therefore, the excessive use of stablecoins in the crypo world looks like a step back in time, as if many crypto holders did not really believe crypto...

Disclaimer: this article does not contain any financial advice. The information is provided for general informational and educational purposes only.

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