Algorithmic stablecoins like terraUSD, which collapsed and sent the crypto market through the mayhem, have low chances of survival, the co-founder of digital currency tether told CNBC.
Stablecoins are a type of cryptos that are pegged to a real-world asset. TerraUSD or UST, is an algorithmic stablecoin which was supposed to be pegged to the U.S. dollar.
Meanwhile, stablecoins like tether and USD Coin are backed by real-world assets such as fiat currencies and government bonds in order to maintain their dollar peg, UST was governed by an algorithm.
UST lost its dollar peg and that also led to a sell-off for its sister token luna, which crashed to $0.
“It’s unfortunate that the money … was lost, however, it’s not a surprise. It’s an algorithmic-backed, stablecoin. So it’s just a bunch of smart people trying to figure out how to peg something to the dollar,” Reeve Collins, the co-founder of digital token company BLOCKv, told CNBC at the World Economic Forum in Davos, Switzerland, last week.
