Update on Algorithmic Stablecoins

The last Monthly Monitor talked about how USD-pegged Empty Set Dollar (ESD) briefly held the #6 position in the stablecoin league table. The ESD launched in September 2020 and was one of the first algorithmic stablecoins to come to market. (An algorithmic stablecoin adjusts its supply to maintain its peg.) However, ESD broke its peg massively in January 2021, and is now trading down around $0.13 resulting in a drop down to #14.

However, there’s another very viable-looking USD-pegged stablecoin, TerraUSD which sits at #7 ($590 million market capitalization). The peg isn’t absolutely perfect, as it has occasionally spiked down to nearly $0.96 and up to $1.04, but since it has launched in October 2019 it has spent most of its time within a $0.98 – $1.02 band, which is better than any other algorithmic USD-pegged stablecoin I’ve seen. TerraUSD is also part of the Terra family of products that seem to be seeing real use cases (see below). 

Terra is a delegated proof of stake system that uses the LUNA token as collateral for the stablecoins it issues, and it has several active use cases underway:

  • The South Korean CHAI decentralized app-based mobile payments system runs on Terra’s payment rail. The rail is built on two the native stablecoin of Terra for funds across the networks and the Luna token for small transaction fees for miners. CHAI has partnered with 15+ major local banks to facilitate convenient fiat on/off ramps, recently crossed 2 million monthly active users. Terra’s network also integrates with MemePay, a Mongolian e-wallet utilized by 1.5% of the online population. 
  • Terra’s Mirror synthetic assets protocol tracks the price of U.S. stocks, futures, exchange-traded funds, and other traditional assets. The Mirror Wallet kicked off with 12 of the top American technology stocks. The target market is users outside of the United States who seek 24/7 exposure to and fractional ownership of synthetic assets. 

FYI besides TerraUSD there are eleven other Terra-based stablecoins (AUD, CAD, CHF, CNY, EUR, GBP, INR, JPY, HKD, KRW, and SGD).

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