The cake wallet added decentralized Stablecoin Deuro to its offerings on Tuesday, expanding its stable digital assets denominated for users.
Decentralized Stablecoin is that -Overcollateralized by other digital assets, including Bitcoin (Btc), Ether (Eth) and Monero (Xmr), means to mint the Deuro Stablecoin, users must first deposit other cryptocurrencies as collateral.
Overcollateralizing, or depositing cryptocurrency worth more than the amount of owned borrowed, acts as a shield against De-Pegging eventsThe Deuro team told cointelegraph. Deuro also offers automatic avoidance, which occurs when the ratios of the nap-value decrease under a specific threshold.
The cake wallet said users can earn 10% yield from Crypto holders supporting Stablecoin, without providing their funds. The yield is formed from stability fees paid by depositors who have stablecoin and deposited in an equity reserve pool, a Deuro spokesman told cointelegraph.
This will help maintain stablecoin stability and increase liquidity in user crypto handling, allowing them to produce a token pegged that do not sell their crypto, the spokesman said.
Decentralized and Algorithmic stablecoins promises the use of cases corresponding to the early cypherpunk ethos of the crypto community. However, algorithm critics and decentralized stable tokens Argue That these properties are taking great danger, pointing to a history of de-pegging events and token collapse.
The algorithm and decentralized stablecoins have a habit of de-pegging
Perhaps the most highly profile algorithmic token collapse is the implosion of the terra-luna ecosystem and the De-Pegging of USTThe stablecoin of the ecosystem, in May 2022.
The Stablecoin algorithmic relies on a mint-and-burn mechanism, where users will burn approximately $ 1 in Luna’s tokens to mint nearly $ 1 at UST.
This method has encouraged arbitragers to take advantage of the differences -prices between Luna and UST, which should keep the price of the token that is located in the US dollar.
https://www.youtube.com/watch?v=IBVP78QDo3s
Despite the theoretical protection provided by arbitrageurs entering and correcting the differences of UST prices, a significant part of Demand for UST comes from the lending platform anchor protocol, which offers users 20% harvest in UST deposits.
Removal of mass from the anchor has triggered a cascade of events caused UST dropped to $ 0.67 In May 2022, before collapse at just $ 0.01.
UST does not feature any collateral backbone, unlike other decentralized successors such as DAI (Dai) and Deuro, who require users to deposit excess collateral against their loans.
However, algorithm backing and decentralized stablecoins with excess reserves have not proven to be a panacea for de-pegging events.
Moreover, collateral backbone is not enough to completely protect traditional Fiat Stablecoins, supported by US debt instruments and bank deposits, from losing their money pegs.
Dai, Sky’s decentralized stablecoin, former Makerdao, De-pegged in March 2023 After the USD coin of the Circle (USDC), used as Collateral -backing for DaiIts dollar-peg has been short.
