A proposal for Polkadot to create its own native stablecoin algorithmic, exclusively -to -token -back, is gaining strong support early.
Co-Founder and Chief Technology Officer of Polkadot chainAcala, Bryan Chen, introduced A Sunday proposal to produce a native Stablecoin For the Polkadot network. Stablecoin will be algorithm, Polkadot’s exclusive -back (Dot) Tokens, and Pusd Ticker will be used.
The suggested Stablecoin will get the decentralized stablecoin and collateralized position of the protocol loan Honzon on the Acala Network. The system is meant to reduce or replace the USDT relying on Tether (USDT) and USDC of the Circle (USDC) Stablecoins.
At the time of writing, more than three-quarters of the votes were cast in favor of the proposal. However, there were more than 24 days to go before the ballot closed, and to this day more than $ 5.6 million worth of DOT has been used to cast votes – more than 1.4 million dots at a price of nearly $ 3.90.
Related: Stablecoins: deegging, fraud and decentralization
The design of stablecoin
The suggested pusd algorithmic stablecoin will be an overcollateralized debt token supported by Dot. It also includes an optional saving module, which allows holders to lock their stablecoins and earn interest from stability fees.
The motivation behind the plan, according to Chen, is to strengthen the Polkadot ecosystem with the native Stablecoin. “The Polkadot Hub should have a dots -supported dot because people need it and otherwise haemorrhage benefits, liquidity and/or security,” the proposal reads.
A decentralized algorithmic stablecoin is designed to monitor the price of a fiat currency without the seizure of centralized collateral held by third parties. Instead, the collateral is made up of digital assets held in the onchain and managed by smart contracts, while the peg is maintained by economic incentives that are programmed into contracts.
Related: Sonic Labs Ditch Algorithmic USD Stablecoin for UAE Dirham Alternative
Algorithmic Stablecoins remains controversial
Algorithmic Stablecoins saw their denial of popularity following the fall of Terra’s high-profile Native Stablecoin, Terrausd (UST)That brought the whole ecosystem with it. However, this category of possessions continues to attract great attention, partly due to their excellent decentralization.
Such decentralization suggests that this method provides for a less consent (less controlled) design. Ki Young Ju, CEO of Crypto analytics firm Cryptoquant, was said in early May Algorithmic stablecoins can facilitate the creation of “dark stablecoins” That does not comply with the regulations or implementation of the penalty.
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