The massive fall of the FSO is starting to have consequences for the entire algorithmic stablecoin industry. The first victim is DEI.
After the FSO, it is up to DEI to see its value decrease. The dollar-pegged algorithmic stablecoin of the DEUS ecosystem lost its peg on the night of May 15, dropping from a dollar to $ 0.52 in just a few hours. Crypto has since struggled to recover and was back at $ 0.67 at the time of this article’s publication. But there is no guarantee that it will recover permanently, because, as Numerama showed a few days ago, the fall of the FSO could spell the end of cryptographic algorithms.
Stablecoins are a separate category within cryptocurrencies. By definition, they should have a stable price and use different mechanisms to do so. The most popular stablecoin, Tether, uses dollars or shares to guarantee its price, but in the case of algorithmic stablecoins, such as UST and DEI, numerous calculations are involved, but in some cases these devices are not enough: UST of Terra the project is the proof, and DEI could be next.
The fall of the DEI, the first of a long list?
DEI is the algorithmic stablecoin of the DeFI (decentralized finance) ecosystem of DEUS, a cross-blockchain project offering financial services. DEI works hand in hand with DEUS, the other cryptocurrency of the system, and it is thanks to a mechanism of burn And mint that the two assets manage to balance – and DEI, to maintain its indexation. It is a slightly different device than that of UST and LUNA, although the stablecoin has also relied on the relationship between the two cryptocurrencies to maintain its value.
The stalemate of the DEI is partly due to several attacks that the ecosystem has suffered in recent months, which have caused the DEUS to lose 43% of its value, explains the specialized media Decrypt. With this decline, the mechanism for keeping DEI afloat became more complex and failed to keep up – and some users took advantage of the cryptocurrency balancing system to sell DEUS at the DEI price. As a result, the price of the stablecoin froze.
The decline in the value of DEI is not entirely due to the FSO – but the timing is not insignificant. Did the sinking of the stablecoin Terra give ideas to others, who tried to make money with the DEI? For now, it’s hard to say. What is certain is that it will be difficult to restore investor confidence in a project similar to the FSO – and this stalemate does not bode well for DEI’s future.
Can the IED be saved?
” Our team is working tirelessly to restore the indexing of the DEI “Warned DEUS on Twitter on May 16, hours after leaving. ” Mitigation measures were immediately put in place and solutions are being developed to ensure long-term stability. ”
For the moment, the DEUS ecosystem teams are avoiding making the same mistakes as that of Terra: they have suspended for the moment the balancing mechanism between the two cryptocurrencies, and are trying to develop a new collateralization system for the OF THE. Whether this will be enough to allow it to regain its indexation remains to be seen.
For the moment, the DEUS ecosystem teams are avoiding making the same mistakes as that of Terra: they have suspended the balancing mechanism between the two cryptocurrencies for the moment, and are trying to set up a new collateralization system for the OF THE. Whether this will be enough to allow it to recover its indexation remains to be seen.
For now, overall, the “classic” stablecoin sector appears to hold. During the FSO collapse, everyone turned to Tether, the most popular stablecoin, which briefly paused at $ 0.95. It eventually held out and was able to go back to its indexing, but the whole industry remains extremely feverish. If the DEI can’t get up early, it may be too late for him.