Founder of Avalanche Protocol: I am still optimistic about UST

Original author: Emin Gun Sirer

Original compilation: 0x9F, Rhythm BlockBeats

This article is based on the views of Emin Gun Sirer, the founder and CEO of AVA Labs, the parent company of Avalanche Protocol, on his personal social media platform. Its collation and translation are as follows:

I always think that the algorithm Stablecoin may have a destructive run. The only mechanism against this is having a strong and motivated team that conducts open market operations.

We need a decentralized stablecoin. Fiat-backed Stablecoins have the potential to be legally seized. A decentralized economy requires a decentralized stablecoin whose asset reserves cannot be frozen or confiscated.

There is not enough room in the market for a dozen and a half dozen Stablecoins, or even two. This is a winner takes all market. If a decentralized stablecoin is successful, it will reap the most value and the most proven team. Let's remember this: this game cannot come from behind.

Why shouldn’t you touch the imitation algorithm Stablecoin released by the pure technology team? If a team is famous because they were an intern at Google, they can't succeed. Only a team with top market operators can be successful.

For various regulatory reasons, it is unlikely that a US team will be successful with an algorithmic stablecoin. Basically only teams in Korea, Singapore or Switzerland have the right regulatory environment.

For a Stablecoin’s algorithm to work, the underlying chain must provide high performance and resilience under load. Few public chains have the right memory, fees, and API infrastructure to handle high loads.

We just had a massive run. If this happens in traditional finance, there's already a lot of talk of doom and bailout by now. The only thing that is certain is that the bonuses of the bankers will not be less than one point.

I am not at all surprised by the resilience of UST. Remember that every Stablecoin unpeggs from time to time, including fully collateralized fiat-backed Stablecoins. As long as they have a real team behind them, they can bounce back. The rebound is a good opportunity for arbitrage, and the motivation that makes the run happen will also fuel the flames during the rebound.

It seems unlikely that a more complex Stablecoin design would be more stable in the event of a run. The simpler the mechanism, the easier it is to understand and implement. I can think of many more complex designs, but I can't imagine any of them achieving better stability.

Every sovereign currency has difficulty maintaining its advertised anchor. There is little difference between a sovereign fiat currency and an algorithmic stablecoin when it comes to the challenges of defending the peg.

Before you say "a team's open market operations don't look decentralized", please keep this in mind The value proposition of Bitcoin is to create an asset whose reserve is decentralized and cannot be confiscated or frozen. For this, a capable team is absolutely necessary.

We all like dramatic events, opportunities to trade for small profits. But at the same time, we also have to bear some unpredictable risks, such as CEX suspension of transactions or deposits. Crypto 's real opportunity lies in longer-term transactions.

In short, the UST will resume anchoring, exactly as we have seen in past historical cases. After the dust settles, I'll be even more bearish on copycats and bullish on UST.

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