Here is our pick of the 3 most important stablecoin stories during the week.
Stablecoin innovation continues during Crypto winter!
First, the bad news, Solana-based algorithmic stablecoin NIRV has become the latest stablecoin to fail after dropping 85% from its United States dollar peg following a hack on adaptive yield protocol Nirvana Finance on Wednesday.
The flash loan attack, which also saw Nirvana Finance’s native token ANA drop by 85%, resulted in the loss of $3.49 million worth of Tether (USDT), with the SolanaFM team being the first to confirm that the funds were syphoned via a flash loan attack on Wednesday:
“Utilising Solend Protocol’s Flash Loans, the hacker borrowed $10M USDC from the Solend Main Pool Vault which was used to exploit $3.49M USDT from the Nirvana Finance Treasury.”
Solana-based stablecoin NIRV drops 85% following $3.5M exploit (cointelegraph.com)
Meanwhile, DeFi giant Aave ecosystem will now have its own native decentralised, collateral-backed stablecoin GHO as the community approved the proposal. On the first day itself, the Aave community confirms their support for the introduction of GHO stablecoin as the majority votes in favour of it.
Breaking: Community Approves USD-Pegged Stablecoin By This DeFi Giant (coingape.com)
Tether came out and said that the hedge funds, which saw Terra’s collapse as a reason to short USDT, have “a fundamental misunderstanding of both the cryptocurrency market and Tether”.
It also attempted to reaffirm the strength of its financial backing and ability to honour redemptions, reiterating that it holds no Chinese commercial paper and had cut its total holdings of commercial paper by 88% from $30 billion to $3.7 billion over the past year.
It added that commercial paper holdings would be as low as $300 million by the end of August, and it will hold zero commercial paper by early November.
Tether calls thesis behind USDT short-selling ‘flat out wrong’ (cointelegraph.com)
So in summary, stablecoin innovation continues apace with both the inevitable stuff ups and interesting ideas around decentralisation coming to the fore. In the meantime the biggest player, Tether, continues to defend its turf.
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.
For context on stablecoins please read this introductory interview with Alan “How stablecoins will change our world” and read articles tagged stablecoin in our archives.