Chapter 406: Algorithmic Stablecoins

These days, the Bitcoin market is a far cry from its idyllic heyday.
That's just how the world is.
When something becomes popular, a ton of counterfeits, knock-offs, and "deluxe editions" immediately spring up like mushrooms after rain.
Then, a bunch of hyped-up scammers rush in, wielding their scythes, ready to harvest wave after wave of newbies.
And cryptocurrency, this thing is practically a breeding ground tailor-made for scams; the air itself reeks of predatory investor exploitation.
Bitcoin, at least, is the founding "big brother," its status in the crypto world undeniable.
But its offspring, its various self-proclaimed "altcoins" and "air coins," are a chaotic mess, a veritable den of monsters and monsters.
"Chairman Su, even today, there are still plenty of people shouting that Tbi is a massive scam, aren't they?"
Liu Bo reported cautiously to Su Hao.
That wasn't wrong.
Even now, countless "righteous people" and "sophisticated individuals" still vehemently criticize Tbi, calling it an elaborate Ponzi scheme.
Their theories, at first glance, do seem plausible.
Even Su Hao himself sometimes finds it unbelievable—how could such a string of ethereal code be traded for forty thousand US dollars a coin?
This world is becoming increasingly surreal.
But value is never something you or I think; it's what the market thinks.
The invisible hand of the market is the ultimate judge.
You might think it's a pile of shit, but if someone's willing to trade gold for it, no matter how much you call it a scam, you can only watch helplessly.
Liu Bo continued his analysis:
"Tebicoin, the leader, is relatively easy to deal with. The real problem is its underlings; they're incredibly good at inciting people.
When they hear that a certain altcoin has increased ten thousandfold, who wouldn't be envious? Everyone's thinking of jumping in, making a quick buck, and achieving a life-changing reversal.
Of course, the probability is extremely low. If you miss the timing, it's not a reversal; it's a direct suicide, and losing everything wouldn't be an exaggeration..."
Su Hao nodded in agreement:
"That's why our Fanghuan Exchange has always been strictly vetted, filtering out those 'air coins' that are clearly just there to scam money and run away, right?"
"Yes...but Chairman Su, the newbies just love this kind of thrill!
They want projects that promise overnight riches, turning a bicycle into a motorcycle.
Our conservative approach makes us seem a bit...out of touch.
We've already started losing users."
Indeed, there is a small group of people in the crypto world who approach "value investing" with analysis and philosophical thinking.
But most are pure gamblers; they don't pursue value investing, they seek overnight riches.
These people are inherently incompatible with the Fanghuan Exchange's style.
Fanghuan Exchange's review process for listing new coins is considered "hellish" in the industry, even more stringent than a mother-in-law checking a prospective boyfriend's background—it's outrageously tedious.
This resulted in Fanghuan Exchange listing a considerable number of cryptocurrencies, each carefully selected, but compared to those shady exchanges that "can package even a pile of shit as chocolate," it was completely outmatched in quantity.
"However, Mr. Su, recently a combination coin called 'Luna' and 'Terra' has emerged on the market, and it's a bit different.
They've developed an algorithm-based stablecoin system, and it's incredibly popular right now, practically the hottest star in the crypto world!
Besides us, every exchange on the market is treating it like a god of wealth!"
Algorithm-based stablecoin system.
As the name suggests, it's a cryptocurrency that claims to have stable value.
Su Hao almost burst out laughing.
What a joke!
Even the fiat currencies issued by various countries, with central banks constantly intervening like playing whack-a-mole, can't guarantee absolute "stability."
You're a cryptocurrency that jumps around more wildly than a monkey, with volatility so high it'd put an electrocardiogram to shame. What makes you think you're stable?
"Its mechanism works like this: 'Luna' and 'Terra' are a pair that work together.
Terra's goal is to be firmly pegged to $1, ensuring its value is always approximately $1.
If Terra's price fluctuates significantly, Luna steps in, acting as an automatic regulator..."
In short, if Terra is expensive, Luna is consumed and Terra is issued;
If Terra is cheap, Terra is burned and Luna is issued.
This two-way exchange creates arbitrage opportunities; there will always be someone willing to push Terra's price back to $1 to make money.
"That's interesting. Isn't this just the 'central bank' system of the crypto world?
Just like how governments print money to maintain currency value or withdraw funds, it's the same principle."
"Yes, Mr. Su! This is the hottest algorithmic stablecoin concept right now."
Actually, the concept of stablecoins has existed for a while, dating back to Tether (USDT) in 2014.
That thing was simple and straightforward, directly backed by real-world US dollars, issued on a 1:1 basis.
But this model has always been criticized by crypto fundamentalists.
Back then, when Tether burst onto the scene, what was its slogan?
Decentralization! Outdoing the bankers!
But this Tether, it's come full circle, still clinging to the US dollar to survive. What kind of decentralization is that?
It's practically a traitor within the revolutionary ranks!
"But 'Luna' and 'Terra' don't require any fiat currency as collateral; they rely purely on algorithms. Theoretically, their capital efficiency and issuance are unlimited.
As long as the algorithm doesn't malfunction, it can continue indefinitely.
That's the biggest difference between them and traditional collateralized stablecoins, and that's what makes them so amazing!
And that's not all, Mr. Su!
They've also launched a financial project called 'DeFi Services.' If you deposit Terra coins into it, the annualized return… guess how much?
Twenty percent! A full 20%!
Everyone's going crazy throwing money into it right now, all for this!"
A 20% annualized "risk-free" return?
Su Hao's eyes twitched.
This interest rate... you wouldn't find anything like it in the crypto world, not even among all the banks in the globe.
"No wonder people are rushing in like mad dogs," Su Hao nodded.
"Exactly! Especially since our biggest competitor, FTX exchange, listed this coin and is promoting it like a flagship product.
Our users are flocking there like crazy, we can't stop them!"