DeFi had been one of the fastest-growing sectors in crypto the past few years, with a slew of borrowing and lending applications offering double- and triple-digit returns. Like most crypto projects, they are dependent on attracting enough transactional volume to keep the blockchain networks going. The model appeared to work until central banks began removing Covid-era stimulus, triggering a retreat in risk appetite and raising questions about whether the incentive-based systems are sustainable.
Hardcore believers in the future of decentralized finance aren’t giving up on algorithmic stablecoins after the spectacular collapse of TerraUSD (UST), saying they remain key for moving to a world without intermediaries such as banks and brokerages.
“An algo stable will exist in the next five-to-seven years,” said Hassan Bassiri, a portfolio manager at Arca, which was an investor in Terra. “And it has to exist or else what are we even doing in this space?”
