Andre Cronje’s algorithmic stablecoin plans re-opens Terra UST wound for crypto community

Sonic Labs and Yearn Finance co-founder Andre Cronje has hinted at launching a high-yield algorithmic stablecoin. In a post on X, he said the stablecoin could be ready for release within 4 – 5 weeks.

Cronje tweeted on March 20 that his team had cracked the process and that work was ongoing with an algorithmic stablecoin. At the time, he added that the previous failure of algo stable tokens, particularly Terra UST, gave him PTSD, and he is not sure whether to implement this idea.

He said:

“Pretty sure our team cracked algo stable coins today, but previous cycle gave me so much PTSD not sure if we should implement.”

Despite his worries, Cronje said the stablecoin will soon be ready. He went further to share projections of the stablecoin’s annual percentage yield (APY). At 10 million total value locked (TVL), it will generate 200% APY, at $100 million 23.5% APR, and $1 billion will bring 4.9% APY. The potential yield has now increased after recent developments.

He said:

“@YJN58 just found a way to turn this into 95.9% APY at $100m TVL, and 19.18% at $1bn+”

While Cronje shared the potential yields that the stablecoin could generate, he did not provide any information on the project’s technical details, such as its collateral, on-chain controls, and algorithmic mechanics. Still, the new project appears separate from Sonic and Cronje’s other DeFi projects. His March 22 statement mentioned plans to “scale up and get a team for a full release.”

Concerns trail potential algo stablecoin as many reference Terra UST

Meanwhile, the crypto community’s reaction to plans for a new algorithmic stablecoin has been mostly negative, with many noting that it evokes memories of the failed Terra UST. The $40 billion crash of the UST in 2022 was the first domino that led to the eventual collapse of the crypto market at the time, leading to many firms going bankrupt.

While the market has recovered, the idea of another algorithmic stablecoin promising significant yield has led many to compare the two incidents. Unsurprisingly, there have been many comments with an X user advising that Cronje should not take the lead on it so another person can go to jail. One user also suggested it should be named the Anchor protocol. Anchor was the DeFi protocol behind UST adoption.

Curve Finance founder Michael Egorov also advised Cronje to rename himself Do Cron on X, a reference to the UST Terra founder Do Kwon. Kwon has been convicted of fraud and faces further criminal prosecution in the US. The failure of UST has also led many regulators to oppose algorithmic stablecoins

Despite these concerns, some believe it is a good idea and will boost DeFi activity on the Sonic Network. Since rebranding from Fantom to Sonic, the layer-1 network has been focused on becoming the base-layer for DeFi with cost efficiency and speed.

Efforts to attract DeFi instances have proven relatively successful, and Sonic’s stablecoin market has grown substantially in the past few months. According to data from Messari, Sonic’s stablecoin market cap is now close to $400 million, and it could soon go higher with native USDC coming to the network.

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