NEAR Protocol’s stablecoin, USN, is shutting down after it began to exhibit similar risks to TerraUSD, which failed spectacularly this year. As it is known, TerraUSD inflicted billions of dollars on investors. Here are the details…
USN stablecoin project at Near Protocol is being terminated
cryptocoin.com As we have reported, NEAR is a Blockchain that is seen as an Ethereum competitor. It is a popular network especially for building decentralized applications (dapps) and issuing NFTs. Since April, Decentral Bank has put into circulation USN, a stablecoin issued by the DAO. But USN has recently become “unsecured”, according to the NEAR Foundation, a nonprofit that supports blockchain, on Monday. This means that there is not enough collateral to back the token.
A Message to the Community: $USN Wind-down
TLDR; $USN is gradually winding down. The contract will be accessible indefinitely, with only minting disabled. $USN is safely redeemable 1:1 for $USDT through a $40M Protection Program.
Full statement: https://t.co/bnCCFqdzZm
— Decentral Bank (@DcntrlBank) October 24, 2022
As a result, the NEAR Foundation added that the token project will be discontinued. Later in the day, Decentral Bank also announced that it would indeed end the USN project. According to a statement from Decentral Bank, the USN “has faced many headwinds over the past few months.” As a result of these issues, they are ending the project in a “controlled and responsible manner”, which will provide protection to USN owners.
Considered the backbone of the crypto economy, stablecoins are typically backed by “real world assets” such as the US dollar or other currencies. But regulators are keeping a close eye on stablecoins as Terra, one of the largest blockchains with a market cap of over $30 billion, completely collapsed in May.
Protocol announced $40 million support
Terra had its own algorithmic stablecoin known as TerraUSD (UST), backed by nothing, based on code to maintain its value. This code ultimately failed and eventually the stablecoin lost its dollar stable. Many investors were negatively affected by this situation. Regulators have repeatedly referred to the collapse of the Terra project when talking about regulating the crypto world.
NEAR Protocol’s USN was also an algorithmic stablecoin when it was first released. However, it was later backed by USDT, the largest stablecoin in the crypto market. The NEAR Foundation noted that despite the update, the USN “has become vulnerable to under-collateralization in extreme market conditions.” He said this could put investors at risk. The NEAR Foundation said it has used $40 million to fund a “USN Protection Program” to protect investors as the stablecoin shuts down.
Total locked value decreased
After Decentral Bank withdrew its liquidity from the protocol, the locked total value (TVL) in the NEAR protocol fell by 45 percent. So right now TVL is worth just over $135 million. At the time of writing, NEAR is changing hands at $2.93, up 0.7 percent.
NEAR TVL. Source: Deflation
