Cardano founder Charles Hoskinson voices his faith in algorithmic stablecoins in the long term as being essential to fully realizing the original vision of Bitcoin.
This comes in the wake of the embattled Silvergate and Silicon Valley Bank (SVB) buzz.
I still firmly believe that algorithmic stablecoins long term are the most essential research stream to fully realize the original vision of Bitcoin. Banks will always let you down as long as they are fractional reserve. https://t.co/zeQVSzhuaI— Charles Hoskinson (@IOHK_Charles) March 11, 2023
"I still firmly believe that algorithmic stablecoins long term are the most essential research stream to fully realize the original vision of Bitcoin. Banks will always let you down as long as they are fractional reserve," Hoskinson tweeted.
The Cardano founder was responding to a tweet by Jesse Powell, Kraken's CEO, who hinted that the market might be losing faith in U.S.-homed financial products following the USDT and USDC's loss of the dollar peg earlier today.
USDC issuer Circle has made it known that $3.3 billion of its total $40 billion in USDC reserves is domiciled in embattled SVB.
When inquired about its exposure to SVB, the Kraken CEO responded, "We have no exposure to SVB."
Algorithmic stablecoins, a different class of stablecoins, rely on algorithms to keep their peg to the dollar. The algorithm controls the relationship between the two tokens, which are generally used in algorithmic stablecoins.
There has been some waning confidence in this class of stablecoins as a result of the failure of algorithmic stablecoins like TerraUSD (UST). This narrative appears to have also been influenced by the volatility of the cryptocurrency market.
The Frax community recently decided against maintaining a partially backed, semi-algorithmic stablecoin in favor of making its FRAX stablecoin completely supported by U.S. Dollar equivalents. At the time of writing, FRAX was below its dollar peg at $0.914 owing to the USDC depeg.
Despite this limitation in the short term, the Cardano founder believes in the long-term prospects of algorithmic stablecoins as the "most essential research stream to fully realize the original vision of Bitcoin."