USDT collateral proposal
Recent events has shown that we rely too much unilaterally on USDC. The were many arguments to support this rational behavior. Supporting arguments were; USDC is regulated and audited and so on. But in light of recent events USDT has shown, despite on it is unregulated and in some sense even unaudited (BDO Audits??), that it is able to hold its peg. even now when all the other stablecoins de-pegged across the board, even algorithmic stablecoins like DAI, whose supposed to be rock solid.
USDT has de-pegged once (also some less significant “de-pegs”). that time it de-pegged around 2-3 % at peak and recovered pretty fast, even though it faced very large sales volumes. So despite the fact that USDT is unregulated and in some sense unaudited, it has shown two times, that it can hold its peg even in extreme market conditions. Back then and now. So Tether management is somehow very capable to fight against large sales volumes and extreme market conditions.
I propose that we will give the USDT 80% collateral value, when this current de-peg event has settled down.
Other benefits onto Algorand ecosystem
After this recent de-peg event, there will be demand for USDT. Most likely some of the current USDC users will look other options, especially USDT. This kind of shift from USDC unipolar stablecoin scene towards multipolar stablecoin scene, will make whole Algorand ecosystem more vibrant and safe. Safe because in case of some Stablecoin (like USDC) de-pegs, there are alternative options where people can move and still keep their collateral value at the same time (eases overall sell pressure). There are also other stablecoins in pipeline, like goUSD and GARD. Gard is an algorithmic stablecoin and I do not have so much knowledge or info about that and how reliable it is, so can’t really say much about it, but it de-pegged in this current environment. And what comes to goUSD. Now goUSD is basically equivalent to USDC, because it’s fully backed by USDC. In the near future, it will get basket behind it and will be more robust, at least in theory, but probably also in reality. These both are great additions alongside USDC and USDT. Now despite these newcomers, I think it is really important to give USDT 80% collateral value, because it is already well known and has proven to be best stablecoin in practice out there so far. It already has large market cap and relatively good liquidity. After granted collateral value, its liquidity will probably increase rapidly because people will be able to use it as collateral. Also people will trust it more than ever before.
Summa summarum, I hope we will be able to implement this change rapidly after this hardest market swing is over and situation is stabilized a little bit.
Happy to hear other’s opinions on the matter.