- Adam Cochran shared a detailed sketch of introducing an algorithmic stablecoin.
- Cochran’s tweet came reflecting on Changpeng Zhao’s comment on his plans to introduce an algorithmic stablecoin.
- Zhao talked about the potential risks of stablecoins like USDT and BUSD that necessitates the launch of smaller algorithmic coins.
Adam Cochran, a renowned business analyst, and fintech executive, recently shared a Twitter thread, presenting an extensive sketch on how to launch an algorithmic stablecoin.
Cochran’s guidelines came reflecting on a recent statement of Binance CEO Changpeng Zhao, who commented on his crypto exchange’s plans to introduce smaller algorithmic stablecoins to counter the potential risks associated with larger stablecoins like Tether (USDT) and Binance USD (BUSD).
On July 31, Zhao addressed his community via the Ask Me Anything (AMA) session on Twitter, where he shed insights on the higher risks of USDT and BUSD. He stated that though Tether continues to be dominant in the world of stablecoins, the asset’s lack of transparency makes him cautious. He added,
I personally have not seen any audit reports of USDT. I don’t think most people I spoke to have not seen that either. So it’s kind of a black box because we just don’t know.
Reflecting on Zhao’s enthusiasm for algorithmic stablecoins, Cochran took to Twitter earlier today to elucidate the easiest way to launch an algorithmic stablecoin. According to his words, any exchange that longs to introduce an “algo stable” could attack other stablecoins without waiting for them to get depegged.
Thinking about it, if you were a big exchange who wanted to launch your own algo stable like CZ admitted, you don’t need others to depeg… you can still attack them:1. Partner with fake sketchy offshore stables (TUSD, FDUSD)2. Give them free trading + leverage on your…— Adam Cochran (adamscochran.eth) (@adamscochran) August 4, 2023
The executive suggested that partnering with “fake sketchy offshore stables” like TUSD and FDUSD could be an initial step towards the launch of an algo stable. Free trading and leverage on the exchange could pump the stablecoins, following which the platform could buy ETH and BTC in bulk to convert them later into USDC. He added that the massive withdrawal of the stablecoin would result in a decline in its market cap. The next step pointed out by him was to redeposit the assets into the same exchange.
Cochran further explained that a repetition of the loop and the then sale of the stablecoins could finally “fuel the narrative.” The executive later directed his followers to focus on the need to accumulate a weaker stablecoin like DAI, where all the above-mentioned steps are repeated.
He reiterated, “If you nuke DAI the pools will get lopsided on Curve after you sell and in that dislocation, you can sell your spikes holdings back minimizing your overall expenses.”
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