Sasha Ivanov, Founder and CEO of Waves Smart Contract Blockchain, said that the crypto industry needs regulation to tackle the issues of market manipulation and protect users from bad actors.
Be. in an interview with[In]Crypto, Ivanov also talked about “six whale accounts” that had aggravated debt positions they couldn’t repay, risking the USDN’s dollar peg, and they tried to save the day. How To Step Up With $500 Million Of His Own Money.
But the stablecoin remains volatile, falling to around $0.90 on August 28. The Neutrino Dollar, or USDN, is an algorithmic stablecoin native to the Waves ecosystem.
Below is an excerpt from the interview.
How did you manage to restore the USDN peg, which fell to $0.80 in April? We understand that you took out a $500 million personal loan to protect Peg. How did it work at all?
Yes, the problem first occurred in April when six whale accounts borrowed the vast majority of Wires Finance’s liquidity and the overall crypto market crashed. As the price of WAVES was falling sharply – like every other cryptocurrency at the time – the six overleveraged whales could not repay their debt as the amount of interest they owed continued to rise. This is when I had to step into my own wallet to slowly pay off the roughly $500 million worth of this bad debt. Not doing so would have allowed those accounts to be liquidated, which would have created more selling pressure due to USDN sales volume.
The selling pressure, in turn, would have increased the risk of massive weathering. Since then, we have collaborated with the Waves community to take a number of steps to prevent this from happening again – all approved by majority consensus via decentralized voting. In addition to containing bad debt and preventing future volatility, we have also introduced new incentives to support USDN through the Smart Utility Recapitalization Feature (SURF) token. Additionally, we have deployed a new system of dynamic lending and withdrawal limits to ensure that Vers Finance can continue to operate even under extreme crypto market conditions.
You had a public dispute with Sam Bankman-Fried over allegations of WAVES price rigging. How was that situation resolved?
Crypto market manipulation is a sign of the times; It is not what we want in space, yet it is there. People with a large balance and a high level of intelligence are able to make profits at the expense of retail traders. Our resolve is regulation, which is on its way. In the meantime, we are working on our own solutions, such as the upcoming launch of PowerDAO to help us regulate our own ecosystem.
By doing this our users will be safe. We are still working out the details on how this will work but it would be completely unique for the Waves community to have a DAO created to protect their interests. PowerDAO will have a new way of governance that will reward actions and decisions that support the community and punish actions and decisions that harm it. This is a new design for decentralized governance and we hope it will be taken up in the crypto sector.
Stablecoins like USDC have become a major discussion point after the recent approval of Tornado Cash. How does USDN relate to regulators as far as enforcement of sanctions is concerned, compared to issues of user privacy?
While this may not be the most popular opinion, I believe we need regulation to protect users. Thus, we are in favor of finding some genuine and efficient solutions through intelligent dialogue with the regulators. That being said, we need to respect the values of immutability, resistance to censorship and decentralization when regulating – there has to be some compromise here or else the core values of crypto will be compromised.
Blanket bans on accounts linked to Tornado Cash and arresting developers for creating code used for illegal methods are utterly ridiculous. Imagine sending a knife inventor to prison for the crimes committed to him! Ridiculous that this is where they have gone with enforcement actions. An informed discussion about what blockchain technology is is needed before such knee-jerk enforcement actions can be taken. We are happy to speak with regulators at any time about how to do this intelligently while respecting the values of the people in the space.
What’s the risk that USDN could ever see a death spiral in the fashion of Terra’s UST?
For starters, USDN is created completely differently than UST, otherwise, we would have already faced the same fate. Our system was designed to prevent such “death spirals” with USDN and Waves in the first place, and I think it is safe to say that USDN’s unique design has proven its resilience in highly volatile conditions.
Not only that, the SURF token that I mentioned earlier was specifically designed to provide a backup to collateralize USDN in case of emergency. This is an important asset for an algorithmic stablecoin as extreme market conditions are inevitable. If the USDN support ratio drops below 100%, SURF becomes available for purchase. The price will be set, which is a ratio of USDN at the time, so if it is 50%, for example, a SURF will cost $0.50. Once the ratio reaches 115%, all SURF tokens are liquidated back to USDN.
This creates a profit incentive for collateralizing the stablecoin and helps keep the peg stable. Another feature of our revival plan is the ability to dynamically limit withdrawals and lending if the platform becomes overused. For example, when more than 95% of the funds are used up, withdrawals will be limited to $1,000 per day per account. This limit will be automatically reduced if the fund utilization is low. When it drops below 80%, all withdrawal limits will be lifted until those limits are reached again. This means that even in the worst-case scenario going forward, USDN will not collapse.