Sonic Unveils High-Yield Algorithmic Stablecoin, Reigniting Terra-Luna Concerns

The Sonic blockchain, led by Andre Cronje, has announced the development of a new algorithmic stablecoin offering up to 23% annual percentage rate (APR). This move has sparked discussions reminiscent of the Terra-Luna collapse in 2022. 

Key Features of Sonic’s Algorithmic Stablecoin

• High Yield Potential: The stablecoin aims to provide an APR exceeding 200% at a total value locked (TVL) of $10 million, stabilizing around 4.9% at $1 billion TVL.
• Algorithmic Mechanism: Unlike fiat-backed stablecoins, this one uses code-based mechanisms to maintain price stability.

Andre Cronje’s Perspective

Cronje, co-founder of Sonic Labs and founder of Yearn.finance, expressed both excitement and caution:

“Pretty sure our team cracked algo stable coins today, but previous cycle gave me so much PTSD not sure if we should implement.”

The Terra ecosystem’s downfall in May 2022, which wiped out $40 billion, serves as a cautionary tale. Terra’s algorithmic stablecoin, TerraUSD (UST), offered over 20% APY on Anchor Protocol before losing its dollar peg.

Sonic’s Technological Advancements

Sonic claims to be the world’s fastest Ethereum Virtual Machine (EVM) chain, achieving a transaction finality of 720 milliseconds during its testnet phase.