Following the Terra stablecoin collapse last May, the Terra blockchain ecosystem has another stablecoin concept in the works called “Solid.” The stablecoin Solid and its white paper were revealed by a decentralized finance (defi) project, Capapult Finance, and the idea has been dubbed a “soft-pegged stablecoin” built on Terra.
Terra Blockchain Ecosystem: See Solid, a new stablecoin
Five months ago, crypto communities were hit hard by the devaluation of the stablecoin Terrausd (UST), also known as Terraclassicusd or (USTC) from $1. USTC trades today at $0.03 per unit. The obliterated Terra Blockchain ecosystem has moved to the Phoenix blockchain network.
Terra 2.0 Network launched, introducing the crypto community to a new native currency called terra (LUNA). Following the stablecoin depegging incident, which wreaked havoc across the entire crypto economy, a defi project called Capapult Finance says it plans to launch a new “soft-pegged stablecoin” built on top of the Terra network called “Solid.” The stablecoin concept was revealed in a white paper called “Solid, a Soft-Pegged Stablecoin on Terra.”
The project’s white paper describes Solid as an “over-collateralized and fully decentralized soft-pegged stablecoin on Terra.” Unlike the original Terra blockchain white paper co-authored by Do Kwon, the authors of the Solid white paper are represented by the six alpha-numeric digits of two addresses — “0x7183, 3A2k4j.”
The white paper published on Oct. 19, 2022, stresses that there’s a need for stable assets in the world of defi, but fiat-backed stablecoins don’t cut it, according to the white paper’s authors. “Fiat-backed stablecoins are not in the owners’ control, as was showcased by the Tornado Cash ban,” the white paper notes. The stablecoin’s paper, hosted on the Capapult Finance website, adds:
To make blockchain technology more widespread, there must be an asset that has minimal volatility and is decentralized. Decentralized money requires a stablecoin. This is more evident every day.
According to the paper, Solid will be created using a collateralized loan position (CDP scheme) similar to Makerdao. Users deposit interest-earning collateral in order for them to borrow the stablecoin. The mechanism also works alongside Capapult Finance’s governance token CAPA, and the project claims to “bring honesty and trust to Web3, join us in our journey to a fully decentralized ecosystem.”
Solidus/Solid claims that the Capapult protocol’s interest-earning collateral offers stability and low volatility. As far as the Capapult protocol’s website is concerned, the site says the application is “coming soon.” At the time of writing, the entire stablecoin economy is valued at $146.44 billion and the top two stablecoins (USDT & USDC) are fiat-backed crypto assets. Two projects within the stablecoin economy that leverage a CDP method, or over-collateralized scheme, include Makerdao’s DAI and Tron’s USDD.
It’s worth noting that a number of crypto supporters believe the onset of the harsh crypto winter was fueled by Terra’s demise. Some of the accusations directed at Terraform Labs executives like Do Kwon, and failed projects like the defi lending platform Anchor, have further tainted the community’s trust in the Terra ecosystem.
While the Capapult Finance website promises the project will bring “honesty and trust to Web3,” it will be interesting to see if the crypto community trusts a stablecoin built on a fractured blockchain ecosystem like Terra.
Do you have any thoughts on the Soft-Pegged Stablecoin Idea that Capapult Finance claims it will launch as a defi? Please comment below to let us know your thoughts on this topic.
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