Today, November 25th 2025, Stablecorp is announcing QCAD, Canada’s first compliant, CAD Stablecoin, is launching on Base Chain, a secure, fast, low-cost Ethereum L2 built to power an open global economy, with typical transaction costs of less than 1 cent and speeds of less than 1 second. This marks a meaningful step towards building trusted digital CAD infrastructure for the benefit of the onchain community and economy.

A Shared Vision: Bringing Canada Onchain

Stablecorp’s goal is to serve as a secure and stable bridge between the traditional economy and the burgeoning global digital asset world. The journey to launch QCAD underscores Stablecorp’s commitment to building a compliant and robust financial future. As larger portions of economic activity move onchain, the need for reliable national-currency infrastructure becomes essential. Canada, a major G7 economy, is a key piece in this future.

Base is on a mission to bring a billion people onchain. We share this vision and practically support this mission by making it easier for Canadians to use a stablecoin in their national currency. QCAD unlocks a foundational utility, giving the onchain community access to trusted CAD liquidity that powers payments, commerce, and new onchain applications. We aim to enable all innovators in building the future of finance, and solidify Canada’s position at the global forefront of digital asset development.

Make Canadian Dollars Secure, Accessible, and Complaint

QCAD is a compliant Canadian Dollar stablecoin that holds 1-to-1 dollar reserves for each issued QCAD at regulated financial institutions. Our prospectus is publicly available on this SEDAR link. Our immediate focal points are:

• Instant, Low-Cost Transactions: QCAD on Base empowers individuals and businesses to send and receive funds across the country and beyond, nearly instantaneously and at a fraction of the cost of traditional financial rails. This revolutionizes everything from e-commerce and payroll to remittances, personal payments and foreign exchange.
• The Bridge to the Digital Economy: QCAD allows for seamless integration with blockchain-based applications, decentralized finance (DeFi), and Web3 innovation, ensuring Canada remains a competitive player on the world stage.
• Unprecedented Transparency and Security: As a compliant financial instrument, QCAD operates with the highest standards of oversight. The reserves backing QCAD are subject to regular audits and public attestations, offering unparalleled peace of mind and consumer protection.

About Stablecorp

Stablecorp is a leading Canadian digital asset infrastructure company, focused on building bank-grade blockchain solutions. In partnership with industry leaders such as Coinbase Inc and Circle Inc, Stablecorp creates secure, scalable, and compliant products. Its QCAD stablecoin, is Canada’s first compliant stablecoin, 1:1 reserved with Canadian Dollars.

Today, November 24th 2025, Stablecorp, on behalf the QCAD Digital Trust, is announcing a significant milestone for Canada’s financial landscape. The QCAD Digital Trust has received a final receipt for the prospectus qualifying the distribution of QCAD tokens, officially making QCAD Canada’s first compliant CAD stablecoin.

This landmark achievement has been the culmination of years of collaboration between Stablecorp, on behalf of the QCAD Digital Trust, and members of the Canadian Securities Administrators paving the way for the mainstream adoption of digital currency in Canada.

We are excited to announce not just this victory for Stablecorp, but for Canada! As larger portions of economic activity move onchain, the need for reliable local-currency infrastructure becomes essential. Canada, a major G7 economy, is a key piece in this future.

A New Era for Canadian Payments

QCAD is a fully compliant 1-to-1 reserved, Canadian Dollar stablecoin. QCAD serves as secure stable bridge between the traditional Canadian economy and the global digital asset ecosystem, unlocking transformative benefits for all Canadians.

• Instant, Low-Cost Transactions: QCAD empowers individuals and businesses to send and receive funds across the country and beyond, nearly instantaneously and at a fraction of the cost of traditional financial rails. This revolutionizes everything from e-commerce and payroll to remittances, personal payments, and foreign exchange.
• The Bridge to the Digital Economy: QCAD allows for seamless integration with blockchain-based applications, decentralized finance (DeFi), and Web3 innovation, ensuring Canada remains a competitive player on the world stage.
• Unprecedented Transparency and Security: As a compliant stablecoin, QCAD operates with the highest standards of oversight. The Canadian dollar reserves backing QCAD are subject to regular audits and public attestations, offering unparalleled peace of mind and consumer protection.

Learn more and stay tuned for more updates!

About Stablecorp

Stablecorp is a leading Canadian digital asset infrastructure company, focused on building professional-grade blockchain solutions, and backed by some of the largest names in digital assets, including Circle, and Coinbase. In partnership with industry leaders Stablecorp creates secure, scalable, and compliant products. QCAD is Canda’s first compliant stablecoin, 1:1 reserved with Canadian Dollars.

With: Paul Kremsky (Cumberland, Head of Global BD) and Nick Philpott (Zodia Markets, COO)

Currencies are the tectonic plates of the financial system, rooted at the base of every trade and transaction. Currencies — in their many forms over time — have underpinned our ability to transact in the real economy and in financial markets. With many different people, companies, central banks, and other government entities having many different reasons to exchange local vs foreign currencies, the foreign exchange (FX) market has grown and evolved in tandem. Today, the FX market is the largest financial market in the world, facilitating over $7.5 Tn in daily volumes and with 70% of that traded directly Over the Counter.

However, while the FX market has become the largest, most liquid market in the world, it continues to run on among the most inefficient and antiquated financial infrastructure in the world, relying on the correspondent banking and Real-Time Gross Settlement (“RTGS”) systems. To illustrate this point, although cross-border flows represent only 17% of total transaction values, they represent 27% of all global transaction fees (~$200bn), which ultimately benefits banks and other third party intermediaries.

Part 1: Digging Into the Four Key Challenges of the FX Market Today

There are four overarching challenges associated with the FX market today: settlement risk, costs of the correspondent banking system, global banking and RTGS hours, and lack of direct access to FX markets.

Challenge #1: Settlement Risk

FX settlement risk refers to the risk of one counterparty paying out a currency while not receiving the corresponding currency it bought in exchange. It is also referred to as “Herstatt” risk after Germany’s Herstatt Bank famously shut down at the end of the day in 1974 with hundreds of millions in USD FX transactions partially settled on its books that it had yet to send during US banking hours. The global counterparties who were waiting for Herstatt to play its role as a correspondent bank and settle their end of an FX trade were left with a total loss of principal. In the immediate aftermath, global transaction flows dropped precipitously as the reality and contagion of the settlement risk became apparent. Most modern financial exchanges in other asset classes manage this issue with central clearinghouses (“CCH”) that minimize settlement risk by providing a common, central counterparty (although CCHs are not without their issues). Despite the 1974 Herstatt crisis, in 1997, 85% of FX transactions were still settled directly using the correspondent banking system. By 2013, however, this had dropped to only 13% due to the introduction of a system known as the Continuously Linked Settlement (“CLS”) system.

The CLS system acted as a global CCH for FX and adopting a “payment versus payment” system, effectively managing settlement risk similar to other markets. CLS is plugged into the settlement rails of 18 central banks and essentially only releases corresponding payment one way once a payment is received the other way. However, CLS has its own challenges:

1. It is only functional in the top 18 currencies, which limits its utility among the growing relevance of emerging market (EM) currencies.

2. It is very infrastructurally cumbersome to operate and, as a result, only the 70 largest financial institutions globally have direct access to the system, leading to a “have” and “have not” scenario in global FX among those facilitating transactions.

3. This infrastructure is also expensive with CLS earning GBP 250mm in revenue in 2022, which translates into 0.13 per mm settled.

4. Because it is inextricably linked to the myriad of global banking systems, it is unable to effectively innovate on its own.

Another, slightly different form of Settlement Risk arises from a phenomenon we’d mentioned in the introduction, a significant portion of securities traded globally involve an FX transaction at some stage of the transaction. Nearly 20% of U.S. securities ($24.9Tn) are owned outside of the U.S. By itself this doesn’t pose an issue, but in May 2024, U.S. and Canadian securities settlement will move to T+1. Given approximately 50% of the FX market settles T+1 or T+2, there is a risk of not having the proper currency required to settle the securities transactions. While this may be able to be mitigated with a futures transaction, the more a treasurer needs to abstract away the true transaction with derivatives to manage the underlying settlement delay the more cost and complexity there is.

Challenge #2: Costs of the Correspondent Banking System

In addition to settlement risk, the costs and inefficiencies associated with the correspondent banking system revolve around the many intermediaries required to facilitate FX settlement. Except in rare circumstances, every transaction that takes place in a certain currency involves a bank in the home country of that currency. So when a Singapore office of an Australian bank uses JPY to buy USD from the London office of a Swiss bank, six banks are involved in the transfer and settlement of those currencies. In the example below from Zodia Markets, a THB vs IDR transaction from Thailand to Indonesia goes through six institutions in three different time zones, costs 4.3% in total transaction fees, and takes several days to settle. This is also at a time when correspondent banking relationships are becoming harder for EM banks to maintain with established banks lowering their risk tolerances.

Several structures have emerged to combat the challenges of moving fiat across borders, but the most successful payment businesses simply…don’t. Paypal, Wise, and several other global payment and fintech companies have adopted a strategy of opening bank accounts in 60–70 countries, holding currency balances in each, crediting their users with a currency “transaction” without actually moving any money across borders, and then periodically rebalancing. While this model functionally works and can provide some level of increased efficiency, there are fundamental flaws with it as well:

1. The infrastructure to manage such a global setup is enormous and expensive.

2. If there are major macro events that lead to unpredictable currency flows, the cost to move money around the globe at scale to meet demand will far outstrip what these companies are charging in spreads and fees.

3. This model does not work for true scale transactions.

Challenge #3: Global Banking and Real Time Gross Settlement Hours / Timezones

It’s so simple that it is often overlooked — being able to trigger an actual transaction in “real-time” in another, foreign jurisdiction can be extremely challenging. The banking hours of the currencies’ countries need to overlap, and the notification periods for each counterparty to notify their bankers (or CLS) to execute a payment can be extremely tight and inconvenient. For example, the CAD and JPY banking systems overlap for fewer than 5 hours a day, not to mention the added cut-off times meant to ensure proper instructions are received and sent. After the G20 endorsed a roadmap to improve cross border payments in October 2020, a key priority included extending operating hours for RTGS. Unfortunately, in a report nearly 2 years later, the BIS called out that “an extension of RTGS operating hours is likely to require technical changes to existing systems, platforms and infrastructures that will need to be carefully planned and deployed. Staffing needs could also increase in order to cover extended operating hours, and many of the associated costs may persist over time.” That sounds like billions of dollars of co-ordination cost and years to implement.

Challenge #4: Lack of Direct Access to FX Markets

If all of this talk of intermediary banks and T+2 settlement seems bizarre, it’s because the consumer is typically insulated from it. If a Canadian travels to the US and uses their debit card to buy a coffee, there is an FX transaction on the back end, but the consumer doesn’t have to think about it as an intermediary handles it for them and bakes in a substantial spread. The largest institutions in the world pays 1–3 pips for FX trades on major currencies (.01 — .03%), while the average user pays 3–5% (+100x) for a trade a fraction of the size. Even with extreme diligence and preparation, there are no executable avenues for individuals to access reasonably priced FX as the margins for intermediaries are enormous. Even a well-informed and conscientious user needs a foreign currency bank account to hold foreign currency, a foreign currency credit card to spend foreign currency, and the willingness to undertake expensive wire transfers at both ends of the transaction to settle. Alternatively, they can go to physical money exchanges (also while paying tremendous spreads) and carry cash.

Part 2: Fully Digital, Blockchain-Powered Money Can Fix This, Three Reasons Why it Hasn’t Yet

Digital assets have the ability to settle instantly, cost fractions of a cent per transaction, operate 24/7 across time zones, and are accessible to anyone with an internet connection. So why hasn’t blockchain overtaken the FX and payments markets? 3 reasons

Reason #1: Lack of Non-USD Denominated Digital Assets and On-Chain FX Markets

60% of the global currency reserves are USD, but 99% of current on-chain digital money is USD denominated. And while the on-chain USD denominated market continues to grow, non-USD digital money is slowly emerging, especially as a greater number of use cases are being identified and accepted. Stablecorp has designed QCAD to bring the Canadian dollar on-chain, while Circle has launched a Euro-denominated stablecoin (EUROC) and StraitsX has introduced a Singapore dollar stablecoin (XSGD). The Global Stablecoin Standard group has also brought together a number of top quality issuers from around the world to help rectify this gap and align on global best practices.

Global trading leader Cumberland has identified non-USD stablecoins as one of the largest growth areas and is working with global exchanges like Zodia Markets to develop liquidity for these markets.

Further, groups like Shift Markets and their Cables product on Avalanche are pricing on-chain FX pairs using spot fiat oracles and off-chain liquidity, and FX-denominated pairs on Decentralized Exchanges like Uniswap, Phoenix by Ellipsis Labs, and Stellar DEX are becoming more prevalent. At the same time, L1 and L2 blockchains are becoming increasingly optimized to facilitate on-chain FX trading and payments use cases. With low-cost fees and sub-second finality, some of these chains and L2s like Avalanche, Stellar, Solana and Arbitrum are able to make trading even a few dollars cost effective.

FX has also made its way into synthetic leverage DeFi platforms like gTrade and Tigris on Arbitrum as well, with traders able to access synthetic levered exposure to FX pairs like USD / CAD and vastly enhancing hedging ability. These various ecosystems are also identifying non-USD digital money and on-chain FX / payments as key drivers of growth and are actively fostering the proliferation of these use cases.

Reason #2: Lack of Connected / Embedded On-Off Ramps and UX

Even if there was strong liquidity for non-USD digital money, in order to bring real value to consumers, “real world functionality” remains a missing link. Even if you can transact instantly for fractions of the cost into a digital representation of your currency, if you can’t pay rent or buy a cup of coffee with it, it’s not that useful. What’s more, current on-chain wallet and other infrastructure remains clunky and difficult to use from a mass adoption perspective. This places a high importance on API-based on-off ramps and self-contained apps that utilize multi-currency stablecoins. Below shows Finoo’s platform to allow Brazilian students to send money from BRL to QCAD and pay tuition in Canada all within one app, powered by blockchain.

Reason #3: Lack of Regulatory Harmonization and Clarity

The age-old challenge with new technology lies with ensuring a conducive and consistent regulatory environment exists to enable mainstream adoption. In this respect, the digital asset world has struggled in particular with digital money, which includes “stablecoins”. That moniker itself is a good place to start as it is a particular challenge for regulators given the famous instability of certain of these coins like UST. While a full deep dive into the various stability mechanisms of digital assets is beyond the scope of this article, broadly they can be divided into:

1. Digital assets which derive their theoretical stability either from issuance and redemption algorithms, crypto collateral or fractional reserve systems, or

2. Digital Money equivalents that are fully reserved 1:1 with traditional Cash or Cash Equivalents in the same currency as the digital money.

While there have been temporary issues associated with the latter “losing their peg” in response to macro issues, the majority of stability issues have been with the former. From a regulatory perspective it is important to separate the two types. The majority of “stablecoin” legislation in process around the world has focused on the latter digital money coins with many explicitly banning the former or treating them similarly to other digital assets like BTC or ETH.

This is not to say that there is yet clarity on fully reserve backed stablecoins, with a variety of views still being debated about whether these should be regulated:

1. Under a securities law type framework similar to a debt security or

2. As a payment instrument more akin to a stored value gift card or e-money or even

3. Left explicitly unregulated, as is the case with spot foreign exchange in most jurisdictions

In the EU, UK, Singapore and some other jurisdictions there is a close parallel view with the concept of eMoney, which developed out of the payment cards businesses of the late 1990s and early 2000s. In this vein, the more advanced legislations including MiCA are leaning towards the e-money approach, while other jurisdictions remain murkier with legislation still under discussion.

That said, while this specific digital money topic remains at the top of the agenda for regulators globally, there is enough clarity to build and launch sophisticated structures and adoption.

Part 3: The Seven Defining Opportunities in On-Chain FX

Let’s get the glaringly obvious one out of the way:

Opportunity #1: Just So. So. So. Much Cheaper for Individuals and Many Small Businesses

A fully built, liquid, connected on-chain FX and payment system drastically reduces FX costs for a significant portion of the market. This means a direct cost reduction in terms of spread, as well as instant settlement and equal access for institutions, businesses, and individuals.

Direct access to DEX’s where on-chain FX is traded is a huge plus for efficiency and transparency as well. As mentioned earlier, generally the total cost of FX in a transaction (particularly a payment transaction) is a combination of a fee and a spread. For “major” currency pairs like USD / CAD the total cost can be 3–5%, for “exotic” currency pairs that can easily get into the 7–10% range quickly. Compare this with the majority of FX pairs on Uniswap v3 (including QCAD / USDC), which have fee levels of 0.05%. Further with Uniswap’s V3’s Concentrated Liquidity, it is possible to do relatively large trades, which only move the market by 0.1% to 0.2%, leading to an all in cost of 0.15–0.25%, again roughly ~90% lower than fiat FX. Further, advanced users can actually contribute liquidity to these DEXs and earn a share of those trading fees, although this does come with risks.

As these DEX’s can be plugged directly into the back end of payment and on-off ramp applications, the possibilities for highly efficient retail cross-border payment structures emerge like the Finoo example below.

Consider, a Brazilian student coming to Canada and looking to pay tuition there. Historically this would involve a laborious process of either setting up a Canadian bank account as a foreign resident or paying via a wire transfer in BRL incurring 7–8% FX fees to forcibly convert to CAD. Platforms like Finoo combine on-chain FX with on-off ramps in a single application. The student can KYC, convert BRL to QCAD for ~90% lower FX fees, and then pay university tuition in Canada right from QCAD using seamless integration with domestic rails. The Finoo app provides the wallet, access to the FX rails, and the payment capabilities all right within the application. This isn’t the distant future: it will be live in Q3 2023.

Opportunity #2: New Life for Institutional and Mid-Tier Digital Asset Exchanges

Let’s face it. The competition for the BTC / USDT trade is incredibly intense and there are enormous international exchanges that are going to win that business 9 times out of 10, sometimes without gold-plated regulatory processes. For exchanges in highly regulated jurisdictions catering to highly institutional counterparties, or those exchanges looking for different niches in which to compete, on-chain FX can be a highly lucrative specialization. There is a built-in advantage over existing FX shops due to digital asset capabilities. It also grants a differentiated value proposition to compete on a jurisdiction- by-jurisdiction basis if you can offer functionality and on-off ramps in domestic currency as well as payment and FX functionality connected in with “traditional” digital asset exchange functionality. Finally, it puts exchanges offering this functionality at the front end of a massive growth wave as the payment and FX space “tips” and updates all at once. Catching crypto trends and waves is one thing that can be lucrative in the short term, FX is universal and will be lucrative in the longest of terms.

Opportunity #3: Sizable, Accessible Arbitrage Opportunities for Hedge Funds and Traders

Arbitrageurs make the world turn. They ensure pricing parity and generally are the semi-hidden Wizards of Oz of financial markets. Whenever you need some hand-waving done on a financial structure, you can safely assume that if there is mispricing, arbitrageurs somewhere will find it and fix it.

In the digital asset space in particular, arbitrage has taken the form of:

1. Currency premiums on Bitcoin (the “Kim-Chi” premium in Korea, or the “Sake” premium in Japan)

2. The basis trade between spot and future BTC price and,

3. Arbitrage between different crypto exchanges

These arbitrage trades almost universally sprung up when crypto ran into some aspect of traditional finance that didn’t move at the same speed or had different dynamics and caused mispricing. The amount of infrastructural and speed changes when FX moves from legacy correspondent banking systems and T+2 settlement to instant settling, free flowing digital asset systems is going to be enormous. The arbitrage opportunities that will arise from this evolution will be generationally enormous as well.

Opportunity #4: “Infrastructural Optionality” For Corporate Treasurers and Asset Managers

While eventually all FX may occur digitally on a 24/7 basis, this will be a journey towards that outcome. In the short-term, for treasurers struggling with the time-zone window issues outlined above, granting programmable access to shift fiat currency into digital money at will to unlock 24/7 “infrastructural optionality” is an extremely powerful tool. Further, this infrastructural opportunity will allow treasurers to hold a much wider basket of currencies as they no longer need a bank account per currency, but simply a digital wallet which can hold a variety of stablecoins. This also can solve the back to back issues with securities transactions settling T+1 as asset managers are able to access currency on-demand. As institutional FX offerings such as that from Zodia Markets continue to partner with global clients, enhanced treasury functionality and optionality like this will become an extremely important route to adoption.

Further, there is the multi-currency and multi-jurisdictional automation angle. Putting it mildly, there is no real way to automate transactions that need to cross a border. Yes, Wise and Pay-Pal etc have APIs to manage a limited set of payment transactions, but true-scale automation will always be blocked by the correspondent banking system. A scale, liquid on-chain FX market unlocks almost complete freedom of where and what currencies can be held. With access to near instantaneous, programmable transactions across currencies, a treasurer’s toolkit for optimizing strategy grows exponentially.

Equally important is on who’s books assets can be held. Banks offer committed credit facilities, but that model doesn’t propagate through the layers to non-bank lenders or smaller credit providers. In those models, providers need to accumulate assets directly and hold them on balance sheet in the same currency and jurisdiction in order to provide fast and efficient access to capital for high velocity transactions, like supply chain finance or Buy Now Pay Later (BNPL). With automatable FX and global transactions, pools of lendable capital can be held anywhere in the globe and accessible via smart contract, drastically enhancing the efficiency of non-bank lending. These are not far flung theories either, QCAD will have one of the largest LatAm BNPL providers launching in Canada using instantly settling transactions to improve returns in Q3 2023.

Opportunity #5: Replicating Existing Fiat Infrastructure in Digital Money

As outlined in Uniswap and Circle’s paper in January 2023, using pure, automatable DeFi rails with instant settlement such as Uniswap can eliminate much of the settlement risk inherent in FX, there will still be a certain amount of settlement and/or counterparty risk for “non-automated” transactions. Whether these are simply transactions that need to be manually signed by one party, or transactions which are being transacted out of cold storage via a custodian, there may still be a timing gap for settlement of institutional FX transactions, even on-chain. The settlement risk period is drastically reduced given the lack of reliance on the correspondent banking system, but there is still some risk needed to be managed.

Into that breach can step institutional custodians, who are effectively able to replicate the “payment vs. payment” structure by acting as settlement agents. A further step will be to address the white space between the custodians by using smart contracts to replicate what, CLS provides in the traditional fiat realm.

CLS settles $6.5tn a day, almost all of which settles at least T+1, reducing a sizable portion of that to instant or at least T+0 settlement leads to cost savings in:

1. Lower margin requirements

2. Reduced interest expense

3. Lower operational and admin costs

4. Improved liquidity throughout the market

5. Enhanced capital efficiency

6. More agile trading strategies

While the total cost savings is very challenging to calculate, assuming a 4% cost of debt, the potential interest savings from removing $6.5tn a day of borrowing to bridge settlement is ~$700bn daily. Whether it is full de-risking using a DEX or instantly settling CEX, or simply a 24/7 on-chain payment vs. payment system, the efficiency and cost savings gains of speeding up the system are enormous.

Opportunity #6: Daylighting Value in Quietly Important Currencies Like CAD

There are certain currencies like CAD that quietly punch well above their weight in a global context. Despite Canada being the 9th largest economy by GDP and the 14th largest exporter in the world, CAD is the 7th highest traded currency in the global FX market (6.2% of daily volume) and the 6th largest currency held in foreign exchange reserves globally (2.43% of foreign reserves).

This highlights a trend over the last 25 years of currency diversification globally at the sovereign level, which is typically a glacial process. In 1999 FX reserves of non “Big Four” (USD, EUR, GBP and JPY) currencies was only 2%, by 2020 this was 10%. Of the non Big Four currencies which were added, CAD forms a full 23%,, only slightly behind RMB. Since 2020 CAD has continued to thrive growing by 40% to reach US$270bn in international FX reserves as of Q1 2023.

Several factors have led to this growth including:

1. Canada’s status as a stable, “soft power” liberal democracy without overly aggressive sanctions or regulators

2. A high “sharpe ratio” of interest rates to volatility leading to better risk adjusted returns for currency portfolio managers

3. A stable banking system with a demonstrated history of resilience to global financial crises

4. Enhanced global liquidity and technology leading to (relatively) lower carrying costs for diverse baskets of currencies

However, one factor that has explicitly NOT been driving the prevalence of CAD globally is its status as a commodities exporter. That market, not unlike digital assets, is still settled globally in USD. The result is that CAD-USD is one of the most active FX markets (5.5% of daily volume), on the back of revenues from commodities sales.

So, what are the opportunities of bringing digital CAD like QCAD to the global market?

1. Individuals by and large have the same diversification drivers as nation states: safety, stability, utility and return. It is highly impractical (and in many cases impossible) for an individual to hold 10+ fiat currencies in 10+ bank accounts. This can be rectified with a single digital wallet and, similar to sovereign CAD reserve growth as technology improved in the 2000s, we expect premium currencies like CAD to proliferate in individual holdings as access and liquidity grows

2. Global commodities pricing in USD have long been a hot button issue for sovereignty and are at the forefront of the “de-dollarization” charge, including the Saudi’s considering pricing all of their oil in RMB. A natural byproduct of the proliferation of digital money currency efficiency is the breaking of USD dominance and re-pricing and customization of commodities currency pricing. Canada, as the 4th largest global producer of oil, would stand to see a large increase in the prevalence of CAD as commodities contracts are settled directly in CAD.

Currencies like CAD have been quietly growing in importance and prevalence in the last 25 years for a variety of deep infrastructural reasons, all of which can be accelerated by reducing the frictions inherent in the global FX system.

Opportunity #7: Separation of Currency and Jurisdiction

As we outlined earlier, it is a somewhat underappreciated fact that each transaction in a currency generally requires a correspondent banking relationship in that country. “Eurodollars” or “Petrodollars”, which are USD held explicitly outside the U.S. and outside of Federal Reserve oversight are the exception that proves the rule. While this is frustrating from operational, cost and settlement time perspectives, sometimes it has larger sovereignty implications. Domestic banks are, almost by definition, extremely tied into the political and geopolitical situation of their home country. As outlined above, we have seen a continuing trend of diversification of reserves around the world and this paired with the signs of “de-dollarization” noted by JP Morgan earlier this summer.. This is likely not driven by the US Dollar’s waning utility, but ultimately by political pressures globally to reduce US influence on transactions, which may have been catalyzed by the US freezing Russia’s foreign currency reserves in February 2022.

With digital money, transactions no longer need to clear through on-shore domestic banks, allowing for currency transactions which are almost entirely divorced from the underlying jurisdiction. This clearly has pros and cons, as these sovereign controls have been used in combating international crime and as checks on aggressive nation states since before World War I. Enter Central Bank Digital Currencies, which aim to gain some of the efficiencies of digitization without losing the sovereignty of currency to the fray. CBDCs vs. other private issued forms of stablecoins are beyond the scope of this article, but remains an intensely relevant area of evolution.

Part 4: What Does it All Mean

Overall, we’re in the first inning of this evolution to a fully digital FX world, but until Q2 2023 we were still in warm-ups. Now:

1. There are meaningful global institutional players like Zodia Markets, Cumberland and many of their counterparties who are actively promoting and encouraging this fully digital money ecosystem.

2. There are some of the largest, fastest growing blockchain ecosystems in the world mandated to grow the volume and prevalence of non-USD digital money including QCAD and on-chain FX transaction volume

3. There is production-level technology to connect on-off ramps, on-chain FX, global KYC and payment structures together to create seamless UX experiences

4. There are open arbitrage trades between DEXs like Uniswap and centralized fiat-priced pairs like QCAD / USDC on exchanges like Shift Markets and others

5. There are institutional grade non-USD stablecoins organized in the Stablecoin Standard group like XSGD, BRZ, G-Yen, Poundtoken, BiLira, amongst others, which are aligned on this mission

6. Regulators globally are putting down policies around stablecoins, with MiCA in Europe, MAS in Singapore, and JFSA in Japan all publishing stablecoin guidelines, and Congress in the US developing a similar framework.

In the next 18 months we will see massive adoption from exchanges looking to gain a foothold in a rapidly growing space, but we will also see significant dollars flow in from hedge funds looking to capture the next significant arbitrage trade as FX goes fully digital. As Ernest Hemmingway said about going bankrupt “it happened slowly… then all at once”. This is the opposite. There is generational wealth to be created in putting the first round of infrastructure in place to fully modernize FX and we’re extremely excited to roll up our sleeves and dig in!

1. The Growth Potential of Non-USD Stablecoins — Cumberland (Paul Kremsky)

2. How DeFi Can Cut Costs and Improve Transparency in FX Markets — Uniswap and Circle

3. Building the Boring Stuff: Making On-Chain Payments and FX Sexy — Michael Casey, Alex McDougall, Gordon Liao

4. Finding Stability in On-Chain Cross Border Payments — Dante Disparte, Alex McDougall

The Seven Defining Opportunities in “On-Chain” FX was originally published in Stablecorp on Medium, where people are continuing the conversation by highlighting and responding to this story.

Transparency is a double-edged sword in Decentralized Finance (DeFi). Open-source code allows the community to access and review the code, building trust and accountability in the technology. However, the same reason that attracts people to DeFi can also leave the ecosystem vulnerable to exploitation if not constructed to meet security best practices and constantly maintained. Take the Wormhole exploit in February 2022 for example. An attacker exploited the use of a deprecated, insecure function to bypass signature verification and stole 120,000 ETH ($326 million USD). In 2022, YaaS Analytics estimates $2,638,605,490 bn USD was impacted by exploits on DeFi protocols, accounting for about 2.8% of average TVL (remember that number!). This is where the story usually stops though in the public consciousness. There is an incident, there is a headline number and then there is grumbling that “DeFi isn’t ready for primetime”. However just like when a traditional company goes bankrupt when a platform gets exploited, often the story is just getting started.

In the immediate aftermath of the Wormhole exploit, Jump Crypto, who had acquired the developer of Wormhole (Certus One) in August 2021, repaid participants all of their lost funds out of their own equity. Effectively a “parental guarantee” if we were to look at TradFi equivalents. That’s all well and good, but what if a platform doesn’t have a parent or foundation with a spare $320 million kicking around? In February 2023, Jump Crypto partnered up with Oasis, a multi-sig wallet developer, and “exploited” all 120,000 of the stolen ETH ($140 million USD) back from the original attacker, which any sophisticated “white hat” hacker could have theoretically undertaken themselves. As we said, the story is just getting started when the exploit happens. White hat hackers, protocol reimbursement, protocol intervention, recovered collateral, and good old fashioned “hacker gave it back”; the list goes on and on of how funds are recovered after attacks. In all, YaaS Analytics estimates about 28.7% of the funds lost are ultimately recovered (remember that number too!).

Coincidentally what was Moody’s default rate for speculative corporate debt in January 2023? 2.8%, the same as the exploits as a percentage of TVL in 2022 above. And what was Moody’s 5-year trailing recovery rate for unsecured high-yield bonds in 2020? You guessed it, just a shade under 30%. Default Rate and Recovery Rate are the holy grails of credit risk in traditional finance, yet when we start looking at DeFi it is more about “headline panic” and “no further questions please”. Clearly, defaults and exploits are not truly apples to apples nor are TradFi and DeFi, BUT it’s time to get past the hysteria and look at the real numbers when evaluating risk in the DeFi space.

Let’s dig in.

Methodology

We extracted our data from a number of existing exploit databases, namely DeFi Yield’s Rekt Database, DeFi Llama Hacks, Slowmist Hacked, and Halborn Blogs just to name a few, with data correct as of 13 March 2023.

Thereafter, we reclassified exploits into Centralized Finance (CeFi) for platforms such as FTX and Binance, and DeFi for platforms such as Uniswap and Compound. For CeFi platforms, we have excluded these events as even if the losses were related to an exploit (ie. Wintermute), those assets were still corporate assets, not direct user funds. We therefore consider these events as Credit Loss events and will analyze these separately in a crypto credit-focused article (also fascinating!).

Next, we further classified the exploited platforms into more specific categories, such as Dexes, NFT Marketplaces, Lending, and Bridges; utilizing DeFi Llama’s protocol categories. Additionally, we came up with our own rubric for classifying each Issue Type to help us get a better understanding of how a protocol was exploited.

We also identified exploits that had funds recovered and included how these funds were recovered to determine what were the predominant recovery methods employed by protocols.

Additionally, we excluded edge cases like Terra Luna / Anchor, which did not seem truly to be an “exploit” in the sense that we were looking to explore in this paper. Please see our multi-part series on algorithmic stablecoins and the Terra Luna event for more details. Overall, this filtering process allowed us to paint a clearer picture of how the funds were lost from each exploit.

The History of DeFi Exploits and Recovery

In total, since 2011 the DeFi industry had an estimated $5,973,900,547 USD of funds impacted across 763 recorded exploits, leading to an average of $7.82mm lost for each exploit. As mentioned previously, the percentage of funds recovered stands at $ 1,712,265,702 USD (28.7%).

Though only accounting for 2.1% of the exploits, the 16 exploits totaled up to $ 3,264,070,257 USD, accounting for 54.6% of the total amount of DeFi exploits. Less the Parity Multi-Sig exploit that happened in 2017, the massive exploits started happening during the meteoric rise of DeFi’s Total Value Locked(TVL) in the second half of 2021, where it reached a peak of $180.08bn USD total TVL on 2nd December 2021, starting with the Poly Network exploit on 8th August that same year.

Let us look at the top 5 exploits, which account for 32.5% of the total funds lost in DeFi, and how they affected the DeFi economy.

1. Ronin Bridge — $625,000,000 USD

• Category: Bridge
• Cause of exploit: Access Control — Backdoor through Axie Infinity
• Date: March 29, 2022
• Audited: Only audited after exploit.

2. Poly Network — $602,189,570 USD

• Category: Bridge
• Cause of exploit: Access Control
• Date: 10 August 2021
• Audited: Claimed to be audited by NCC Group, Certik according to Twitter user @WuBlockchain.

3. Wormhole — $326,000,000 USD

• Category: Bridge
• Cause of exploit: Smart Contract Vulnerability
• Date: 2 February 2022
• Audited: January 2022 by Neodyme

4. Euler Finance — $197,000,000 USD

• Category: Lending
• Cause of exploit: Smart Contract Vulnerability
• Date: 13 March 2023
• Audited: 9 audits by 6 unique auditors (Omniscia, Sherlock, Certora, Halborn, Solidified, Zk Labs)

5. Nomad — $190,000,000 USD

• Category: Bridge
• Cause of exploit: Smart Contract Vulnerability
• Date: 1 August 2022
• Audited: 9th June 2022 by Quantstamp, but reported that vulnerability was outside the scope of the audit firm.

Exploit Categories and Statistics

We wanted to identify which category of protocols was the most prone to exploits. Bridges have suffered some of the largest losses in DeFi exploits, accounting for 33.3% of all exploits. According to Chainalysis, Bridges often rely on a central storage point for the funds backing bridged assets on the receiving blockchain, creating an attractive target for bad actors seeking to exploit vulnerabilities in the protocol. The concentration of liquidity in a single point also exacerbates the impact of any successful exploit. We also observe that Access Control and Smart Contract Vulnerabilities are the 2 main causes of exploits, accounting for 65.1% of total exploit losses at $3,891,712,303 USD.

Despite boasting the highest TVL of any DeFi sector, standing at 18.09 billion USD across 741 protocols as of March 20th, 2022, according to DeFiLlama, Decentralized Exchanges (Dexes) only ranked third in total funds lost, with 102 exploit incidents. While the number of exploits was the third highest across all DeFi categories, it is possible that the sheer volume of Dexes on the market played a role in limiting the damage caused by any one exploit. With so many options available to users, funds are distributed across multiple platforms, reducing the impact of a single exploit.

Now that we understand where all these exploits are occurring, let us dive deeper into the history of these exploits.

Despite increased awareness, rugpulls continue to plague the DeFi space, with the most recent notable incident being the rugpull of Dictum Exchange. On December 31st, 2022, Dictum Exchange, a protocol built on the Arbitrum network executed a hard rug on its liquidity providers (LPs) shortly after airdropping its $DIC token. The LP contracts were constructed using a proxy upgradeability pattern, which enabled the deployment of new implementations with malicious code, including a burn() function that allowed its creator to drain liquidity from the contracts. Rugpulls are often hard to keep track of, as the creators usually delete their social media accounts and website after they pull all the funds. Thankfully, some members of the community such as DeDotFi help to warn users of these exploits and recover any funds if possible.

It is crucial for users to perform their own due diligence when with new DeFi protocols. Some of the simplest measures include conducting thorough research before providing liquidity and using non-custodial wallets so that you are the owner of your private keys. It is also recommended to stay up to date with the latest news and developments in the DeFi space, as well as to avoid sharing personal information or private keys with anyone.

Recovery of Funds

Almost 30% of funds lost in DeFi hacks to date have been recovered. Great! But how? In TradFi, generally when a company goes bankrupt a court liquidates all of its assets and those assets are used to pay back creditors pro rata. In DeFi……. it’s a bit more complicated.

The most common recovery method for stolen funds was when the hacker voluntarily returned the funds, accounting for $815,851,258 USD in recovered funds, or 47.6% of the total recovered funds. Some of the common reasons for Hacker Returned was because the hacker received a bounty, as in the case of the Crema Finance exploit, where the hacker negotiated a bounty of 45455 SOL (~$ 1.4 million USD) in exchange for returning all $ 8 million in stolen funds. Another reason for fund recovery was when the hacker turned out to be a White Hat, an ethical security hacker, which was seen in the Poly Network exploit, where the hacker decided to return the funds and send a message to the creators of the protocols. There are various other recovery vectors as well for funds lost to exploits, such as collaborating with blockchain security firms to identify and restrict wallet transactions, or stopping the blockchain altogether (remember the inaugural DAO hack? The good ole days).

In all, YaaS Analytics has identified recovered funds on 59 out of the 763 exploits in the ecosystem. Interestingly, when there was a recovery the size of the recovery was generally a pretty high proportion of assets, with the average recovery rate when there were funds recovered being approximately 76%. In 25 of those 59 scenarios, 100% of the funds were recovered.

Another interesting data point, while not exactly apples to apples, is based on a report published by Sophos on mid-sized businesses affected by data breaches. In about 46% of these cases, these more traditional tech companies turned to paying a ransom to recover data not that dissimilar to negotiating a Bounty with a hacker. That 46% is coincidentally the exact same proportion of exploit recoveries where the Hacker Returned the funds. Thankfully, hackers for DeFi protocols seem to be more generous than hackers in traditional businesses, returning approximately 70% of the exploited funds as compared to a 61% recovery rate of encrypted data.

How Can I Protect Myself?

One of the easiest ways to protect yourself in the DeFi space is to verify that the protocol you’re interested in has undergone a security audit by a reputable blockchain security firm such as Certik, Peckshield Inc, and Consensys Diligence. Out of the 763 exploits that occurred, only 52 of them were audited protocols, which is only about 7%! You can usually find audit reports for major protocols on their official websites or in their GitHub repositories. By doing so, you can be confident that the protocol’s codebase has undergone professional scrutiny and that any potential vulnerabilities have been identified and addressed. While audited protocols are not completely immune to exploits and the biggest hacks listed above were all on audited protocols, they do provide an additional layer of verification for users not well-versed in analyzing smart contracts.

In addition to audits, purchasing DeFi insurance is another way to protect yourself. DeFi insurance can cover a variety of risks, such as smart contract vulnerabilities, stablecoin de-peg risks, contract bugs, and economic attacks. By purchasing insurance, you can mitigate potential losses in the event of an exploit. It is important to research and choose a reputable insurance provider with a proven track record of payouts.

DeFi insurance is gaining popularity as more people seek protection in the unpredictable and volatile market, with around $322.83mm currently locked into insurance protocols according to DeFiLlama in 2023. To learn more about the various options available for protecting yourself with DeFi insurance, you can refer to a Twitter thread we shared in July about DeFi Insurance.

You can also learn more about protecting yourself with DeFi insurance by checking out our CEO Alex McDougall’s presentation on “DeFi: How to earn passive income with Crypto” at Coindesk Consensus 2022. In his talk, Alex discusses how to use DeFi insurance to safeguard your investments. You can find the video of the presentation on Yahoo Finance here and here.

There are also evolving new models such as Tranching as a Service platforms like Idle Finance, which offer junior and senior tiers of exposure on underlying DeFi and CeDeFi platforms that can provide another tier of first-loss capital.

You can also use some of the data from this report and our YaaS Analytics database to make better data-driven decisions about where risk is accumulating in the space and take extra precautions when using the riskiest types of platforms like bridges.

Finally, always think about who stands to benefit or is incentivized to protect these platforms if there is an attack. It is a pre-known piece of information that Jump Crypto was backing Wormhole and has sufficient resources to support fund recoveries. Similarly, if it is a platform on a newer protocol or one of the leaders on a protocol then that protocol has a strong incentive to step in and make people whole as well. There are no guarantees in this role, but it is similar to an implied parental guarantee for the subsidiaries of larger financial institutions when evaluating credit risk.

What’s Next For DeFi?

The transparent nature of DeFi no doubt exposes the vulnerabilities of a protocol to the public, however, with more blockchain security firms popping up in recent years, as well as the joy of open-source software where innovations can be shared instantly, exploits are becoming difficult. Furthermore, there have been success stories of exploit prevention and recovery of stolen funds through counter-exploits, such as BlockSec’s article on rescuing stolen funds as well as the previously mentioned Wormhole recovery by Jump Crypto and Oasis. The success stories of recovery innovations suggest that there is hope for blockchain security, and ongoing efforts to improve security measures are likely to yield positive results in the future.

Nonetheless, it is important to perform your own due diligence to ensure that you understand the risks involved in DeFi and take measures to protect yourself, such as hedging your assets with insurance and investing in professionally audited protocols. At YaaS Analytics, we are constantly monitoring DeFi Exploits and Recovery to generate a fully transparent risk-adjusted portfolio to help protect our assets as well as deliver the best data and research in the industry.

If you are interested in finding out more about YaaS Analytics, you can follow us on Twitter and sign up on our website for a free trial of our data streams!

By Alex McDougall and Ryan Tan

What Happens After the Hack? A Deep Dive Into DeFi Exploits and Recoveries was originally published in Stablecorp on Medium, where people are continuing the conversation by highlighting and responding to this story.

1. A Brief History of Algorithmic Stablecoins

2. The Rise of Terra Classic

3. The Collapse of Terra Classic

4. The Aftermath of the Terra Crash

The fallout resulting from the UST crash was, to say the least, quite immense. Almost every corner of the cryptocurrency industry took a huge hit post-crash. DeFi, for example, saw its total value locked in protocols drop as much as 59% from $205b on May 5 to $85b at the end of August 2022. It is important to note however that in many ways this significant drop in TVL is a feature of DeFi and not a bug. DeFi is entirely transparent and open so when yields drop, risk rises, DeFi insurance claims are paid out or if any number of events happen, users know about it immediately and are able to withdraw assets immediately. This is often in contrast to CeFi or TradFi where issues are only known months later and often disclosed too late for users to take appropriate risk mitigation strategies.

Luna Foundation Guard

Particularly devastated in the fallout of the Luna crash were the reserves of the Luna Foundation Guard (“LFG”), where billions of dollars in reserves were spent trying to defend UST’s peg. Total funds in the LFG reserves dropped significantly from around $3.33b immediately before the crash to around $78.13m at the time of writing, a 97.65% decrease. BTC reserves were most significantly depleted, dropping from 80,394 BTC to 313 BTC, a decrease of around $2.85b in value to $6.69m, or 99.8%. However, this depletion of the LFG reserves through selloffs did not cause the price of LUNA to rebound in the way that many had hoped. LUNA’s price dropped so dramatically that despite the total number of LUNA tokens increasing over 13,000% from 1,691,261 to 222,713,007, the value of these holdings has dropped around 99.98% from $123m to $23k. Pictured below is a graphic of the LFG’s reserves in December 2022.

Implications from the collapse of UST and LUNA meant that Terraform Labs and the Luna Foundation Guard had to take serious measures to try and salvage any additional parts of their operations. Many remedies were proposed in the immediate aftermath as potential solutions for how to move forward with UST and LUNA, but ultimately Do Kwon & Terraform Labs proposed a solution that was approved on May 25th; fork Terra without UST, essentially removing UST from the Terra ecosystem entirely. This move would also change the name of the current chain, now called “Terra Classic.” At the time of writing, LUNA’s price is sitting at $1.33, with a market cap of around $169m.

Since May, TerraForm has also put several measures in place to try and keep assets in their ecosystem while they examine the fallout. Specifically, Terra has been doing Airdrops of their LUNA and UST tokens, given to those who are still holding the assets as a reward for not selling them. These airdrops have happened twice, once on May 28th of this year and then once again on September 4th.

Do Kwon

Do Kwon, who of course founded and ran Terraform Labs, was most recently interviewed by Laura Shin on October 18th on the Unchained podcast, where he was asked about various topics including the numerous allegations against him, his involvement with Basis Cash and whether or not Terraform Labs cashed out billions of UST on Degenbox (a program created by Abracadabra for trading non-interest bearing tokens that supported trading UST for “Magic Internet Money” or “MIM” another algorithmic stablecoin), amongst other things.

For context, a South Korean court currently has a warrant out for the arrest of Do Kwon under charges based on the Capital Markets Act in Korea. As well, on September 26, Interpol issued a red notice for Do Kwon, requesting law enforcement worldwide to locate and arrest him.

When asked about this, Do Kwon states that the charges levelled against him by the South Korean government are not applicable under the Capital Markets Act due to the government not regarding cryptocurrencies as securities, instead stating that they are in fact politically motivated. Immediately afterwards, he claims that he has been operating in cooperation with the investigation against him, maintaining that he is not on the run, despite keeping his whereabouts unknown in spite of the arrest warrant and red notice.

Do Kwon admits to cashing out $2.7b worth of UST through Degenbox in exchange for MIM before exchanging the vast majority of this MIM for USDT and USDC. He claims that this exchange was an arbitrage mechanism rather than an attempt at cashing out.

When asked about his involvement in a previously failed algorithmic stable coin Basis Cash, Kwon maintains that “all I did was to join Telegram rooms and shitpost.” When repeatedly pressed about whether or not Terra investors would have had an interest in knowing that he had worked on a previous stablecoin that had failed, he avoids directly answering the question, repeatedly stating that “Basis Cash is not something that I designed or operated. It’s something that I encouraged.”

When asked about what he would do differently if he could go back in time to before the crash, the first thing Kwon mentions is that he would have tried to build BTC on-chain reserves earlier so that the reserves would have been more significant.

Contagion from the Crash

Unfortunately, the number of people and protocols affected by the crash is far too many to list in just one article. Rather than try to name all of those affected by this event, we will provide a breakdown of the three most notable fallouts that occurred in the wake of the Terra LUNA crash:

· Celsius Network

· Three Arrows Capital

· Voyager Digital

Each of these organizations have filed for some form of bankruptcy or insolvency in the wake of the Terra crash, with each having a unique ripple effect throughout the markets.

Celsius Network

Celsius Network is a crypto lending firm based out of NYC. Founded in 2017, Celsius worked on a ‘CeFi’ model, meaning that they took in investments and allocated from a central authority, rather than through a protocol using smart contracts such as Compound or Aave. At its peak, Celsius had upwards of $12b worth of assets under management, had issued loans amounting to almost $8b, and was worth about $3.25b at its most recent funding round — less than a year ago, when the crypto market was at its peak.

Celsius, while facing a large amount of scrutiny over the years, was backed by some very reputable firms, including the Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), who invested in mid-2021. For a long time Celsius was seen as a leader in the open-lending world, and the platform had nearly 2m users.

However, the market conditions shifting upon the collapse of Terra caused a massive ripple effect through the industry that the Celsius team would later dub the “domino effect”, eventually leading to their bankruptcy. Terra’s collapse caused a massive sell-off across the industry. This massive sell-off led to a bank run-style series of events where many Celsius users all at once requested their money to be withdrawn from the network, something Celsius was not able to accommodate. As a result of this, on June 12th Celsius froze withdrawals, swaps, and transfers in a move which stoked major fear among the 1.7m Celsius users that their assets may remain frozen indefinitely.

The Celsius fallout is still ongoing, and their team had been working to free up capital locked up in various loans to return to users. Celsius has laid off a significant amount of their staff, hired restructuring lawyers, and filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in the Southern District of New York. On October 13, 2022, a tool coined Celsius Networth publicly revealed customer losses in a game style leaderboard that retrieved private customer data, likely from the public bankruptcy court filing, further damaging their reputation. This tool revealed that Celsius owes around $4.7 billion to its users.

Three Arrows Capital

Three Arrows Capital (“3AC”) is a cryptocurrency hedge-fund based out of Singapore. Founded in 2012, 3AC was a massive institutional player who borrowed billions of dollars to fund trading, lending, and other operations. At its peak, 3AC managed about $10b, and did business with many of the largest CeFi players in the industry.

Much like many other CeFi lenders, 3AC would rehypothecate money posted as collateral for their loans in order to drive additional interest. Unlike other institutional desks however, 3AC would take these rehypothecated funds and lend them out to projects with higher risk profiles like DeFi platforms — including, of course, to Luna.

After the Terra Luna collapse, many creditors reached out to 3AC to inquire about their exposure to the collapse, with high-up people in 3AC including founder Su Zhu stating that there is “nothing to fear”and that their Luna positions are publicly known with no leveraged long positions. However, in mid-June Three Arrows Capital did in fact confirm that liquidations in their lending book did cause a 3AC collapse and resulted in insolvency of the platform. This collapse was seen as a surprise as many creditors were told that the exposure was minimized, and in early July 3AC confirmed that they had filed for Chapter 11 bankruptcy.

Currently, 3AC has appeared to have lost at least $3.5bn in total from at least 33 lenders, with many firms coming out publicly to confirm their specific exposure to the Three Arrows team including Genesis, BlockFi, Crypto.com, and Galaxy Digital. US regulators are still investigating the fallout and looking into whether 3AC mislead investors about the strength of its balance sheet as well as whether or not they had registered with the SEC. According to the filings, the founders whereabouts are still unknown, mimicking Do Kwon’s disappearance in the aftermath of the Terra Luna collapse.

Also worth noting in relation to the collapse of 3AC is the effects this had on the lending firms BlockFi and Genesis Trading. BlockFi took a significant loss to 3AC at the time of the crash, and was required to get a $250m revolving line of credit from FTX to be able to continue their operations.

Genesis required an injection of capital of around $140m from its parent company Digital Currency Group (DCG) to cover some of their losses in relation to 3AC.

Voyager Digital

Voyager Digital is a US based cryptocurrency brokerage company based in NYC. Founded in 2018, Voyager offered investors a secure way to trade over 100 crypto assets through their applications and earn rewards up to 12 percent on cryptocurrency loans.

In late June, it was reported that Voyager may be another victim of the DeFi contagion around the Terra, Celsius, and 3AC crashes. Voyager, it was reported, had lent out over $670m to Three Arrows Capital. Voyager also reported that Three Arrows Capital had failed to meet the necessary payments on its loans. This led to Voyager having to put a notice of default on Three Arrows Capital in early July. Crypto trading giant FTX and their venture firm Alameda Ventures offered a lifeline to Voyager, giving them a credit line of over $300m to help ease liquidity.

Currently, Voyager Digital is still facing the fallout of its bankruptcy filings around 3AC’s defaulted loan, and as of September 7th Voyager is at the auction block awaiting the selling off of its parts.

Market Conditions

As stated earlier, the fallout from the Terra Luna implosion caused a massive shift in the broader market conditions for cryptocurrency trading and lending. As mentioned previously, the TVL in DeFi has dropped upwards of 59% from its pre-crash high of $205b earlier this year.

Similarly, the number of loans at the biggest CeFi platforms have dropped off significantly as well. Genesis, who had nearly $15b in active loans as of March 31st 2022, had just $4.9b in loans by June 30th of this year. Genesis, like most of the largest CeFi players, had been growing their loan books continually throughout their entire operations, having had a positive quarter-over-quarter growth for all but Q2 of 2021 in their past 2 years of operations before the Terra Luna crash. It is important to note that this is simply the data from the Genesis Quarterly Reports on their lending book as of Q3 2022 and does not take into account any of the current context around Genesis and their decision to freeze withdrawals in the wake of the FTX crisis.

Interestingly, while both TVL in DeFi and total assets in CeFi have seen significant drop offs from their all-time highs, stablecoin volume has not been observed to have the same affect. Stablecoin market caps have been relatively stable across all chains, with the total stablecoin market cap only dropping about 8.8%, from around $170b at the start of May to around $155b now.

Another interesting dynamic to observe over time will be the market capitalization of both USDC and USDT. USDT briefly saw its peg be lost earlier in 2022, and with many questioning where Tether’s reserves are currently being held, and there may be a potential reversal in their respective market capitalization wherein USDC would become the dominant stablecoin. It’s important to note, however, that this trend has reversed quite significantly since May. Currently, USDT’s market cap islin around $69b while USDC’s market is at $43b, and there has been several large moves from competittos trying to gain market share back from USDC and USDT.

Broader crypto markets have also taken a hit from the succession of market crashes that occurred. About a year ago, crypto markets reached their peak in market capitalization, when all crypto market capitalizations surpassed $3t in total value. Crypto markets also had significantly higher volumes earlier this year, with 24 hour trading volume across all exchanges reaching as high as $300b. These days, the market is substantially less profound, with a market capitalization under $1t and 24 hour volumes of around $40b.

Impending Regulations

When the UST crash happened, it resulted in the loss of funds for countless individuals, very few of whom have been reimbursed. Losses of these sizes with this much publicity around them have brought forward a new focus on implementing better and more robust regulations to an ecosystem that has up until this point remained largely unregulated.

Around the globe, lawmakers are forming new regulatory frameworks to have better oversight over the market, with many lawmakers specifically eyeing a way to better regulate the stablecoin market and the DeFi market. In the US, regulators from both the Federal Reserve and SEC have come forward about wanting to have better oversight on the ways that stablecoins are made going forward. Many believe that these products being issued by private organizations while not having any reserves to back up their holdings present massive risks to investors who may not be aware of their risks and treat the products like fiat currencies.

As a result of this, several stablecoins have voluntarily come forward to detail exactly where their reserves are, including Circle’s USDC and Paxos’ USDP, and Binance’s BUSD. These efforts by stablecoin issuers have been a way for them to combat against the negative press that the industry has received as well as to prove exactly what assets are backing their currencies.

No matter what happens moving forward, it’s clear that the market is now facing the consequences of using stablecoins that are not properly regulated or reserved in ways to protect users’ assets. Investors are now looking to use products that regulators have sanctioned as compliant to the relevant risks that may be apparent, where they can be assured that their assets are backed up by some tangible value.

By Marc Doucette and Jack McKay

The Aftermath of the Terra Crash was originally published in Stablecorp on Medium, where people are continuing the conversation by highlighting and responding to this story.

1. A Brief History of Algorithmic Stablecoins

2. The Rise of Terra Classic

3. The Collapse of Terra Classic

4. The Aftermath of the Terra Crash

State of the Market Before the Crash

Prior to the crash, the crypto market was beginning to stabilize after a couple of bearish months. Bitcoin was trading at $36,000 and Ethereum at $2900 . On May 7th directly before the crash began, the Luna Foundation Guard’s reserves consisted of:

• 80,394 BTC
• 39,914 BNB
• 26,281,671 USDT
• 1,973,554 AVAX
• 697,344 UST
• 1,691,261 LUNA

This made the LFG the 7th largest single holder of BTC. These reserves had been most recently bolstered two days prior on May 5th, via a $1b OTC swap with crypto broker Genesis in exchange for $1b worth of UST, as well as a $500m purchase of BTC from the now insolvent crypto hedge fund Three Arrows Capital, also paid in UST. LUNA was trading at $86, down from its all-time high of $119 one month prior, while UST was holding its peg steady at $1 with a total market cap of $18.6b. As well, the total value locked in DeFi protocols was $200b at this time, down 20.6% from its all-time high of $252b in late December, but 9.5% higher than its YTD low of $181b in January.

Not the First Time

The most recent depegging event was not the first time that UST lost its peg. In fact, UST had previously lost its peg almost exactly one year ago in May 2021, when the price dropped more than 5 cents below its peg. The price began to depeg in the first week of April, when it dropped to $0.9944. UST continued to fluctuate between $1 and $0.995 for the next month and a half, before dropping to $0.9838 on May 20th, and then further dropping to $0.9457 on May 22. The price quickly recovered, and by the start of June, UST had regained its peg.

Market conditions at the time of this depeg were very similar to those at the time of the 2022 depeg. Within the weeks leading up to depeg, the crypto market was experiencing extreme volatility, with the price of BTC dropping 40.4% in the span of 2 weeks, falling from $58.2k on May 8th to $34.7k by May 22nd. Similarly, ETH had dropped even more dramatically, falling 49.6% from $4.17k on May 10th to 2.1k on May 22nd. As the price of LUNA began to fall, rapid liquidations on Anchor caused it to fall further. However, at this point the market cap of UST was only around $3b, and there were not nearly as many whales invested in the protocol. As well, many of the investors in the protocol were genuine believers and not simply driven by the attractive high interest rate offered by the anchor protocol. This made a ‘bank run’ less likely, thus a death spiral never initiated, and UST was able to naturally regain its peg by the start of July.

Notably, this depegging event marked the first time the total market cap of LUNA fell below that of UST. In the history of UST, this has only happened twice; during the May 2021 depeg and the May 2022 depeg. This meant that during these times, UST was not fully backed; all the LUNA in the ecosystem could be sold, and it would not be enough to cover the outstanding UST.

This ratio is notable because it illustrates how much LUNA can be burned in response to price volatility from UST. Soon after UST regained its peg in late June, this ratio rose back up, eventually reaching ~5, meaning that there was about $5 worth of LUNA in circulation for every $1 of UST. This remained the case until the November 2021 burning event.

November 2021 Burning

On November 9 2021, the Terra community voted to burn 89m LUNA tokens, roughly equivalent to $4.5b worth of LUNA, over the following weeks. This move, proposed by Terra co-founder Do Kwon, was designed to increase the supply of UST in the ecosystem, as well as to increase the value of LUNA by decreasing the supply. In response to the announcement, the price of LUNA shot up from $50 to $54. While this move did indeed lead to a higher valuation of LUNA, it also caused the ratio of LUNA market cap to UST market cap to fall. The November burning caused this ratio to fall from about 5:1 to almost 2:1 within a matter of months, drastically altering the supply relationship between UST and LUNA and lowering the volatility cushion inherent in UST.

The Beginning of the End

On May 7th at 9:44pm, Terraform Labs withdrew 150m UST from the Curve 3pool in order to get ready to fund the Curve 4 pool, which was to go live on Ethereum the week after. Prior to this withdrawal, there was about $650m UST in the 3pool. Terra, along with another growing algorithmic stablecoin FRAX, aimed to make the 4pool the most liquid trading pool on Curve. Terra had this goal in mind because of the way through which Curve Finance managed their pools; projects would compete to provide the deepest liquidity to their pools, with rewards being distributed in Curve’s native token, $CRV. The more CRV tokens a project holds, the more leverage they have to vote on how token rewards are distributed to the pools. This gives projects a huge incentive to add liquidity since the winning pool would generate higher yield on their stablecoins thus attracting more liquidity. Additionally, having a deep liquidity pool on Curve is especially important for an algorithmic stablecoin such as UST since it provides the deep liquidity necessary to maintain the token’s dollar peg. The removal of a large amount of UST from the Curve 3pool on May 7th made it more susceptible to disruption from a ‘whale’. Thirteen minutes later at 9:57pm, an anonymous wallet sold 85m UST into the Curve 3pool, causing an imbalance in the pool and causing UST to start to depeg. The wallet behind this swap has come to be known as “Wallet A”, and it is suspected that this swap was part of a planned attack on UST’s peg. It has become highly suspect as Wallet A, in addition to the 85m Curve transaction, also withdrew around 200m UST from Anchor on May 7th, and sold 108m UST on Binance causing UST to depeg on that exchange as well. Within one hour of this 85m UST swap on Curve, another trader swapped a total of 100m UST for USDC over the course of four trades further disrupting the pool’s balance. Terraform Labs responded by withdrawing another 100m UST from the pool in an attempt to rebalance the pool, but by this point the damage was done, and these large trades in quick succession had started to irreversibly break the UST peg.

Vive La Resistance

UST however did not go down without a fight, and multiple entities committed to repairing its peg. Chainalysis reported that three unidentified traders swapped a combined $480m USDT for UST across three trades on the Curve 3 pool. The first trader bought 276m UST on May 7 at 10:55pm, the second bought 108m UST on May 8th at 2:25am, and the third and final trader bought 96m UST on May 9th at 5:02am. Using data pulled from Dune Analytics from May 7th to May 24th, the graph below displays the peaks and valleys as attempts were made to rebalance the Curve 3pool but eventually the pool was drained of USDC/USDT/DAI as people sought to exit their UST positions.

The price continued to fluctuate slightly below its peg on May 8th, at which point the Luna Foundation Guard committed to loaning $750m BTC to market makers in order to defend UST’s peg and pledged another $750m in UST to buy back the BTC after the peg recovered.

On May 9th, the Luna Foundation Guard transferred 52,189 BTC to a counterparty in exchange for 1,515,689,462 UST. On May 10th, Terraform Labs sold a further 33,206 BTC on behalf of the LFG in exchange for an aggregate 1,164,018,521 UST. These trades briefly recovered UST’s peg, but by this point a death spiral had begun to initiate as fear and panic pervaded the market, and by late May 9th UST had once again lost its peg, this time permanently.

The Lunapocalypse

On May 9th at 11pm UST dropped to a then all-time low of $0.7693. Around this same time, LUNA was trading at $31.84, down from its pre-crash price of $87.4 days prior. The prices of both tokens never recovered; on May 10th UST experienced a brief resurgence to $0.9318 before dropping to $0.3063 on May 11th, with LUNA trading at $0.65 by 11pm on the same day. By May 13th UST was trading at $0.154 and LUNA was trading at $0.0001 and by June 1st UST was consistently trading below $0.02, while LUNA was trading at less than $0.00001, an effective drop of 100% from its pre-crash price.

The Perfect Storm

The vast majority of all UST in circulation was on the Terra blockchain, with about 18.7b, followed by 2b on Ethereum. Of the UST on Terra, over 72% was locked in Anchor. As such, Anchor was clearly the most influential player in UST’s ecosystem with the majority of UST holders depositing on Anchor to take advantage of the generous earnings of almost 20%. At the beginning of 2022, there was already a lot of negative sentiment in the community around Anchor and the lack of liquidity in the protocol’s reserves. True algorithmic stablecoins are a faith-based peg that relies on true believers of the system — what happens if your supporters get scared? May 7th brought about conditions that may be considered the perfect storm, with crypto markets beginning a downward trend, lower liquidity in the UST pools on Curve, Binance being hit with a large quantity of UST, and a few large withdrawals off Anchor totaling almost 2 billion. Withdrawals off Anchor continued at a steady rate and the TVL on Anchor went from $14b to $9b in less than 48 hours. In the span of one week, TVL dropped over 98%, from $16.75b on May 6 to $0.314b on May 13. Within one month of the crash, TVL in Anchor was sitting at $4.25m.

Looking at transactions on anchor occurring between May 7 and May 8 — around the time UST began to depeg, we categorize these transactions by amount, with the following classifications:

• Whales: > $5m
• Large: $1m — $5m
• Medium: $100k — $1m
• Small: $10k — $100k
• Very Small: < $10k

From the total hourly redemptions graphed below, there are two big spikes in total redemptions, the first occurring on May 7 at 10pm and the second, larger spike occurring on May 8 at 1am. These spikes correspond to $480.5m and $723.7m in redemptions respectively. Notably, the composition of the transactions making up these spikes differs greatly, with whale transactions comprising only 47.2% of the first spike compared to 82.1% of the second. This means that the second spike marked a huge rush for whales to get their money off of Anchor. Typically these larger wallets are more likely to have had built-in alarm systems that were able to react to the depegging event in order to get out quickly.

The Rush to Exit

There were a couple main options through which people could exit their UST positions; through the Terra protocol (basically this acted as an algorithmic central bank where 1 UST could always be swapped for $1 of LUNA) or at the open market such as decentralized exchanges (eg. Curve pools, Terraswap) and centralized exchanges (eg. Binance, OKCoin). With the mass exodus off Anchor beginning and UST down to 98.5 cents, fear took hold and the number of users trying to exit their positions grew rapidly.

Exiting at the Protocol

As discussed in previous articles, UST is a seigniorage style algorithmic stablecoin, with a sister token LUNA that is used to absorb price volatility from UST. It does so by expanding or contracting the supply of UST by providing arbitrage opportunities to users. When the price of UST drops below $1, holders are able to sell their UST back to the protocol in exchange for $1 worth of LUNA. The protocol then burns the repurchased UST, lowering the supply and thus increasing the price. The converse is true if the price of UST goes above $1. Users can then buy newly minted UST from the protocol in exchange for $1 worth of LUNA. This then expands the supply of UST on the market, and thus lowers the price back down to its peg.

Due to the way the protocol functions, since the price of UST was dropping, rather than sell on the open market, UST holders would try to become whole at the protocol through LUNA. There was a rush to sell their newly minted LUNA since LUNA’s price was already crashing. Additionally, there was a cap on how much UST can be burned daily (thus LUNA minted) at the Terra protocol which increased the already intense sell pressure for UST. The Terra blockchain could also only handle so much activity and ‘panic selling’ ensued as the Terra blockchain became clogged. The number of UST burn requests at the protocol skyrocketed to more than 50,000 on May 11th, compared to an average of 1000 on a normal day.

Using data pulled from Flipside Crypto, graphed below is the number of LUNA minted and UST burned at the protocol between April 1 and May 31. Here we note the predictably massive spike in mints and burns around the time of the crash. On May 11, Do Kwon revealed plans to implement community proposal ‘1164’, which proposed increasing the minting capacity of LUNA from $293m to over $1.2b, allowing for LUNA holders to absorb the volatility from UST more quickly. However, by increasing this minting capacity, the price of LUNA would become susceptible to dropping even further. This announcement allowed copious amounts of LUNA to be minted causing further inflation and LUNA’s price to drop even further. As a result, on May 12 Terra was forced to halt their blockchain at a block height of 7603700. This halt lasted for 2 hours, and was soon followed by LUNA hitting an all-time minting peak of 5.88t tokens minted on May 13.

The Osiris of This Meltdown: Curve Pools

We know that the initial events that set the depeg into motion (Terra’s 150mm UST withdrawal, Wallet A’s 85mm UST selloff) occurred on Curve. In order to move UST to the Curve pool, users would be required to bridge their UST to Ethereum using one of the Terra/Ethereum bridges. The most popular was through Wormhole. The chart below displays the number of users bridging UST to Ethereum through Wormhole each day. This number peaked at 56k on May 11, followed by 55k on May 12, before steeply dropping to just 6.5k on May 13 as the supply on curve pools were drained.

At the time of writing, the UST + USDC/USDT/DAI balance in the 3pool stands at $474k, down 99.96% from its pre-crash total of $1.2b.

Binance

UST’s depeg occurred across multiple exchanges. Wallet A’s 85mm dump of UST on Curve caused UST’s price to begin to teeter on that platform, but Wallet A didn’t stop there; they proceeded to offload a further 108mm UST on Binance, causing the price to depeg on Binance as well. This naturally led to capital flight on Binance as users sought to exit their UST positions. Binance offered several UST pairs on their platform such as UST for BTC, UST for BUSD and UST for USDT. Using market data pulled from Binance, we examine one of the most popular of these swaps; UST for USDT. Graphed below is the number of swaps per hour from the start of the depeg on May 7 until Binance froze UST trades on May 13. Here we see that there were very few swaps for most of May 7 with a brief spike of 18.5k trades from 10–11pm, before dying back down throughout May 8. There were relatively few trades for the majority of May 9, before a huge spike from 5.6k trades between 6 and 7pm to 47.5k trades from 7pm to 8pm. Swaps continued to rise during May 10 and into May 11, where the number of hourly swaps hit its all time high of 216k between 6 and 7am. This indicates that it was the morning of May 11 where alarm bells really began to sound off on the UST crash leading to a frenzy of swaps.

Most interestingly, plotting the average number of UST swapped per transaction per hour gives us a graph that appears almost like an inverted version of the first graph, with by far the largest transactions (in terms of token quantity) occurring before May 10, and especially concentrated around the evening of May 7. This indicates that bigger players were the first the liquidate their UST positions, doing so well before the average user. The spike in average UST swapped per transaction seen on the 7th is likely a result of the 108m dump done by Wallet A. Indeed, the average UST tokens swapped per transaction before May 10 is 10220.39, compared to 1809.07 after; meaning that transactions before May 10 were on average 5.64 times as large as those taking place on or after May 10.

Should They Have Known?

Terra was very aware that they neeeded to collateralize UST at least partially in order to support the peg amid volatile market conditions, thus the creation of the Luna Foundation Guard (LFG). They were also aware they required deeper on-chain liquidity to help stabilize the peg thereby announcing the creation of the Curve 4pool. Furthermore, Terra had plans of reducing the high interest yield on Anchor as it was continually draining the reserves since the actual interest rates from the protocol’s borrow side was not enough to support the depositors. Whether it was a planned attack on a vulnerable ecosystem or too little support too late, one thing is for sure — all ‘true’ algorithmic stablecoin interations, (those backed only by smart contracts and algorithms), have failed to date due to their inherent vulnerability in volatile market conditions.

Of the 18.67b UST circulating prior to the crash, 72% of holders were invested in the Anchor protocol. Thus the main driver of UST adoption clearly was to farm yield off the astronomical rates provided by Anchor, rather than a belief in the future of the currency and protocol. These users are less likely to stick with a protocol through periods of adversity and as such were far more likely to jump ship as soon as UST’s price began to wobble. As these users exited their positions, they caused the price of UST to drop further, perpetuating the fear surrounding the protocol and motivating even genuine believers to withdraw their money as it became less and less likely that UST would recover. When mass sell-off ensued it clogged exchanges, congested the blockchain and thus causing the sell pressure to skyrocket until a ‘death spiral’ began.

Almost 60b was wiped out in a span of days causing ripple effects throughout the entire crypto ecosystem and sparking important conversations about controls and regulations in the industry. In our next article we discuss these effects and the aftermath of the UST crash.

By Jack McKay and Julie Paterson

The Collapse of Terra Classic was originally published in Stablecorp on Medium, where people are continuing the conversation by highlighting and responding to this story.

1. A Brief History of Algorithmic Stablecoins

2. The Rise of Terra Classic

3. The Collapse of Terra Classic

4. The Aftermath of the UST Crash

Note that at the time of writing, the original Terra Chain has been rebranded as Terra Classic and Terra has been relaunched as Terra 2.0 after the UST collapse. When we refer to Terra throughout this article, we are referring to Terra Classic.

What is the Terra Blockchain?

The Terra blockchain is a proof-of stake public blockchain with mainnet launch in April 2019. Development on Terra began in 2018 by the South Korea based Terraform Labs, a software development company founded earlier in 2018 by Do Kwon and Daniel Shin. Terra was initially intended to be an e-commerce platform, and to create a group of price-stable cryptocurrencies pegged to the world’s major fiat currencies, such as USD, EUR, JPY in order to facilitate transactions and address the regionality of money. Included among these fiat-pegged currencies was what Terra considered their flagship currency TerraSDR, that was pegged to the International Monetary Fund’s (IMF) Special Drawing Rights (SDR) currency basket in order to offer a cryptocurrency that was superior in reducing global risk.

In Terra’s white paper, the founders postulate that ‘[s]ince the value of a currency as a medium of exchange is mainly driven by its network effects, a successful new digital currency needs to maximize adoption in order to become useful.’ The white paper further goes on to state that there is great demand for a decentralized, price-stable currency in both fiat and blockchain economies, and that if such a currency was successful, it would be the best use case for cryptocurrencies. Thus, it would seem from the beginning that maximizing user adoption was one of the primary objectives of Do Kwon and the other founders of Terra.

The price of Terra stablecoins such as UST are algorithmically maintained by the protocol’s native token LUNA, which absorbs the price volatility of Terra stablecoins through a burn & mint mechanism. Simply put, new UST would either be minted or burned depending on whether UST was trading above or below its intended price. This mechanism would expand or contract the supply of UST, thus decreasing or increasing the price, respectively. We go more in-depth on the mint and burn mechanism used by algorithmic stablecoins in our previous article, The History of Algorithmic Stablecoins.

In addition to this, LUNA is also the staking and governance token, where LUNA coin holders can stake LUNA for rewards and use its weight to vote on governance proposals.

The Growth of UST

TerraUSD (UST) — now known as TerraUSD Classic (USTC) — was one of the algorithmic stablecoins running on the Terra blockchain that was pegged to the US dollar. UST launched in September 2020 and experienced meteoric growth during 2021, exploding from a market cap of $182mm at the start of January 2021 to $16.5 billion by the end of March 2022, leading UST to become the 4th largest stablecoin on the market, behind USDT, USDC and BUSD. The price of LUNA soared from $0.63 to $109 over the same timeframe — an increase of 17300% — with LUNA’s market cap peaking at $41.05b on April 3rd 2022, making it the 6th largest cryptocurrency by market cap.

While this growth was aided by the crypto bull market of 2021, it was predominantly driven by Anchor, a savings protocol on the Terra blockchain that promised an annual percentage yield (APY) of almost 20% on UST deposits. This astronomical APY led investors to flock to the Anchor protocol in droves, propelling Anchor to become by far the most dominant protocol on Terra. On May 5th, the total value locked (TVL) on the Terra blockchain was $29.65b; on the same day, there was $17.05b locked on the Anchor protocol, meaning that 57.5% of the value on Terra was locked in Anchor. As well, on April 23rd it was reported that up to 72% of all UST in circulation was deposited on Anchor. Thus, it is clear that the majority of DeFi activity on the Terra blockchain was occurring on Anchor.

Anchor Protocol

The Anchor protocol, launched in March 2021, was the biggest driver of user adoption on Terra. Anchor is a savings, lending and borrowing platform built on and for the Terra blockchain. In their whitepaper, Nickolas Platias et al describe Anchor as “a savings protocol on the Terra blockchain that offers stable yield powered by block rewards of major Proof-of-Stake blockchains.” Anchor differentiated itself from other DeFi savings protocols by offering a much higher, non-cyclical interest rate wherein lenders would deposit UST into the Anchor pool, and then would earn up to 20% APY on their deposit. UST in this Anchor pool would then be lent out to borrowers for a period before eventually having to be repaid. Borrowers would have to put up significant collateral in “stakeable” digital assets, which Anchor would then lock up to generate yield through a liquid staking mechanism to pay lenders. Basically, the staked tokens would be liquidated by the Anchor protocol into UST for depositors in order to pay them the target earnings of 20%. As well, Anchor incentivized borrowing by paying out rewards with its native token ANC. This idea of earning while borrowing was an incentive used to drive early adoption of the protocol. Although you had to over-collateralize your loan as a borrower on Anchor as well as pay high interest relative to other lending platforms, the ANC rewards generated through borrowing offset these fees. This effectively allowed the borrower to earn while borrowing. The stable high interest rate was incredibly enticing to investors, and when combined with this idea of earning while borrowing resulted in rapid growth for the protocol and UST. The protocol surpassed a whopping 4 billion TVL within the first 6 months of launch.

The Issues with Anchor

There were a number of fundamental issues with Anchor as a lending protocol. First, the 20% deposit interest was so attractive that it led to an imbalance between borrowers and lenders; this got to the point where by January 2022 there was one borrower for every 4 lenders. Additionally, borrowing always tends to dry up when markets are in a downward trend — as seen at the end of 2021 when markets started to cool off. UST adoption was increasing, deposits on anchor were increasing but borrowing — and thus collateral — was decreasing at a staggering rate. Borrowing and lending algorithms such as Anchor depend on borrowers putting down collateral, with this collateral then being staked by the protocol. The rewards from this staked collateral are then combined with the charged interest from borrowers and used to feed the depositors earnings. The discrepancy between the borrowers and lenders caused rapid depletion of the Anchor reserves, forcing Terraform Labs to continuously inject UST into these reserves in order to maintain the high yield rates promised to the lenders. The true yield was estimated to be lower than 8%, less than half of the promised yield, which in reality was simply a marketing ploy to drive user adoption.

This marketing scheme had another negative effect on the Anchor protocol; it created synthetic demand. This means that most users invested in Anchor and ultimately UST did not necessarily believe in the product, but instead were only invested to turn a quick profit. This left Anchor especially vulnerable to a bank run, as these users are more likely to withdraw their UST at the first sign of trouble in order to minimize losses. Thus, when the price of LUNA began dropping, a death spiral quickly initiated as investors rushed to withdraw their UST. Evidence of this synthetic demand can be found by looking at what borrowers would do with their ANC rewards. Using data pulled from Flipside Crypto, illustrated below is the proportion of Anchor borrowers that sold their ANC rewards within 7 days of receiving them for rewards paid out between January 1 and May 1. Rewards were considered sold only if the exact reward amount was swapped entirely for UST, and only users borrowing on Anchor were considered. Finally, only ANC rewards that were sold on Anchor or Astroport (an AMM built on and for the Terra blockchain) were considered. Here we see that in the 4 months leading up to the UST crash, 39% of borrowers would sell their ANC within a week. This reinforces that much of the user demand for Anchor was indeed synthetic, as many of the users borrowing from the protocol opted to cash out their rewards rather than hold a stake in the protocol. Hence, despite its explosive growth, demand for Anchor was primarily driven by its astronomical rates rather than a belief in the future of the protocol.

Trouble on the Horizon

In May 2021, while cryptocurrency markets were enduring a downward trend UST experienced its first major depegging event when the price dropped more than 5 cents below its peg. The price began to depeg in the first week of April, when it dropped to $0.9944. UST continued to fluctuate between $1 and $0.995 for the next month and a half, before dropping to $0.9838 on May 20th, and then further dropping to $0.9457 on May 22. The price quickly recovered, and by the start of June UST had regained its peg. This incident sparked fear in the ecosystem and questions began to persist about the sustainability of a true algorithmic stablecoin peg during volatile market conditions.

On January 19 2022, Terraform Labs announced the creation of the LUNA Foundation Guard (LFG), a non-profit organization founded with the goal of maintaining and safeguarding UST’s peg to the US dollar. Terraform Labs realized that they needed to begin building reserves in order to better insulate UST’s peg, and so they began accumulating assets via the LFG. According to Terraform Labs, the LFG was “mandated to build reserves supporting the $UST peg amid volatile market conditions” as well as to “allocate resources supporting the growth and development of the Terra ecosystem” through grants. In truth, by this point Terraform Labs was very aware that they should move away from a true algorithmic stablecoin model and should begin to collateralize their asset. Seen below is the makeup of the LFG’s reserves as of April 2022, immediately before the crash.

Here we see that the vast majority of reserves were held in BTC, followed by LUNA and AVAX as the only other reserves above 1%. Note that ~98.5% of the LFG’s reserves were comprised of volatile cryptocurrency, with USDC and USDT as the only stablecoins. While this has some benefits, such as greater decentralization, it also comes with downsides, namely the volatility of the crypto market means that the value of these reserves can quickly change and the market volatility that would cause the reserves to be used would be correlated with the value of the reserves themselves. As well, crypto assets are more vulnerable to price manipulation than traditional fiat assets.

Do Kwon had publicly stated that the LFG planned to bolster its reserves to $10b by the end of the 3rd quarter. However, time ran out and these reserves were not enough to protect UST’s peg when the next round of volatility came. While UST began to temporarily fluctuate from its peg May 8th, 2022, Tuesday May 10th, 2022 marks a shocking and tragic day for many as LUNA and UST dropped to $16.87 and $0.68 respectively, thus beginning their ultimate downward spirals. By Friday, May 13th, both LUNA and UST had flatlined, dealing a 40 billion blow to LUNA and UST holders with fallout triggering one of the most shaking crashes in crypto market history.

In our next article, we will further delve into the crash of UST, investigating how and potentially why it occurred as well as a statistical analysis of the factors behind it.

By Jack McKay & Julie Paterson

The Rise of Terra Classic was originally published in Stablecorp on Medium, where people are continuing the conversation by highlighting and responding to this story.

1. A Brief History of Algorithmic Stablecoins

2. The Rise of Terra Classic

3. The Collapse of Terra Classic

4. The Aftermath of the UST Crash

With the recent implosion of Terra Luna, many in the industry are wondering what the future holds for algorithmic stablecoins. Instead of postulating about the future, this article will instead look back on the history of algorithmic stablecoins, examining previous failed algorithmic stablecoins and posing answers to some of the most important questions around algorithmic stablecoins today.

What is an Algorithmic Stablecoin?

Stablecoins and stable assets are some of the most interesting applications of blockchain technology, taking advantage of all the benefits of a cryptocurrency — decentralization, security, low transaction fees, no intermediaries — while avoiding the foremost downside; the price volatility. The hurdle to developing a successful stable asset lies in the price stabilization mechanism (also known as the pegging mechanism); how does the stable asset maintain its peg to the relevant reference asset?

In general, stable assets can be classified as either algorithmic or collateralized, both of which are targeting “stability”, but have extremely different use cases, functionality and fundamentals. As their name suggests, collateralized stable assets are backed entirely by collateral held in reserve. Collateralized stable assets aim to generate stability either by creating a tangible link to a “traditional stable asset” like a fiat dollar or a deposit in a bank, or by backing the stable asset with an “overcollateralized” amount of a less stable digital asset (like Ethereum) to absorb volatility. Stability is the goal at all costs and this lends these assets simplicity and greater utility in payments and other high growth use-cases of today. However these models are not necessarily the most capital efficient. This has led to a wide array of experimental stable models which seek to solve the stability vs. capital efficiency dichotomy. This article series will be focused on these algorithmic experiments, but we will return in a follow-up series to the here and now and dive into the leading collateralized stable assets including suggesting some alternative nomenclature to clearly delineate between the two.

An algorithmic stablecoin is a type of stablecoin that relies on a price stabilizing algorithm to maintain its peg to a reference asset, such as the US dollar. Algorithmic stablecoins are usually divided into seigniorage style, rebase style or fractional style algorithmic stablecoins.

A popular type of algorithmic stablecoin is the seigniorage style stablecoin. A true seigniorage stablecoin holds its peg strictly using algorithms without needing any collateral. This type of stablecoin typically consists of two tokens; the stablecoin and a second, free-floating cryptocurrency which is used to absorb the price volatility from the stablecoin by providing users with arbitrage opportunities; users can always buy or sell the stablecoin at its intended price, with payment being sent or received in the form of the second token. To illustrate this process, we will use a fictional stablecoin STBL, with a stabilizing cryptocurrency CRYP. Assume that STBL is pegged to the US dollar, such that one STBL token is worth $1USD.

- If STBL begins trading on the open market at $1.10USD, users will then be able to exchange their CRYP for STBL from the protocol at a rate of $1USD per STBL; this means that users will effectively be paying $1 for an asset worth $1.10. This in turn will expand the supply of STBL, as the protocol will mint more STBL to sell to users, which in turn will cause the price of STBL to drop back down to $1. The thought process behind this mechanism is that users will continue buying STBL until it is no longer profitable to do so — which will occur when the price of STBL reaches $1.

- The converse is true when the price of STBL on the open market drops below $1; say STBL is currently trading at $0.90. In this case, users will be able to sell their STBL back to the protocol in exchange for CRYP, at a rate of $1 per STBL. This means that users will be effectively paying $0.90 for an asset worth $1. The protocol then burns the STBL it buys back, thus decreasing the supply of STBL and in turn increasing the demand, causing the price to go back up.

Note the difference between the price of STBL on the open market and on the protocol; users can always buy STBL from the protocol at exactly its peg and then trade it on the open market at whatever its current price. In this way, the protocol functions similar to a central bank in traditional finance. This function is what allows for arbitrage opportunities. Figure 1 illustrates how this algorithm works to raise the price of STBL in the event that it should drop below its peg. The thinking is that in this case, users will continually trade in their STBL for $1 of CRYP for as long as it is profitable to do so — while STBL is trading at less than $1. Thus, this form of algorithmic stablecoin relies predominantly on its users to maintain the coins peg.

Why Algorithmic Stablecoins Have Failed Repeatedly

The value in stablecoins is based on their stability; if a stablecoin cannot consistently maintain its peg, it is no longer stable and will become worthless. Non-collateralized algorithmic stablecoins are inherently vulnerable in that the only thing maintaining their peg is an algorithm. According to a paper by Dr. Ryan Clements , there are three main factors that affect the efficiency of these algorithms and thus the stability of a stablecoin:

Market Demand & Volatility: As with any product, the conditions of the relevant market can have drastic effects on the efficiency of the product. Due to the implicit volatility of the crypto market, massive shifts in the market can occur in short periods of time. Algorithmic stablecoins rely on a specific level of demand to operate successfully. Support for financial products is not always guaranteed especially in volatile market conditions. While these algorithms can be stress tested, it is impossible to predict the entire range of responses the algorithm could have to different market conditions.

Independent Actors: Previous iterations of algorithmic stablecoins have relied on an even less predictable factor to maintain their peg; independent actors. Each of the aforementioned failed stablecoins relied on independent actors to maintain the stablecoins peg through providing these actors with monetary incentive through arbitrage opportunities. While it is usually safe to assume that users will act in a way that they believe will maximize their earnings based on the information available to them, human behavior is erratic and cannot be perfectly predicted. (Alternatively, humans will typically act in a way that they believe will maximize their own profits given the information available to them, and this does not always coincide with what will best help the protocol, ie death spirals).

Price Information: In order to provide people with these arbitrage opportunities, protocols also require fast, reliable and up-to-date price information such that people are appropriately incentivized to stabilize the coin’s price. While price oracles usually provide accurate price information, most report prices periodically instead of continuously. This leads to slight information delays which, in the event of a crash or attack, can prove catastrophic.

Thus, the three fundamental building blocks upon which stablecoins rely to maintain their peg — market conditions, independent actors, and quick, reliable price information — are all hard to predict and indeed ‘unstable’, and so the convergent reliance on these three factors leaves algorithmic stablecoins to be inherently vulnerable.

Previous Failed Algorithmic Stablecoins

Basis Cash (BAC): Basis Cash launched on Ethereum in December 2020, to much excitement and anticipation. However, despite the positive sentiment surrounding the stablecoin, BAC never managed to consistently maintain its peg to the US dollar, frequently experiencing wild fluctuations before crashing to $0.30USD by February 2021. BAC never recovered, and currently trades at $0.0061USD. Interestingly, it was recently reported by CoinDesk that Do Kwon, the founder of Terra, was also behind Basis Cash, with him and the other founders launching it under the pseudonyms “Rick” and “Morty”.

Empty Set Dollar (ESD): Empty Set Dollar was another seigniorage style algorithmic stablecoin launching in late 2020, reaching a peak market cap of $560mm in December 2020, before collapsing to $91mm a month later, and with a current market cap of $650k at the time of writing.

Iron Finance: Launched in June 2021, the Iron Finance stablecoin (IRON) was a stablecoin pegged to the US dollar, and was the first partially collateralized stablecoin. It was another example of a seigniorage style stablecoin, and was launched alongside a standard token, TITAN, which was used to absorb the price volatility of IRON. As investors bought into the protocol, the price of TITAN boomed, leading whales to sell their TITAN in droves in order to realize profits. This caused the price of TITAN to drop, leading smaller investors to begin panic selling, causing IRON to lose its peg and thus initiating a ‘death spiral’, in what is considered the first major bank run in crypto.

There were two main factors that enabled this collapse: Partial collateralization and the lack of a proper price stabilizing mechanism. Iron Finance was only partially collateralized, meaning that the value of the assets they had in reserve totaled less than the maximum possible loss by the protocol. This meant that when users began panic selling their IRON, the protocol did not have enough reserves to pay out all of its users, further fueling fear and perpetuating the death spiral. As well, the lack of a proper price stabilizing mechanism meant that Iron Finance relied on a price feed oracle to relay the price of the tokens so that the protocol could then provide the appropriate arbitrage opportunities. The issue here was that the price feed oracle relays prices periodically instead of instantaneously; this meant that once the price of TITAN started to collapse, the delay between the reported price and the actual price meant that arbitrage opportunities were unprofitable, thus disincentivizing users from stabilizing the price. Because Iron Finance relied on users to stabilize the price, this lack of incentive caused further sell-offs and accelerated the death spiral. While the price of IRON did eventually restabilize, it did so at an insignificant market cap, and the coin has since faded into obscurity.

Terra Luna: On May 7th, the algorithmic stablecoin UST lost its peg to the US dollar, in what is considered one of the biggest crashes in crypto. On the morning of May 7th, UST had a market cap of $18.79B USD; at the time of writing this figure currently stands at $84.58mm, marking a decrease of 99.5%. Luna (now Luna Classic — LUNC), the stabilizing coin to UST, dropped from a high of $73.89 on May 7th to a current price of $0.00005796, effectively a 100% decrease, and UST currently sits at $0.0423. In the next article, we will discuss the meteoric rise of UST, including the factors that led it to become one of the biggest stablecoins on the market.

A Light in the Dark

Despite the previous failed iterations, it’s not all doom and gloom for algorithmic stablecoins. At the time of writing, one example of an algorithmic stablecoin that has experienced continued success and stability is RAI, a decentralized and non-pegged stable asset launched in February 2021 by blockchain startup Reflexer Labs. Defined by RAI co-founder Ameen Soleimani, “RAI is an asset backed only by ETH, governance-minimized, and programmed to maintain its own price stability without needing to peg to an external price reference like the USD.” Thus far RAI has been generally successful in its endeavor for price stability, with the price fluctuating a maximum of ~5.5% over the last year, between $2.949 and $3.1152.

RAI relies entirely on an algorithm to maintain stability and has been designed such that minimal governance is required. It was initially launched with the goal of becoming an alternative to pegged stablecoins with use cases as collateral and as a stable reserve asset. RAI has both an open market price and a redemption price, the latter of which is the price at which RAI can be redeemed at in exchange for ETH. RAI achieves stability via an algorithmic controller that automatically sets a redemption rate on its tokens such that when the open market price of RAI deviates from its redemption price — in this case $3.14 — people are incentivized to return it to its target price. This algorithmic controller is called a PID Controller, which is a control loop mechanism that is widely used in industrial control systems amongst other things.

Why Do People Think Algorithmic Stablecoins Are the Holy Grail of Decentralized Finance

Algorithmic stablecoins have often been referred to as the ‘Holy Grail’ of decentralized finance. This is because a successful stablecoin has the potential to be incredibly capital efficient — they require very little capital relative to the potential value they can generate. Figure 2 shows the positioning of algorithmic stablecoins in the stablecoin trilemma. Algorithmic stablecoins are incredibly capital efficient due to the lack of collateralization — meaning that they require very little capital to produce $1 of value — as well as fully decentralized. Because of this, algorithmic stablecoins have huge potential, but for the reasons outlined above, many have thus far consistently failed when it comes to maintaining price stability. Despite this, they also have the greatest potential of achieving all three aspects of the trilemma. Fiat collateralized stablecoins are fundamentally centralized, as there must be a central entity controlling fiat reserves. Similarly, crypto collateralized stablecoins are fundamentally capital inefficient, as thus they must be overcollateralized due to the volatility of the crypto market. Algorithmic stablecoins on the other hand have the potential to achieve price stability — doing so just requires a working algorithm.

This fact in conjunction with the potential efficiencies of algorithmic stablecoins means that we have not seen the last of these digital assets, and the world will continue to come up with different iterations in search of a working algorithm.

Why Are Controls and Regulations So Important?

Controls and regulations are necessary in all kinds of finance, but particularly so in novel structures like decentralized finance as investor, user and ecosystem protection is paramount to a successful evolution of the economy. It is one thing for free floating assets like Bitcoin to have risk baked in since there is also price upside, but for assets designed on stability, there is only downside to the loss of stability and therefore risk tolerance on these assets is much lower. Countless stakeholders lost money on UST. Those who did not generally either had an inside view of events, a deep understanding of how algorithmic stablecoins were constructed, “machine speed” monitoring and alerts or were those who purchased decentralized insurance. An average user was woefully underprepared and undereducated for an event like this.

Experiments are important to allow as they are critical to the evolution of our industry and economy, but insider activity, appropriate disclosures and appropriate demonstrated risk-tolerance are even more important in nascent types of economic structures like algorithmic stablecoins. The meltdown of UST also had meaningful ripple effects with other major CeFi players suffering liquidity crunches and declaring bankruptcy. We will dig into these later in the story. Interestingly however, the majority of DeFi platforms have continued to operate as intended even in the period of significant volatility that preceded and followed the meltdown. This lends credibility to the algorithms that manage leverage, collateral and liquidation triggers on those platforms.

In all, it is a hallmark of all finance that we constantly are searching for a better mousetrap. Evolution will continue and in the open-source, decentralized world of digital assets evolution happens quickly and often explosively. It is critical to the founding ethos of the digital asset industry that regulation be smart and allow room for this type of radical experimentation with economic models. However, it is also exceedingly important that:

1. Stakeholders be given all the information they require to make fully informed decisions

2. Information asymmetry be kept to a minimum to reduce material differences in actionable intelligence by insiders and the broader stakeholder community

3. Bad actors continue to be prosecuted for fraud, insider trading, market manipulation, wash trading and other securities and criminal law violations

In our next article, we will take a look at the rise of Terra, including why UST became the 4th largest stablecoin on the market in just a year and a half, as well as the factors that led to this explosive growth.

By Jack McKay & Julie Paterson

A Brief History of Algorithmic Stablecoins was originally published in Stablecorp on Medium, where people are continuing the conversation by highlighting and responding to this story.

September 23 2020: Stablecorp and Loopring are thrilled to announce that QCAD, the first mass market Canadian Dollar Stablecoin is now officially listed on Loopring.io, Ethereum’s zkRollup Exchange. As of today, QCAD is available to trade against USDT (Tether). Users can now deposit QCAD to Loopring’s layer 2 (a scaling solution), maintaining complete self-custody, while being able trade at the highest speeds and lowest costs of any Ethereum DEX. The first 30 users to aboard onto Loopring using the code “QCAD” will receive 5 QCAD in their layer 2 account as a promotional offer.

QCAD is now also able to be transferred to any other user on Loopring’s layer 2. This means QCAD can be used for payments on Ethereum, without incurring gas fees or long delays. Loopring’s zkRollup scaling construction ensures users are able to avoid the congestion currently experienced on the Ethereum base chain, without sacrificing Ethereum-level security guarantees at all.

This listing is a milestone as it marks the first synthetic-FX trading pair between a US Dollar Stablecoin and a Canadian Dollar Stablecoin on a scalable Ethereum DEX, allowing Loopring to showcase how its high-performance, non-custodial order book exchange is able to compete with centralized incumbents. The FX use case demands low latency, low cost, and is something that Loopring’s layer 2 is especially suited to support.

In addition to the announcement of the QCAD/USDT pair launch on Loopring, we will also be launching a liquidity mining campaign to help incentivize trading activity, or more specifically, liquidity provision. Traders adding liquidity to the QCAD/USDT orderbook (placing resting limit orders) will automatically be eligible to receive their share of ~$1300 QCAD ($1k USD) in rewards. Rewards accrue hourly to any resting limit order within a 0.5% spread, proportional to order depth and order balance. Liquidity providers will accrue these rewards every hour for 30 days, and can see a dashboard depicting all their earnings in real time. For more details on Loopring’s liquidity mining, see here.

This integration with Loopring marks QCAD’s first major Decentralized Exchange (DEX) listing and the second major international exchange integration this year. QCAD is currently integrated with over 20 different ecosystem service providers including the majority of the Canadian digital asset exchanges as well as several custodians, wallets and service providers. This integration with Loopring will help to accelerate QCAD adoption and liquidity internationally, especially as it relates to the budding Ethereum & Decentralized Finance (DeFi) ecosystems, enabling it to be one of the premier tools-of-choice to move funds in and out of Canada in a more efficient way. This listing couldn’t come at a better time for two reasons:

1. The trend of rapidly increasing trading volume across decentralized exchanges. September has already surpassed the total volume seen in August. With $14.9 billion so far this month, this reflects an almost 30% increase in month over month volume, according to data published by Dune Analytics.
2. Ethereum usage is exploding, having settled more transactions than ever before on September 17th, with over 1.4 million transactions. As such, the network is congested, and gas prices (the cost to execute a transaction on Ethereum) is higher than ever, precluding much activity from taking place. Layer 2 scalability is needed now more than ever.

To access Loopring for trading or transferring QCAD, visit https://loopring.io. All that’s required is an Ethereum wallet.

About Loopring:

Loopring is a layer-2 open source protocol for scalable transfers, order-book trading, and AMM swaps on Ethereum using zkRollup. Loopring.io is the first publicly accessible zkRollup exchange and payment application on Ethereum mainnet. It is 100% non-custodial, inheriting complete Ethereum-level security guarantees while capable to perform at a throughput 1000x greater, and 800x cheaper than layer-1 DEXs.

About Stablecorp:

Canada Stablecorp Inc. is a joint venture between 3iQ, Canada’s largest cryptoasset manager and Mavennet Systems, a leader in blockchain development. QCAD is Stablecorp’s first product release, and is a digital asset with the stability of the Canadian dollar. It is built on the Ethereum blockchain by utilizing the ERC-20 standard and enjoys the full benefits of enabling seamless settlement and full traceability. Launched in February 2020, QCAD is the first ever major Canadian-dollar Stablecoin designed for the mass market and is currently live with over 20 ecosystem partners including digital asset exchanges, OTC desks, custodians and payment processors and more.

To learn more about Stablecorp and QCAD or to explore partnership opportunities please reach out to info@stablecorp.ca

To learn more about QCAD visit: www.stablecorp.ca

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Stablecorp announces collaboration with Loopring to launch QCAD trading and transfers on Ethereum… was originally published in Stablecorp on Medium, where people are continuing the conversation by highlighting and responding to this story.

June 2, 2020: We are excited to announce that Stablecorp has partnered with VirgoX to list QCAD on their global Stablecoin trading platform. Starting today VirgoX will be offering QCAD as a trading pair to USDT, but we have plans to expand trading pairs to other major Stablecoins including ones denominated in Asian currencies in the second half of 2020.

This will be Stablecorp’s first major international exchange integration and the launch of their first US Dollar Stablecoin trading pair. Stablecorp is currently integrated with over 20 different firms, including the majority of the Canadian digital asset exchange ecosystem. This integration with VirgoX will help to accelerate QCAD adoption internationally, enabling it to be the tool-of-choice to move funds in and out of Canada in a more efficient way.

“Canada Stablecorp is thrilled to bring QCAD onto the Virgo X platform as we truly believe in the promise and potential of establishing a venue to trade Stablecoins against each other. This listing will provide the first major crypto native exchange rail between a Canadian Dollar Stablecoin (QCAD) and a US Dollar Stablecoin (USDT), a use case that we are very excited to be unlocking. The fiat FX market is the largest financial market in the world with over $5 Trillion traded daily. If we can help digitize and execute even a small percentage of that with Stablecoins, we would be helping and adding value to a significant number of companies and individuals. And that is what QCAD is about.” — Jean Desgagne, CEO of Stablecorp

The timing of this announcement couldn’t be any better as Stablecoins have become the largest growing category within the digital asset space. Over the last two years, they have seen a 415% gain in market capitalization, growing from $2.6 Billion in May of 2018 to over $10.8 Billion at present day, according to CoinMetrics. This year the appetite for Stablecoins has resulted in an additional $4 billion added to the total market capitalization between February and May. Stablecorp and VirgoX believe that Stablecoins have a promising outlook, and will help to digitize the global financial market. Additionally, they have the potential to improve global payments and remittances by decreasing costs and increasing processing speed.

“VirgoX has a strong commitment to build the World first Stablecoin Trading Center. It actively looks for Stablecoin projects across different stages that are well-designed and likely to be adopted by global users both within and outside of the digital asset space. QCAD is the most promising Canadian dollar Stablecoin that is backed by a team of experienced capital market professionals in Canada. It is our pleasure to work with the QCAD team and excited to be the first international exchange that lists and promotes QCAD. “ — Adam Cai , CEO of VirgoX.”

VirgoX will accelerate the establishment of a world Stablecoin trading center by launching a series of well-designed Stablecoins and incubate Stablecoin projects from early stages. With its complete ecosystem ranging from spot & contract trading, lending, global payments & remittance, traders can experience a full-functioning Stablecoin trading platform. VirgoX will launch more innovative products, such as Stablecoins empowered FX pairs, meeting the present needs of users and anticipating future demands.

To learn more about Stablecorp and QCAD or to explore partnership opportunities please reach out to info@stablecorp.ca

To learn more about QCAD visit: www.stablecorp.ca

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Stablecorp Partners With VirgoX to List QCAD On World Stablecoin Trading Center was originally published in Stablecorp on Medium, where people are continuing the conversation by highlighting and responding to this story.