In the wake of increasing concerns over stablecoin risks, renowned business analyst and fintech executive Adam Cochran has proposed a novel strategy to launch an algorithmic stablecoin, offering a fresh perspective. Cochran’s ideas come in response to recent comments made by Binance CEO Changpeng Zhao during an Ask Me Anything (AMA) session on Twitter.
Zhao expressed caution about the lack of transparency surrounding dominant stablecoins like Tether (USDT) and Binance USD (BUSD). He emphasized that the absence of audit reports for USDT has raised uncertainty within the market, leaving it like a “black box” regarding true financial stability.
Building on Zhao’s enthusiasm for algorithmic stablecoins as a potential solution, Cochran took to Twitter to outline a creative and intriguing approach to launch such a stablecoin. According to Cochran’s suggestions, an exchange could employ strategic maneuvers to create turbulence for existing stablecoins while building up its algorithmic stablecoin.
The first step in Cochran’s proposal involves partnering with lesser-known and potentially less stable stablecoins like TUSD and FDUSD. These tokens can be pumped by offering them free trading and leverage on the exchange, driving their prices upward. Simultaneously, the exchange can leverage these activities to accumulate Bitcoin (BTC) and Ethereum (ETH) at a low cost, inflating their prices.
Once BTC and ETH are acquired, the exchange can convert them into USDC and withdraw them, causing a decline in USDC’s market cap. As the business of USDC declines, the exchange can further harm its reputation, paving the way for the entry of the new algorithmic stablecoin.
Cochran further suggests that the exchange should sell USDT on-chain, triggering concerns within the market about its stability. Over time, The exchange can accumulate DAI, the smallest among the main stablecoin competitors. The acquired DAI can be used to launch an attack on other stablecoins.
While the strategy seems promising, Cochran emphasizes the need for a slow and gradual execution to avoid arousing suspicion. However, he acknowledges that certain situations, such as issues with Curve pools, may necessitate faster action.
Although the plan appears well-crafted to take down competitors at a low cost, Cochran acknowledges that any inconsistencies or leveraged stress in the system could pose risks to the entire strategy.
Cochran’s creative approach highlights the ever-evolving nature of the crypto market and the pressing need for more secure and transparent stablecoin solutions. As the debate over stablecoin safety continues, innovative ideas like Cochran’s may pave the way for safer and more robust digital currency systems in the future.
