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Asymmetry Finance’s afUSD synthetic dollar is based on Ampleforth’s supply adjustment mechanism, which stabilizes prices with elastic supply.
The US dollar is performing strongly in 2024 and the digital assets market is growing rapidly. Ethena’s synthetic dollar USDe, with a market value of approximately $3.4 billion, is attracting rivals trying to grab a share of the global stablecoin market.
The latest startup to join this race is Asymmetry Finance. The company is partnering with Ampleforth and Paid Network to launch a fully on-chain synthetic dollar afUSD with an elastic supply dependent on market conditions.
The algorithmic stablecoin uses Ampleforth’s adjustment mechanism, which directs a supply of tokens at a certain price. According to Asymmetry, the system is more secure and scalable than similar products such as Ethena’s USDe.
“The important thing to understand is that there are no breakout conditions,” a spokesperson from Asymmetry told Cointelegraph. “There are no oracles that can be manipulated, and the system can be bent but not broken,” he said. The initiative is backed by former members of Genesis Global Trading, Quantstamp, LayerZero and other crypto firms.
Algorithmic stablecoins use a set of rules or algorithms to maintain their value against a fiat currency, usually the US dollar. Unlike traditional stablecoins, which are not backed by low-risk asset reserves, algorithmic stablecoins rely on algorithms to stabilize their prices.
Similar crypto products have failed this task in the past. The biggest failure in the history of algorithmic stablecoins was the collapse of TerraUSD (UST) in May 2022. The stablecoin was designed to maintain its stability through a mechanism related to another token, Terra (LUNA). Users could always exchange 1 UST for $1 worth of LUNA and vice versa.
However, a massive selling wave during a market decline caused LUNA to hyperinflate. This event started a death spiral that caused the value of both tokens to plummet, destroying billions of dollars of market value in the crypto industry and leading to months of turmoil.
According to Asymmetry, its elastic model can protect its stablecoin from real-world financial stress.
Asymmetry spokesperson said, “Unlike traditional stablecoins, afUSD uses Ampleforth’s AMPL, eliminating traditional collateral and associated risks. “The full on-chain nature increases decentralization and security,” he said. “Ethena cannot scale infinitely and users will turn to other options.”
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