Yigit Taha OZTURK 
Sonic blockchain has announced the upcoming launch of its yield-generating algorithmic stablecoin, triggering fears of a repeat of the Terra-Luna collapse that sent shockwaves through the crypto world in 2022.
Terra PTSD Resurfaces
Andre Cronje, co-founder of Sonic Labs and founder of Yearn.finance, shared the news in a March 22 X post. He claimed that Sonic’s new stablecoin could offer up to 23% annual percentage rate (APR), depending on total value locked (TVL).
He noted:
“POC looks good. Yielding > 200% APR @ 10m TVL, around 23.5% APR @ 100m, steady at around 4.9% at 1bn+. Will scale up and get team for a full release.”
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Despite the optimism, Cronje admitted to having PTSD from previous algorithmic stablecoin failures:
“Pretty sure our team cracked algo stable coins today, but previous cycle gave me so much PTSD not sure if we should implement.”
A Grim Reminder: Terra-Luna Collapse
In May 2022, the $40 billion Terra ecosystem collapsed after its algorithmic stablecoin, TerraUSD (UST), lost its peg. The once top-10 crypto LUNA plunged over 98% in value, from over $120 in early April to $0.84.
What Makes Sonic Different?
Sonic claims to be the world’s fastest Ethereum Virtual Machine (EVM) blockchain, delivering true 720 milliseconds (ms) finality. Sonic’s testnet achieved this milestone on September 8, 2024.
In the wake of Terra’s collapse, the European Union’s MiCA regulation is set to prohibit algorithmic stablecoin issuance, aiming to prevent another disaster.
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