Journalist
Posted:
Cardanos [ADA] Co-founder Charles Hoskinson highlighted in a recent YouTube stream on February 13 how legacy financial institutions encroaching on crypto could jeopardize its fundamental ethos.
As critical concerns continue to rise in the crypto space, asset-backed stablecoins have gained a dominant position in the market, often overlooked by mainstream cryptocurrency enthusiasts.
Hoskinson also criticized the recent enthusiasm around spot Bitcoin [BTC] ETFs and expressed concern about the potentially growing influence of Wall Street.
He said,
“The more we go back to older systems, the more we realize we have lost control.”
Risks associated with asset-backed stablecoins
Addressing the dominance and centralized nature of asset-backed stablecoins, Hoskinson highlighted:
“Asset-backed stablecoins have two characteristics: a central issuer that is subject to regulation and that cannot become fractional.”
He also outlined the impact of stablecoins, their influence on DeFi ecosystems, and how they can influence outcomes during blockchain forks, noting:
“Stablecoins cannot exist on multiple forked chains without compromising their support.”
Algorithmic stablecoins: a possible solution?
Charles Hoskinson juxtaposed this with algorithmic stablecoins, arguing that they better align with the decentralized ethos of cryptocurrency. He emphasized,
“Algorithmic stablecoins are an essential thing we need to look at.”
Algorithmic stablecoins are governed by on-chain algorithms that are free from the influence of a central authority that could skew outcomes in their favor.
On the contrary, Colin LeMahieu, creator of Nano [XNO]criticized algorithmic stablecoins, stating:
“Having a reliable algorithmic stablecoin is impossible or at least ‘unfair’ because the treasury holds asymmetric price information”
So if cryptocurrencies lose their decentralized nature, they could start to look exactly like the traditional financial systems they initially set out to change.