In partnership with Ampleforth, Asymmetry Finance has launched the afUSD synthetic dollar, stabilizing prices through elastic supply.
The market for digital assets associated with the United States dollar is experiencing robust performance in 2024. USDe, Ethena’s synthetic dollar, has a market capitalization of nearly $3.4 billion, attracting competitors seeking a proportion of the global stablecoin market.
Asymmetry Finance is the most recent initiative to participate in this competition. The company is introducing the afUSD, an entirely on-chain synthetic dollar, through a partnership with Ampleforth and Paid Network. The supply of the afUSD is elastic and dependent on market conditions.
The algorithmic stablecoin employs Ampleforth’s adjustment mechanism, which adjusts the token supply to a predetermined price. Asymmetry asserts that the system is more secure and scalable than comparable products, including Ethena’s USDe.
“It is crucial to comprehend that there are no breaking conditions.” A spokesperson for Asymmetry informed Cointelegraph that the system is impervious to manipulation and that it is capable of bending but not breaking. Former members of Genesis Global Trading, Quantstamp, LayerZero, and other crypto firms are the driving force behind the initiative.
To preserve their value about an objective price, typically a fiat currency such as the U.S. dollar, algorithmic stablecoins implement a set of rules or algorithms. In contrast to conventional stablecoins, supported by reserves of lower-risk assets, algorithmic stablecoins depend on the algorithms to maintain their value.
In the past, comparable crypto products were unsuccessful in achieving the objective. The collapse of TerraUSD (UST) in May 2022 was the most significant failure in the history of algorithmic stablecoins.
Terra (LUNA) was involved in developing the stablecoin’s mechanism to maintain its basis. The exchange of 1 UST for $1 worth of LUNA and vice versa is always possible for users.
Nevertheless, LUNA experienced a significant increase in value during a market downturn due to a substantial sell-off. The event precipitated a death spiral in which the value of both tokens plummeted, resulting in months of turmoil in the crypto industry and the erasure of billions of dollars in market value.
Asymmetry asserts its elastic model can safeguard its stablecoin from real-world financial duress.
“Unlike conventional stablecoins, afUSD employs Ampleforth’s AMPL, eliminating the necessity for conventional collateral and associated risks.” The spokesperson stated that the entirely on-chain nature of the system improves security and decentralization. “Ethena is incapable of infinite scaling, and users will pursue alternative alternatives.”