USDN: the failure of the Waves algorithmic stablecoin


Neutrino USD (USDN) is an algorithmic stablecoin issued by the Neutrino protocol whose value is pegged 1:1 to the US dollar. Or at least it should be.

As can be seen in the evolution of its priceUSDN has started to lose its parity in recent days, reaching a low of $0.68 yesterday, April 4th.

The cause of the USDN stablecoin parity loss

Neutrino is a project developed on the Waves blockchain and therefore USDN is issued against a collateral deposit in WAVESa currency native to the blockchain of the same name.

The operation is very similar to that of the Maker platform, where DAI, an on-chain collateralized stablecoin, is backed by collateral deposits via ETH or another supported crypto as collateral.

If the collateral value falls below a certain threshold, the stablecoin loan issued by the protocol is no longer sustainable. That is why Maker has decided to diversify the offer of backed guarantees.

The goal is not to make the ecosystem dependent on a single asset, because in case this asset depreciates drastically, the entire protocol and the loans generated by it would be compromised.

In part, this was the cause of the loss of the Neutrino USD parity. The fault, however, is the poor and above all ill-intentioned management by the Waves team.

The Waves team executes transactions to manipulate and inflate the performance of the WAVES cryptocurrency

The scheme used

A DeFi analyst, who goes by the pseudonym 0xHamZ on Twitter, has recognized a recurring pattern in blockchain movements. The pattern used to manipulate the price of WAVES it’s easily guessed from his tweet posted a few days ago.

Affirming at the end with a certain ‘challenging’ tone:

“This is chain traceable”

In fact, the user managed to detect this pattern thanks to the monitoring of chain transactions.

In simple terms, the team deposited a certain amount of USDN to Vires Finance, a DeFi platform on the Waves protocol, to borrow USDC. These were then transferred to Binance and were used to purchase WAVES. Finally, the obtained WAVES were collateralized to issue more USDN. And so the process began again..

the same user also created a thread which clearly reconstructs all the movements made on the various blockchains by attaching, as far as possible, the transaction link visible on the chain.

Negative implications for the Waves ecosystem

Compounding this is the fact that most of the TVL in the waves ecosystem it is linked to the use of USDN.

In fact, since the loss of the stablecoin peg, the Registered TVL within the Waves DeFi ecosystem has decreased by $1.3 billion, more than 27%.

As if that wasn’t enough sasha ivanovfounder and lead developer of Waves, in a Twitter thread accuses Alameda Researcha cryptocurrency trading company, to manipulate the price of WAVES to benefit from a short position they opened.

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