Roller coaster is a term commonly used in cryptocurrency. It's certainly the first word vocabulary that comes to mind when looking at the Waves chart. The coin gained 240% in March 2022, but has given back all of those gains and more, and is now trading 70% below where it opened on New Year's Day.
It currently ranks 81st on CoinMarketCap. In 2017, it was in the top 20 before competitors like Solana, Matic and Polkadot stormed the scene.
So what's going on here?
First, what is Waves?
A multi-purpose blockchain that can support various decentralized applications and smart contracts, Waves really sums it up as an alternative to Ethereum. Most popularly, it gives users the ability to create and trade custom crypto tokens conveniently. No massive smart contracts are required, instead the currencies can be run via scripts by user accounts built on top of the Waves blockchain.
Why the crazy price action?
The chart below, which plots WAVES' year-to-date market cap, only takes one look to appreciate how unusual the price action has been here.
The March boom was caused by a few variables. Looking forward to the Waves 2.0 upgrade. Announcing a $150 million fund to promote applications and protocols running on its blockchain. Additionally, the following tweet, which confirmed Waves founder Sasha Ivanov as Ukrainian, also seemed to provide some stumbling blocks.
But why the choppy decline since then, 93% from the top? Of most concern was the analysis circulated on Twitter that the team was involved in manipulating the price of its native token through its own DeFi lending protocol, Vires.finance. It is important to note that Ivanov dismissed these as false and instead blamed Alameda for the price manipulation while simultaneously launching a hostile media campaign to incite panic selling in the markets.
USDN-De-Pegging
In any case, the debate dampened enthusiasm for the token, which was reflected in the price. This all got worse when — and stop it if this sounds familiar — a stablecoin started to unpeg. USDN is the coin in question, it works with Waves similar to UST with Luna.
Ivanov's actions to ward off a de-pegging event have been controversial - reducing liquidation thresholds, limiting borrowing and imposing maximum APRs. However, amid the excitement, Waves token has continued to fall, while liquidity in the Vires.finance protocol has done the same.
Now, the team has released a proposal to revamp the approach and regain confidence in USDN after de-pegging, down to just 75 cents last month and still trading below 97 cents at the time of writing.
USDN is currently supported by approximately 40 million WAVES leased to two generation nodes. Half of the generated WAVES lease profit is sent to USDN stakers as a reward and the other 50% is sent to the smart contract to increase USDN reserves.
Eager to decentralize and solidify the Peg control mechanism, the team is looking for crypto investors and community members “who are willing to run their own nodes for Neutrino needs to improve system reliability and to arouse their own interest”.
The admission of the participants takes place gradually and individually.
The maximum number of participants must not exceed 80.
Initially, each participating node will receive 1 million WAVES in lease, although this amount will change in the future with the possibility of additional participants.
Participants are grouped into groups of 10 addresses to simplify the management of the amounts rented.
The second phase of the program will give the community the ability to steer decentralization through voting.
Conclusion
Whether this will restore trust in the community after de-pegging remains to be seen. The UST stablecoin meltdown obviously sent shockwaves across the room, but since USDN has so many parallels, the pain was more pronounced here than elsewhere. On the bright side, the Waves team has recognized that action is needed and is now acting accordingly. If they can learn from Terra's mistakes and make the necessary adjustments, they could make a comeback.
It will be interesting to follow.
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