NEAR Foundation Announce $40Million Protection Fund !
The NEAR Foundation is taking steps to help USN holders to avert another stablecoin collapse and a crypto pandemic. On October 24 the platform stated that it has set aside $40 million for a grant for the “USN Protection Programme.”
By guaranteeing that users and holders of USN can redeem the stablecoin at a 1:1 ratio with USDT.e, the fund aims to protect them. The action comes after Decentral Bank (DCB) made a separate announcement on October 24 that it was discontinuing the independent stablecoin, USN, which was built on the NEAR blockchain.
Stablecoin With Insufficient Collateral is Discarded
USN is a pegged algorithmic stablecoin that is supported by a reserve fund that includes NEAR and USDT. Surprisingly, USN has maintained its position, decreasing only slightly in the last few days.
The under-collateralization risk materialized in the first half of 2022, according to DCB, which launched the stablecoin in April as the first for the NEAR ecosystem. It resulted in a $10 million collateral imbalance, which has now escalated to a $21 million shortfall.
It noted that the stablecoin already had many challenges in recent months as a result of shifts in market perception brought forth by recent high-profile instances, adding:
We made the difficult decision to wind down the USN project responsibly and controllably in order to protect USN holders as a result of these issues.
The NEAR Foundation intervened rapidly to prevent panic and the collapse of its own native token as consumers feared another LUNA moment. Because of “extreme market conditions,” the algorithmic procedures failed, resulting in a collateralization shortage.
The $40 million disparity, it was said, is set and has absolutely nothing to do with the price of NEAR tokens. This is because there is no hardcoded burn or mint link between it and the USN.
The entire value locked in NEAR has decreased since DCB removed its liquidity, according to private security firm PeckShield. As per DeFiLlama, TVL has decreased by 45% over the past 24 hours to $136 million.
NEAR Token is Not Affected
The native coin has so far survived the storm despite the withdrawal of collateral from the ecosystem. At the time of publication, NEAR was trading at $2.98, up 2% on the day.
But, the bears sunk their teeth into NEAR during this slump. It is currently 85% lower than its all-time high of $20.44 set in January.
The layer-1 proof-of-stake blockchain NEAR has a fast throughput thanks to its sharding architecture.Source