During the early hours of 13th December 2021, The Malaysia-based finance company MQ
Technology made their intention known to incorporate the idea of stable coin into real-world
finance with their Capricorn protocol which permits the use with Defi applications. This
intention came into reality in the late hours of May 31, 2022, when a Malaysia-listed technology
company adopted the multi-asset-backed stable coin protocol at a whooping rate of US$200
million.
The Rise And Fall Of Luna, UST As A Stable Coin
In cryptocurrency, there are a lot of agreements that can be taken to foster the growth of stable
coins and one of them is the fixed saving rate agreement. This comes with a constant annual
income of varying percentages. This same agreement provided UST with a fixed income of 20%
on an annual basis giving it the room to rake in millions of dollars. And of course, these dollars
didn’t fall from the sky; it was generated from the subsidy and capital invested.
On May 9, Luna was reported to fall below UST in market value, this was due to Terra's failed
reserve system. One of the major ideas behind the creation of cryptocurrency was to be able to
store and move large amounts of money. At the time when UST was raking in millions of
dollars, a means of the reserve was needed and they opted for BTC and acquired BTC for about
$3 billion which further caused their poor performance.
With the bear dominating the market for quite a while now causing BTC to drop in price. This
affected the support offered by BTC to UST making the system insolvent and the continuous
decline in the market further intensified the fall of UST igniting a chain reaction. It can then be
further stated that the repeated bleeding of Terra’s saving protocol is a precursor of UST
collapse. All this was made known during a live discussion that Capricorn had with its guest in a
recently concluded event that focused on the stable coin market.
To later emphasize the impact of the program, Capricorn stated two-aspect
Capricorn believed that people are smarter and wouldn’t just dabble into any asset or project
without proper research. Through the style of operation, Capricorn believes it is a good
opportunity for stable coins like theirs with collateral to thrive
Although, it is no longer news that the downfall of the terra system was plotted by their collateral
which doesn't have an actual value thus stating that a sensible mechanism, enough collateral with
actual values, and user’s confidence are the unique ways of building any coin if stability is of the
essence. It is believed that with the development of Capricorn alongside its unique
characteristics, CUSD will have a huge turnover and the asset invested in it will have higher
capital utilization hence the participating funds will have a huge return.
Management Procedures
It is believed that this great and loud impact will catch the attention of the authorities thereby
resulting in more difficult entry into the stable coin industry. Although, Capricorn believes it is a
big chance for his team as they are well versed in the banking industry with an in-depth
understanding of the legal and financial affairs of the industry. It can then be concluded that
Capricorn is well equipped and ready to take on any development of sable coin around the
regulatory system.
Challenges and opportunities
The demand for the stable coin has greatly increased over the years to about 1.2 trillion US
dollars which is still expected to grow more in the future. It is then believed that if a small
percentage of the real-world assets are converted into blockchain assets this will increase the
demand for the stable coin. Vincent Cheung added to this stating that if bitcoin should begin the
encryption season, the stable coin will be pushed into the era of encryption prosperity and which
will in turn affect today’s real assets and this will be known as the true value internet change
Although it is perceived not to be an easy one, many challenges will stem from this such as a
prolonged verification period for the Capricorn mechanism, increased requirement for entry, and
more difficult regulations but nothing is easy to accomplish, the first major step is to start the
race. We have all seen the wide ground covered by some stable coins such as USDT, USDC, and
as well as the likes of UST, and ESD that couldn’t make it to stardom, all these are available for
the Capricorn team to learn from and use to their advantage stated by Bryan Teh Capricorn.
The executive director of MQ technology stated that the collaboration with Capricorn will
provide them with more options by using its lending protocol which will help prevent the
difficulties encountered during the covid 19 epidemic where enterprises experienced a shortage
of funds and couldn’t get help as at when needed.
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