The cryptocurrency market is still bearish, although many coins are making a slow recovery from the drastic crash. Among the coins that have been posting some good recovery this time is Shiba Inu, which had been one of the most hit coins by the bear market. Though looking at the other cryptocurrencies, SHIB is still not there, not even close to its ATH. That is why many people fear that soon everyone's favorite memecoin will take the same road as Terra (LUNA). Well, the fear is legit because according to crypto experts, SHIB is almost in the same category as terra LUNA. These are projects that have not been built on a solid product. They have no real use-cases. The biggest challenge for the Shiba Inu project is the lack of utility. This is because Shiba Inu started as a meme coin and built its huge marketcap on hype and not in a real product. But is it really going to fall like LUNA? Let's find out.
The Terra ecosystem has two cryptocurrencies — Terra (Luna) and TerraUSD. The latter is a stablecoin pegged to the U.S. dollar. Some stablecoins, such as USD Coin, are backed by cash reserves or cash equivalents. TerraUSD, though, uses an algorithm to maintain a stable price.
The algorithm behind TerraUSD attempts to automatically adjust the price by minting or burning the stablecoin or its sister token Luna. This process typically works pretty well. However, its Achilles' heel is its inability to handle extreme price volatility.
Several days ago, TerraUSD lost its peg to the U.S. dollar. This led to panic selling of the stablecoin, resulting in a downward spiral for both TerraUSD and Luna. The algorithmic software couldn't maintain stability with the plunging prices.
The Terra meltdown could understandably cause investors to wonder if Shiba Inu might be next. There's an easy answer, at least for now: No. Shiba Inu isn't currently linked with any stablecoin available for trading.
However, there is a Shiba Inu stablecoin in development. Lead Shiba Inu developer Shytoshi Kusama recently revealed in an online post on Medium that the stablecoin project "is nearing completion."
One key difference between the Shiba Inu stablecoin (referred to as SHIB) and TerraUSD is that it will be pegged to US$0.01 rather than US$1. Shiba Inu's founder believes that this will make stablecoin even more stable.
SHIB will be an algorithmic stablecoin. However, it's unknown at this point whether or not how the algorithm will attempt to maintain its peg to the US$0.01.
After the Terra debacle, Shiba Inu holders would be unlikely to support a stablecoin that held the potential to bring down SHIB. It also seems reasonable to conclude that the SHIB developers wouldn't adopt a similar approach used with TerraUSD's algorithm.
Shiba Inu was initially launched as a rival to Dogecoin and, much like its predecessor, it has since been labeled a meme-coin – a subgenre of tokens that are generally a much more lighthearted take on the idea of cryptocurrency. At least, in theory.
The developers behind Shiba Inu have made some pretty solid innovations and it seems that the project is likely to continue its evolution into a fully-fledged DeFi platform. The SHIB token is an ERC-20 token, built on top of the Ethereum blockchain. In addition to the token, there is also the Shiba Inu exchange, which is compatible with several other Ethereum-based tokens.
The platform has also launched the BONE and LEASH tokens, to facilitate yield farming and other DeFi applications. The continued expansion of the Shiba Inu brand shows that it is more than just another meme coin and could ultimately help it to outlast Dogecoin and other similar tokens.
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