Metastablecoins Are Go!

Source

Terra (UST) was suppposed to be a "stablecoin", trading very close to $1. It rapidly became the third largest such coin. From April 11^th 2022 it started trading mainly around a 10% discount, and by May 11^th it was essentially worthless. The crash destroyed about $45B in notional value.

In Metastablecoins I pointed out that, absent the backing of a central bank, dollar "stablecoins" like UST were misnamed. They were, as UST had shown, in fact metastable so should be called metastablecoins. Wikipedia explains that:

By Georg Wiora

metastability denotes an intermediate energetic state within a dynamical system other than the system's state of least energy. A ball resting in a hollow on a slope is a simple example of metastability. If the ball is only slightly pushed, it will settle back into its hollow, but a stronger push may start the ball rolling down the slope.

Exactly what the "stronger push" that sent UST into its "state of least energy" was still isn't clear, but the coin's metastability is.

On July 18^th this year the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) was signed into law. It purports to regulate metastablecoins but, like most things about cryptocurrencies, it is largely gaslighting. Below the fold I explain why this is and discuss some recent publications about metastablecoins.