- Sonic blockchain is developing a high-yield algorithmic stablecoin offering up to 23% APR, despite concerns about potential collapses similar to Terra-Luna.
- Sonic co-founder Andre Cronje revealed successful testing of the stablecoin mechanism despite admitting to PTSD from previous algorithmic stablecoin failures.
- The EU’s Markets in Crypto-Assets Regulation will prohibit algorithmic stablecoins to prevent catastrophes like Terra-Luna’s $40 billion collapse, which still sees $21 million in daily trading volume.
Sonic blockchain is advancing with plans to introduce a high-yield algorithmic stablecoin, offering up to 23% annual percentage rate (APR) despite lingering industry trauma from the Terra-Luna collapse. The development comes as algorithmic stablecoins—which use code-based mechanisms rather than fiat currency backing—remain controversial following previous market catastrophes.
Andre Cronje, co-founder of Sonic Labs and founder of Yearn.finance, announced the progress in a March 22 post on X, stating: “POC looks good. Yielding > 200% APR @ 10m tvl, around 23.5% APR @ 100m, steady at around 4.9% at 1bn+. Will scale up and get team for a full release.”
The announcement followed Cronje’s earlier admission of experiencing post-traumatic stress disorder related to algorithmic stablecoins: “Pretty sure our team cracked algo stable coins today, but previous cycle gave me so much PTSD not sure if we should implement.”
His concerns stem from the catastrophic collapse of the $40 billion Terra ecosystem in May 2022, when TerraUSD (UST)—which similarly offered over 20% annual yields through Anchor Protocol—depegged from the dollar, crashing to roughly $0.30. The collapse triggered a market-wide contagion that sent the sister token LUNA plummeting from over $120 to less than $1, erasing billions in investor value within days.
Despite this cautionary tale, Sonic is moving forward with its stablecoin implementation. The blockchain positions itself as the world’s fastest Ethereum Virtual Machine (EVM) chain, achieving 720 milliseconds finality—the time needed for a transaction to become irreversibly confirmed on the blockchain. The network has gained industry recognition since its testnet demonstrated this performance on September 8, 2024.
Regulatory responses to previous algorithmic stablecoin failures are already materializing. The European Union’s Markets in Crypto-Assets Regulation (MiCA) will prohibit algorithmic stablecoins entirely to prevent another Terra-like collapse.
Remarkably, despite LUNA’s catastrophic failure nearly three years ago, CoinMarketCap data shows the token still generates over $21 million in daily trading volume. Technical analyst Optimus KevTron observed this indicates “people are still buying it even though it’s dead.” LUNA currently trades 98% below its all-time high of $19.54 recorded on May 28, 2022.
Sonic’s total value locked has increased 66% since rebranding from Fantom, reaching $253 million as the project continues its development despite the cautionary context of previous algorithmic stablecoin failures.
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