Sonic Blockchain is advancing development of a high-yield algorithmic stablecoin despite lingering industry trauma from the catastrophic Terra-Luna collapse that triggered crypto's longest winter. The project's co-founder acknowledges experiencing "PTSD" from previous algorithmic stablecoin failures but is proceeding with implementation plans that promise yields reaching 23% annually.
Andre Cronje, who co-founded Sonic Labs and previously established Yearn.finance, confirmed the development in a March 22 post on X. "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," Cronje wrote.
His announcement came just one day after expressing significant hesitation about the project. "Pretty sure our team cracked algo stable coins today, but previous cycle gave me so much PTSD not sure if we should implement," Cronje admitted in an earlier post.
Unlike fiat-backed stablecoins that maintain their peg through direct currency reserves, algorithmic stablecoins rely entirely on code-based mechanisms to maintain price stability. This approach drew intense regulatory scrutiny following the Terra ecosystem implosion in May 2022.
That collapse erased approximately $40 billion in value within days. Terra's algorithmic stablecoin, TerraUSD (UST), had been offering over 20% annual percentage yield through the Anchor Protocol when it catastrophically lost its dollar peg, plummeting to approximately $0.30. As the crisis unfolded, Terraform Labs co-founder Do Kwon shared recovery plans on social media while the ecosystem's sister token LUNA crashed more than 98% to $0.84, down from April highs exceeding $120.
Sonic's stablecoin development continues despite the European Union's Markets in Crypto-Assets Regulation preparing to prohibit algorithmic stablecoins specifically to prevent similar collapses. The company has positioned itself as operating the "world's fastest Ethereum Virtual Machine chain" with transaction finality of 720 milliseconds.
Interest in Sonic has grown since September 2024 when its testnet achieved the promised 720 milliseconds finality. Total value locked in the protocol has reportedly increased 66% to $253 million since rebranding from Fantom.
Remarkably, even years after Terra's collapse, trading activity in the original LUNA token persists. Data from CoinMarketCap shows the token remains down more than 98% from its all-time high recorded nearly three years ago, yet still generated over $21 million in trading volume in a recent 24-hour period.
Technical analyst Optimus KevTron noted this ongoing activity, stating that "people are still buying it even though it's dead." The continued trading reflects the complex aftermath of a collapse that sent shockwaves through both crypto markets and regulatory agencies worldwide, ultimately helping spur legislation like the EU's forthcoming MiCA regulations.