Billionaire Mark Cuban announced the need to regulate DeFi projects and stablecoins after the collapse of the TITAN token of the Iron Finance project, in which he lost 100% of his invested money.
The Iron Finance project with the TITAN token connected to the Polygon network on May 18 to improve the efficiency of transactions and reduce fees for their execution. Iron Finance introduced the stable cryptocurrency IRON, pegged to the USDC stablecoin and the TITAN token in such a way that its value is maintained at $ 1.
In the case of IRON, which was “collateralized” by TITAN, users could create new stablecoins through the Iron Finance network, blocking 25% in TITAN and 75% in USDC. Taking into account the tokenomics of this DeFi project, when new stablecoins IRON are created, the demand for TITAN is growing, which leads to an increase in its rate. Conversely, when the price of TITAN falls sharply, as it did on June 16, the peg becomes unstable.
Finder.com.au founder and Iron Finance investor Fred Schebesta said that when TITAN hit $ 65 and then dropped to $ 60, big investors started selling it en masse. This led to a significant deviation in the IRON course. When the “whales” “flooded” the market with an excess of TITAN tokens, its value began to fall dramatically, as did the price of IRON later.
As a result, a mechanism was put in place that began issuing additional TITANs and removing liquidity in an attempt to keep IRON at $ 1. This created an opportunity for arbitration on the difference in the price of IRON and TITAN, so users began to sell the token even more actively, which led to its complete depreciation. The creators of the project offered users to pay off the balances of the collateral in USDC stablecoins. Shebesta believes that this situation happened not because of fraud, but because of the unfinished tokenomics of the project.
On June 13, American billionaire Mark Cuban wrote about the TITAN token on his blog, announcing that he had become one of the liquidity providers on the QuickSwap decentralized exchange. He tweeted that “the cryptocurrency business makes more sense than it sounds and it’s much easier to value tokens than you think.” However, on June 16, when the TITAN rate fell from $ 65 to $ 0.00000003 in less than a day, Kuban said that he also suffered losses, like other users. According to Kuban, in any business he is aware of the likelihood of risks, trying not only to make money, but also to gain experience.
At the same time, Kuban urged regulators to develop regulations governing tokens of decentralized finance projects and stablecoins.
“We need to develop rules defining what stable cryptocurrencies are and what kind of collateral they should have. Should they be pegged to the US dollar on a one-to-one basis, or could there be other collateral options such as Treasury bonds or something else? ”Kuban said.
Cuban has recently become a supporter of cryptocurrencies. In May, he called Bitcoin a “new financial religion” and also stated that if Ethereum developers continue to move to Proof-of-Stake, it will lead to an “explosive growth” in ETH.
