Our response to the TerraUSD (UST) crash — and why our customers shouldn’t worry
Even the most non-technical and non-financially-savvy Australian will have seen the news recently about TerraUSD.
The algorithmic stablecoin, which was pegged too loosely to the US dollar, dramatically crashed, causing a knock-on drop in the value of Bitcoin, and an even wider shake in confidence in the whole blockchain and cryptocurrency ecosystem.
If you are a customer of ours — or indeed considering becoming one — you may have some questions on your mind right now about our business. Is Block Earner’s use of stablecoin for my investments actually stable? Am I going to lose my investment in the same way many people did with TerraUSD? How can I ever trust the very idea of stablecoins given what’s just happened to one of the most famous ones?
We wanted to write this blog post to address each of those questions in turn and calm any fears anybody may have over Block Earner’s use of stablecoin and stablecoins more generally. Bear with us, and we hope to put your mind at ease.
USDC - Our Stablecoin Of Choice
USDC is a regulated and routinely audited stablecoin that is pegged 1:1 to the U.S. dollar and backed by USD cash reserves and U.S. treasuries. Issued and managed by Circle
, USDC is always redeemable 1:1 for US dollars which means that the value of 1 USDC never drops below the value of the U.S. dollar. There is currently over $50 billion USDC in circulation.
Secondly, USDC is regularly attested
by Grant Thornton
, the sixth largest accounting and advisory organisation in the United States. These reports
are generated monthly and available freely online, maintaining transparency and accountability with investors.
Our Business Ethos
We started Block Earner because we want to bring all the benefits of decentralised finance (or DeFi
for short) to the masses in Australia. We believe that DeFi is the future of finance, and it’ll completely revolutionise the way the world envisages money, from savings and deposits to insurance and mortgages.
But at the same time, we understand that most people don’t quite fully understand DeFi yet — that it seems a mysterious world, and a complicated investment option. And those who want to get involved aren’t always sure of the best place to start.
Therefore, when we started the company, we made two strategic decisions about the way we operate. One of our primary goals at Block Earner is capital preservation, and in line with this commitment is working with tier-one assets, platforms and companies. With recent events, we feel reassured in our decision to opt for a more conservative approach. Being conservative means we closely assess the risk and reward of all the products we offer
, and this commitment has ensured that Block Earner customers were not affected by recent events.
Why We Chose USDC
Our selection of the USD Coin (USDC) as our stablecoin of choice is a prime example of a conservative decision we took within the blockchain investment world. Unlike TerraUSD, USDC is a routinely audited stablecoin that is fully backed by US dollar reserve assets held in segregated accounts with regulated US financial institutions.
The accounting firm Grant Thornton oversees these segregated accounts and provides monthly attestation reports
. Because of this level of transparency and accountability — and the fact that this stablecoin is backed by reserve assets, means USDC is extremely unlikely to suffer the same fate as TerraUSD.
And to give you extra peace of mind, with Block Earner your funds and digital vaults are protected by Fireblocks
, an ISO- and SOC2-certified asset custodian. Our company is also registered with AUSTRAC
, which is responsible for preventing, detecting, and responding to criminal abuse of the financial system.
This conservative approach to DeFi is the cornerstone of our business — and it’s not going to change, even as we expand our product portfolio in years to come.
The second strategic decision we took when we started our business is to educate the masses as much as possible about DeFi.
We want to build your confidence in the system, and your confidence in us to help you invest in it. If you’ve been following us in the media over the past few months, you’ll notice our founders Charlie Karaboga and Jordan Momtazi comment on DeFi in The Sydney Morning Herald
, The Australian Financial Review
, and more — looking to spread the good word about DeFi’s amazing potential.
Both Charlie and Jordan
have spent most of their professional lives working in cryptocurrency in Sydney. As such, they know the industry (and the technology backing it) inside out, and they have a close affinity to Australia. Now, they see Block Earner as their way of giving back to the country they now call home.
Asset-Backed Stablecoin vs. Algorithmic Stablecoins - What’s The Difference?
USDC is an asset-backed stablecoin, which fundamentally differs from an algorithmic stablecoin. An algorithmic stablecoin is a coin backed by a blockchain algorithm that allows for a change in supply and demand between the stablecoin and another cryptocurrency. Algorithmic stablecoins are typically undercollateralised, meaning they have variable assets in reserve to back up the value of their stablecoins. Instead, its value is pegged to the value of a real-world asset (such as government bonds) and adjusted by an algorithm to maintain its value.
Asset-backed stablecoin USDC is "over-collateralized" by USD reserves, which means it has cash or cash-equivalent assets in its reserves. An asset-backed stablecoin is much less prone to crashing than an algorithmic stablecoin, lowering the risk to investors, and aligning with our conservative approach to DeFi.
We hope this post addresses any of the concerns you may have had around stablecoins and our business. But if you still have any questions at all about how we operate as a business, please don’t hesitate to get in touch. We’d be happy to talk. Until then, do keep enjoying our fixed rate of 7% on your deposits (or the variable rate of 2–18% if you’ve gone for that option).