People who have been in the scene a few years ago might still remember one of the oldest decentralized stablecoin called NuBits. New traders less so as the NuBits market cap is only 5.4 million USD at the time of the writing.

The project differs heavily from popular stablecoins like USDT and TUSD as these two have central issuers and have their reserves in USD somewhere in company owned bank accounts. The reason why USDT and TUSD are holding their 1:1 pegs towards USD is because there is a high level of trust involved as a result of a promise that they will always accept their stablecoin in exchange for the USD equivalent. Technically these central forces only issue more coins when they recieve FIAT from investors who want to enter crypto investing via these coins instead of exchanges directly and the issuer promises to put the FIAT into a bank account as a reserve.

The biggest problem that decentralized authority suffers in this case is that they can’t really hold FIAT reserves as these entities can’t claim ownership over bank accounts. NuBits is holding its reserves in Bitcoin and gains reserves via issuing NuBits on demand. They have several methods to raise funds, one of them is selling NuBits for a bit above market price (sell walls) and buying them below the market price (buy walls). This method usually works in a stagnating market or a bull market, but sadly seemed to fail twice during bear markets when people potentially try to hunt bottoms and require BTC in exchange for their stablecoins. The first time it lost its peg was during a 2-3 month Bitcoin downtrend that happened around June 2016 and now again in March 2018.

The official forum is in huge uproar currently, people seem to demand justice as they are unable to liquidate their NuBits as Bitcoin price and the demand for it keeps rising. Several users complain that they lost half their funds in a coin that is meant to be stable around $1 USD. According to several statements the company has reserves, but a fast buy-back seems impossible with all the selling pressure thus they are potentially waiting for an exhaustion in sellers while they are slowly buying back. For us this doesn’t seem as something overall positive, because it raises a huge question: even if the NuBits price recovers and gains back a peg, is a stablecoin really stable, which was traded way below the peg price for months and didn’t let people liquidate their expected funds? Currently NuBits are trading for $0.54 and have previously reached a low of $0.3.