The layer-1 blockchain Sonic (S), formerly Fantom, is testing a new algorithmic stablecoin with interest rates of up to 23%/year. This information was disclosed by Andre Cronje, co-founder of Sonic Labs and one of the most influential figures in the DeFi world, on March 22.


Minimal USD (MUSD) – The New Generation Algorithmic Stablecoin?


Sonic's new algorithmic stablecoin is called Minimal USD (#MUSD ). The interest rate adjustment mechanism of MUSD will depend on the amount of assets locked in the protocol (TVL - Total Value Locked), with levels:

🔹 10 million USD TVL: Interest rate 200%

🔹 100 million USD TVL: Interest rate 23.5%

🔹 1 billion USD TVL or more: Interest rate stable at 4.9%/year


This allows MUSD to adapt better compared to algorithmic stablecoins that have failed in the past, as interest rates are not fixed but automatically adjust according to TVL to ensure sustainability.


Is Sonic Heading into the "Traps" of LUNA-UST?


Information about MUSD immediately recalls the infamous crash of LUNA and UST in May 2022. The UST stablecoin once promised a fixed interest rate of 20%, but this model could not be sustained during a liquidity crisis, leading to the collapse of the entire Terra ecosystem.


However, MUSD has an important distinction:

✅ Interest rates are not fixed but adjusted based on TVL.

✅ Focus on DeFi rather than targeting the mass of small retail users.

✅ Sonic has a stronger foundation, with a TVL of 850 million USD, making it the 11th largest blockchain in the world.


However, many remain skeptical about the algorithmic stablecoin model and worry that Sonic may be "betting" on a risky field.


Are Algorithmic Stablecoins Making a Comeback?


Sonic is not the only project pursuing algorithmic stablecoins. Several recent projects have also announced plans to revive or launch new stablecoins:



  • #USDD from TRON: Claims to return with an interest rate of 20%.



  • #GHO from Aave: Soon to implement a lending mechanism to increase applicability.



  • RLUSD from Ripple, USDtb from Ethena/BlackRock, USDT0 from Tether are also attracting attention.




Although the crypto market has shown signs of cooling down in the past two months, the market capitalization of stablecoins continues to reach new highs, exceeding 230 billion USD. This indicates that stablecoins remain an important sector, especially as crypto regulations in the US are becoming clearer.


Conclusion: Opportunity or Risk?


Sonic's experiment with MUSD at high-interest rates will certainly spark much debate. This could be a breakthrough in DeFi, but it could also be a risky gamble if not tightly controlled. Will Sonic make it, or will it become a second UST? The market will provide the most accurate answer. 🚀