NEAR Token Rises On New Stablecoin Launch, Can It Rival Terra?

NEAR, the native token on the namesake protocol, surged on Tuesday as the blockchain’s widely anticipated stablecoin, USN, began trading.

NEAR jumped nearly 10% from a three-week low, and is currently trading around $14.8. But tracking broader losses in the crypto market, the token is still down 12% over the past week.

Trading in the Near Protocol’s algorithmic stablecoin began late-Monday. USN was launched by NEAR-based decentralized organization Decentral Bank. While the token will have a dynamic yield, Decentral said early lenders will likely receive a yield of 20%, which rivals that of Terra’s UST stablecoin.

NEAR’s USN token goes live

USN is an algorithmic stablecoin, which means it uses a mix of tokenomics and a reserve to maintian its 1:1 peg against the U.S. dollar. Users can burn NEAR tokens to mint USN, and vice-versa.

USN’s reserves will be maintained by Decentral Bank. The DAO plans to hold monthly votes to distribute $10 million in rewards for trading in USN. The token’s algorithmic nature puts it in direct competition with Terra’s UST.

Sources had leaked the planned launch of USN earlier this month, which had caused NEAR prices to rally to near record highs. The main point of attraction for USN is its proposed 20% yield.

Interest in stablecoin staking has surged this year, as investors sought steady returns amid high market volatility. Terra’s Anchor Protocol, the blockchain’s largest DeFi platform, saw total value locked hit a record high on Tuesday.

USN faces a crowded market, tough competition

While NEAR prices reacted positively, the launch’s social media reaction was mixed. Most users said they will adopt a wait-and-see approach to USN, while also looking out for more DeFi options in the Near protocol.

USN faces tough competition in the stablecoin market. Terra’s UST, which USN intends to compete with, is backed by about $2.5 billion in reserves, and is also the third-largest stablecoin by market capitalization.

I’m not apeing in now. I want to see how this plays out. I will follow $USN closely though. And soon there will be another competitor in $USDD (Tron) that promises 30% APY.

-DeFi analyst @Route2FI

USN also has to compete with other established stablecoins such as Tether (USDT) and Circle (USDC), which command enormous volumes.

NEAR is also not the only recent entrant to the stablecoin space. Justin Sun’s Tron intends to launch its own stablecoin next month, with $10 billion in reserves and a claimed 30% yield.