Sonic Blockchain is moving forward with the implementation of its algorithmic stablecoin

promising yield generation of up to 23% APR, despite concerns of a potential collapse reminiscent of the Terra-Luna meltdown

March 23, 2025 – Sonic Blockchain is forging ahead with its algorithmic stablecoin, promising high-yield generation of up to 23% APR, despite concerns of a potential collapse reminiscent of the Terra-Luna meltdown that triggered crypto’s longest winter.

Unlike fiat-backed stablecoins, algorithmic stablecoins use code-based mechanisms to maintain price stability. According to Andre Cronje, co-founder of Sonic Labs and founder of Yearn.finance, the new stablecoin’s proof-of-concept (POC) is showing promising results with high APYs at lower TVLs that decrease as TVL increases. At $10M total value locked (TVL), the APR is yielding over 200%, and at $100M TVL, the APR is 23.5%. However, at a higher TVL of $1B+, the APR is settling at around 4.9% and appears to be holding steady.

Cronje posted on X on March 22:

“POC looks good. Yielding > 200% APR @ 10m TVL, around 23.5% APR @ 100m, steady at around 4.9% at 1bn+. Will scale up and get team for a full release.”

Cronje’s announcement came a day after he revealed his hesitancy to continue with the project due to lingering PTSD from the Terra collapse.

“Pretty sure our team cracked algo stablecoins today, but previous cycle gave me so much PTSD not sure if we should implement,” he said on March 21.

The Terra-Luna crash in May 2022 saw over $40 billion in value wiped out as its UST stablecoin lost its dollar peg and sister token LUNA plunged over 98%.

Sonic claims to be the world’s fastest Ethereum Virtual Machine (EVM) chain, boasting a 720-millisecond (ms) finality—meaning transactions are considered irreversible almost instantly. The blockchain hit the news when its testnet achieved this milestone on September 8.

While interest in algorithmic stablecoins remains despite the collapse of Terra, Sonic’s project faces skepticism as regulators worldwide have imposed stricter measures. The European Union’s Markets in Crypto-Assets Regulation (MICA) bill, in particular, outlaws the issuance of algorithmic stablecoins to prevent another catastrophic meltdown.

The clock is ticking for Sonic to launch its stablecoin as it faces an uphill battle to collect enough funding to scale up and hire a team to complete the project.

As the project progresses, it will be interesting to see if Sonic can overcome the skepticism toward crypto projects following the downfall of promising projects like Atomics and Blockhash, which ultimately failed to deliver on their promises.

The crypto industry will be watching closely to see if Sonic’s algorithmic stablecoin can avoid the pitfalls that doomed its predecessors and become a success story in the ever-evolving cryptocurrency landscape.