BANK RUN in DEFI - Lessons Learned From The Iron Finance Collapse

BANK RUN in DEFI - Lessons Learned From The Iron Finance Collapse

So what was the first large scale bank run in DeFi all about? Why is it so hard to create a working algorithmic stablecoin? And what can we learn from the IronFinance fiasco? You’ll find answers to these questions in this video.

IronFinance initially launched on Binance Smart Chain in March 2021 and aimed at creating an ecosystem for a partially collateralized algorithmic stablecoin.

As we know, building algorithmic stablecoins is hard. Most projects either completely fail or end up in a no man's land by struggling to maintain their peg to the US Dollar. Because of this, building an algorithmic stablecoin has become one of the holy grails in DeFi.

Achieving it would clearly revolutionize the DeFi space as we know it today.

The current ecosystem relies heavily on stablecoins that come with major trade-offs. They maintain their peg to the US Dollar at the cost of either centralization or capital inefficiency.

For example, the custody of USDC or USDT is fully centralized. On the flip side, stablecoins like DAI or RAI require a lot of collateral which makes them capital inefficient.

IronFinance tried to address these problems by creating a partially collateralized stablecoin - IRON.

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