The sudden drop of what should be a $1 stablecoin, USDN, down to 81 cents, then shortly before publishing has taken another dive to 0.69 cents, is drawing attention to a heated conflict going on in crypto right now.

The battle is between the project that issues the USDN stablecoin and the WAVES token and its founder, Sasha Ivanov, on one side.

On the other side - an anonymous 'analyst' who goes by 0xHamZ on Twitter, was the first to tweet the accusations that went viral, along with Alameda Research, which is the company that owns the exchange FTX, whose founder also chimed in.

First Shots Fired...

The controversy began with a tweet stating "WAVES is the biggest ponzi in crypto" and accuses WAVES of a clever way of using both their USDN stablecoin and WAVES token to basically invest in themselves with borrowed coins.

To understand the claim, first you need to know what was happening publicly. 

So 'Vires' is a decentralized exchange/lending platform owned by WAVES, and was getting a lot of people to deposit USDC by offering 30% APR returns. 

Here's what WAVES was accused of doing:

-Deposit USDN on Vires

-Borrow USDC on Vires

-Transfer USDC to Binance

-Buy WAVES with USDC

-Convert WAVES to USDN

-Start over

Showing this chart as evidence, 0xHamZ says it happens "every 2 days at 10-12 pm est."

Which would mean WAVES rise from $9 to $60 over the last 6 weeks is largely because it's backed by BORROWED funds. 

WAVES Founder Responds...

The project’s founder, Sasha Ivanov responded and immediately rejected the allegations, stating that WAVES’ recent growth was organic. He cited similar token lending models used by other DeFi platforms.

Problems with the LUNA Comparison

Comparisons have been made between WAVES lending practices and Terra, the organization behind LUNA and their TUSD stablecoin. This is based on how they both operate on similar mechanisms, in the sense that LUNA can be burnt to mint TerraUSD. 

But that ignores a lot, such as Terra pro l-actively lowers its lending rates to ensure sustainability, as seen in a recent vote on Anchor Protocol, their DeFi platform.

Their value is backed by much more as well. Terra holds about as much Bitcoin as Tesla, over $1 billion worth, to serve as a reserve for its stablecoin. There are no known Bitcoin reserves for Waves, which is a pretty huge difference.

The Result: Chaos on the Waves Ecosystem...

Not only has their stablecoin lost all stability, as mentioned at the beginning of this article - the WAVES token is also in freefall, losing about $2 billion at the time of publishing.

WAVES Fires Back...

Citing what they say are abnormally large shorts (people who will profit if the price goes down) put on their token, they say what we're seeing is market manipulation - and they accuse Alameda Research (FTX) of doing it, saying in a tweet:

"I started searching on Vires for who could borrow it there. And look who I found - email: info@alameda-research.com verified address: 3PHkZUJpS3AfmnXBNLCBmpqL25GJZb1hGiE" along with the image below:

They also say that in order to get their coin listed on FTX they were required to make an Ethereum pegged version (a coin on the Ethereum blockchain that trades for the same price as WAVES on its native chain), but that they don't touch this Ethereum version, never have, and that coin has been used in this market manipulation. 

A Highly Debated 'Solution' is Proposed...

"Let's protect the waves ecosystem from greed" said the Founder of WAVES who posted this proposal to the community (which runs as a DAO, a decentralized organization which requires token holders to vote on major changes) meant to target and liquidate whoever is shorting WAVES.   If it passes, they could liquidate, or force the short sellers to buy another $30 million in WAVES to maintain their position. 

The responses so far are generally negative, this one sums up the general sentiment:

"This proposal is absolute bullshit and u know it. Just because alameda has a large WAVES borrowed position you can’t fuck over every user who is using your platform legitimaly and also borrowing one of the assets provided.

"I can guarantee you this will be the darkest day in Waves history if it passes.

It’s an absolute travesty this was even uttered in a governance forum, to make such an harmful proposal to the protocol that would manipulate price and liquidate thousand of your users willingly."

Where can WAVES go from here?  While I can't come up with a viable path back to the top, crypto is too full of surprises to say they're surely done.  All it takes is a bit of new information and enough people swayed into believing it's a bullish sign, and the coins begin to rise again. 

But I'll repeat - I can't imagine what that would. So with the standard disclaimer saying ‘this is not financial advice’ - I absolutely wouldn't recommending holding any WAVES or USDN at the moment.