Will the Helio Protocol (HAY) Destablecoin Collapse?

Many speculators are wondering if the Helio Protocol, Helio.Money, or Hay (HAY) stablecoin could collapse?

The Helio Protocol, or Hay, is a stablecoin they call a destablecoin. I imagine the term destablecoin refers to a decentralized stablecoin. They build Hay on the Binance Smart Chain blockchain (BNB).

However, the Helio Protocol is far more than a stablecoin. It is also a lending platform. To explain, individuals can put up Binance (BNB),  BinanceUSD (BUSD), and other BNB assets as collateral for Hay Destablecoin loans. They claim Hay holders can yield farm HAY on DEXEs for a competitive Annual Percentage Yield (APY).

What is the Helio Protocol?

They claim Helio can provide a sustainable yield of 7% because of over collateralization in BNB. The Helio Protocol itself is an open-sourced decentralized blockchain governed platform they govern by a Proof-of-Stake Authority (PoSA) Consensus.

Helio provides multi-chain scaling, scaling on many blockchains, through a BNB Chain Application Sidechain (BAS) or BNB Sidechain. A sidechain is a smaller blockchain that connects blockchains. For example, a BAS could connect an Ethereum (ETH) platform and a BNB protocol, such as Helio.

The Helio Protocol works with Ethereum platforms because it is Ethereum Virtual Machine (EVM) compatible. The EVM is the digital computer that runs the Ethereum blockchain. You need access to the EVM to make non-Ethereum protocols compatible with Ethereum (ETH) and Ethereum Request for Comment (ERC-20) tokens.

Will Hay (HAY) collapse?

Speculation that Hay (HAY) could implode began after HAY’s price fell to 69.8₵ and 40₵ on 2 December 2022. BeingCrypto reports. However, CoinMarketCap reported HAY’s price was 95.6₵ on 6 December 2022. In contrast, CoinGecko gave Hay a 95.65₵ Coin Price on 6 December 2022.

This means Hay (HAY) had lost its peg. To explain, the Peg is a price close to  $1 USD. That means Hay was worth less than $1.

They base the price of stablecoins such as HAY on the illusion that the stabelcoin contains a US dollar. In reality, a stablecoin contains a smart contract (digital robot) that makes payment in US dollars when you spend it.

How Stablecoins Collapse

Tether (USDT), makes payment in US dollars held in a bank account. Conversely, destablecoins such as Hay (HAY) pay in dollars a decentralized finance (defi) ecosystem provides.

If the system cannot provide dollars, the stablecoins cannot pay and lose their value. That’s what happened to the TerraUSD stablecoin, which collapsed in May 2022.

The fear is that Hay’s loss of value shows there are no dollars available. This can generate a run, a panic in which many people sell or cash out Hay for USD. If there are not enough dollars to pay all the Hay owners, Hay collapses.

Fears of a Hay collapse are spreading because of news reports that allege hackers stole $5 million from the Ankr Protocol (ANKR). Hackers penetrated Ankr’s security by exploiting a weakness in the Helio Protocol, BeingCrypto alleges.

How Safe is the Helio Protocol?

It is hard to tell how safe Hay (HAY) is, because Helio posts its audit reports on GitHub. However, four entities, SlowMist, PeckShield, Verisdise, and Certik audit the Helio Protocol.

Moreover, CoinMarketCap offers no MarketCap, or Fully Diluted Market Cap for Hay. Hence, there is no way to determine how much money Helio has.

Instead, all CoinMarketCap listed for Hany was a $7.499 million 24-Hour Market Volume and a $57.450 million Decentralized Exchange (DEX) volume on 6 December 2022. CoinMarketCap did not rank Hay.

However, CoinGecko gave Hay (HAY) a $47.538 million Market Cap, a $6.865 million 24-Hour Trading Volume, and a Fully Diluted Valuation of $956.158 million on 6 December 2022. They base those numbers on a Circulating Supply of 49.718 million HAY, a Total Supply of 49.859 million HAY, and a Maximum Supply of one billion HAY. Hay was CoinGecko’s 394th ranked cryptocurrency on 6 December 2022.

I think Hay (HAY) is a dangerous asset investors need to avoid because the price fluctuates. If a $5 million hack at another protocol can crash Hay, I think speculators need to stay away from this destablecoin because it will collapse.