Algorithmic Stablecoin
An algorithmic stablecoin holds its peg with code instead of reserves — minting and burning supply (or a sister token) to push the price back to $1. Terra'
An algorithmic stablecoin holds its peg with code instead of reserves — minting and burning supply (or a sister token) to push the price back to $1. Terra’s UST was the infamous example: a $40B experiment that collapsed in days when confidence broke.
Why it matters
“Backed by math” sounds elegant until a death spiral starts: falling price → more minting → more selling → lower price. Reserve-backed stablecoins can also fail, but they fail like banks; algorithmic ones fail like physics experiments. After Terra, treat every algo-stable claim as guilty until proven innocent.
Related terms
stablecoin · collateral ·
depeg