What is an algorithmic stablecoin?

Anar999

"Generally, an algorithmic stablecoin is a type of stablecoin that does not require any reserves or collateral and is fully regulated by an algorithm to adjust its supply and circulation. This algorithm controls the supply and demand of the currency, aiming to peg the stablecoin's price to a reference currency (usually the U.S. dollar). Typically, when the price rises, the algorithm will issue more coins, and when the price falls, it will buy back more coins from the market. This mechanism is similar to seigniorage, where central banks regulate the supply and value of their currency by issuing or destroying money. For some algorithmic stablecoins, their functionality can be modified based on community proposals, and this modification is achieved through decentralized governance, giving the power of seigniorage to the users of the currency rather than a central bank.

In summary, algorithmic stablecoins differ from common stablecoins like USDT and USDC in their decentralization aspect. They do not require reserves and are self-sustained. As algorithmic stablecoins are currencies based on the inherent relationship between mathematics, monetary economics, and technology, they introduce a potential model for stablecoins that may be more advanced than centralized stablecoins."

Samiksha

USDT is quite useful, and for me, it's very stable.