Algorithmic stablecoin
algo stablecoinalgo stable
A stablecoin that maintains its peg through programmatic supply expansions and contractions rather than 1:1 reserves.
Algorithmic stablecoins use minting / burning, seigniorage shares, or rebase mechanics to push the price toward the Peg. Pure algos (no collateral) have repeatedly failed under stress — the May 2022 collapse of Terra USD wiped out roughly $40B in value. Modern designs typically blend an algorithmic component with partial collateral; see Fractional stablecoin.
Related terms
- Fractional stablecoinA stablecoin partially backed by collateral and partially by an algorithmic / market-driven mechanism.
- Rebasing stablecoinA stablecoin whose balance changes algorithmically in each holder's wallet to maintain a target price or yield.
- DepegA stablecoin trading materially away from its target price ($1 for USD-pegged stables) on a primary venue.
- PegA stablecoin's design target price — usually $1 USD, though EURC, agEUR, and XSGD are pegged to other currencies.