What are algorithmic stablecoins?

Algorithmic stablecoins exemplify these traits; part monetary economics, part financial markets, part mathematics, and part technology. Sitting at the intersection of money and blockchain technology, they are new and complex—and pose many challenges and unanswered questions over how the future of DeFi will unfold.

What are stablecoins and how do they work?

Stablecoins are digital assets designed to hold a certain value relative to a different asset, most commonly the U.S. dollar. They have become a popular way to hedge against crypto price risk and move funds across exchanges throughout the world.

What are fractional-algorithmic stablecoins?

Fractional-algorithmic stablecoins are partly collateralized, meaning they are somewhat backed by a real-world asset. Frax is an example of a fractional-algorithmic stablecoin, as it is partially backed by USD Coin, a stablecoin that is backed by the U.S dollar. In some cases, algorithmic stablecoins can be very beneficial.

What is an example of a REBASE algorithmic stablecoin?

Ampleforth is an example of a rebase algorithmic stablecoin. Seigniorage algorithmic stablecoins use a burn-mint multi-coin structure, where one coin is minted or burned to control the value of another. Terra Lab's Luna and UST cryptos were an example of this, which you can read more about below.