What is an algorithmic stablecoin?

There are several algorithmic stablecoins on the market today, such as Basis Cash (BAC) and Empty Set Dollar (ESD). For many, an algorithmic stablecoin represents how blockchain and crypto should operate, with code controlling the cryptocurrency and zero human input. Until recently, the most popular algorithmic stablecoin was TerraUSD or UST.

How do REBASE algorithmic stablecoins work?

Rebase algorithmic stablecoins manipulate the base supply to maintain the peg. The protocol mints (adds) or burns (removes) supply from circulation in proportion to the coin's price deviation from the $1 peg. If the coin price > $1, the protocol mints coins. If the coin price < $1, the protocol burns coins.

Are algorithmic stablecoins undercollateralized?

Algorithmic stablecoins are typically undercollateralized – they don’t have independent assets in reserves to back the value of their stablecoins. In fact, “undercollateralized stablecoins” and “algorithmic stablecoins” are often used interchangeably. What are algorithmic stablecoins? Algorithm can be an obfuscating word.

Why should you invest in a stablecoin?

These foundational benefits offer a scalable solution that is not actually offered by any other set on the market as of now, and the absence of the tangible asset requirement behind algorithmic stablecoin eliminates the possibility of errors from the user's end.