Algorithmic Stablecoin
A stablecoin that holds its peg through supply mechanics rather than reserves.
Algorithmic designs mint and burn a companion token to expand or contract supply, aiming to steer price back to the peg without holding full collateral.
The model failed spectacularly with TerraUSD in May 2022, wiping out tens of billions of dollars in days and triggering a chain of insolvencies across the sector.