Glossary · Stablecoins
Algorithmic stablecoin
Also: algo stablecoin, seigniorage stablecoin
An algorithmic stablecoin is a token that attempts to hold its peg by minting and burning a companion token rather than by holding reserves, a design whose largest example, TerraUSD, collapsed in May 2022.
Related terms
- Depeg
- A depeg is a sustained deviation of a stablecoin's market price from its target value, usually triggered by doubt about the reserves behind it or by redemption becoming slow, restricted or impossible.
- Stablecoin
- A stablecoin is a token designed to hold a constant value against a reference asset, almost always the US dollar, using reserves, overcollateralization or a hedged trading position to defend the peg.
- CDP stablecoin
- A CDP stablecoin is a token minted as a loan against crypto collateral worth more than the amount issued, with the surplus collateral and a liquidation mechanism standing in for an issuer's cash reserves.
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