Algorithmic Stablecoin (Seigniorage model)
Also known as: algo stablecoin, seigniorage-based stablecoin, non-collateralized stablecoin
Algorithmic stablecoins use smart contracts and supply algorithms to maintain a stable value without collateral.
Algorithmic stablecoins are a type of cryptocurrency designed to maintain price stability using algorithms and smart contract logic, without being backed by fiat reserves or crypto collateral. These tokens expand or contract their circulating supply based on market demand to keep the price close to a target (usually $1). The seigniorage model involves minting and burning tokens dynamically, often supported by a secondary token that absorbs volatility. Notable examples include failed experiments like TerraUSD (UST) and theoretical models explored in decentralized finance.