Problems of Algorithmic Stable Coin | Bitcointalksearch.org

TastyChillySauce00

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Quote from: @sriyan on September 12, 2023, 04:05:06 AM

I am researching about the risks and problems of algorithmic stablecoins. As I know, it controls the supply without the need for reserves. Is it possible to develop a new algorithm to handle this problem(Depeg) and create a new algorithmic stable coin?

It's not even possible to handle depeg without being backed by stable collateral asset like fiat money. You can take Terra luna as an example about how the pressure towards LUNA has been also destroyed its UST stable token as well caused by the algo could not get too much selling pressure. How can you handle the volatility in your token if it's being used as a stabilization for your algorithmic stable token? Used fiat money to back the stable token is the best way.
The algorithmic token has no stability as it peg on the volatile asset which can go up and down easily. It's impossible to create risk-free algorithmic stable token.
The algorithmic stable token will never work.

vv181

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Quote from: @sriyan on September 12, 2023, 04:05:06 AM

I am researching about the risks and problems of algorithmic stablecoins. As I know, it controls the supply without the need for reserves. Is it possible to develop a new algorithm to handle this problem(Depeg) and create a new algorithmic stable coin?

The way algorithmic stablecoin gets pegged is because of the other form of token/coin that goes along with the stablecoin, a dependent relationship between those tokens. The problem is if there is no incentive, at the whole level, of that coin it will lose its peg. The hard question is how to empower the main token, given its fragile state (a single main utilization for the main token and the fallibility system of the algorithm).

What backed the main token value, noting that the true algorithmic stablecoin shouldn't have any reserves? Because that is one of many reasons it got depegged.

Xal0lex

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The problem with algorithmic tokens is that they are unstable. All known solutions to algorithmic tokens have proven to be unworkable and many have abandoned them. There is nothing more unstable in the world of cryptocurrencies than algorithmic stablecoins, which can lose their peg at any time and catch hyper inflation, as was the case with UST. At this point, algorithmic tokens are not justified and it is not worth it to use them as stablecoins. The more complex you come up with a collateral algorithm, the faster this whole system will collapse.

@sriyan

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I am researching about the risks and problems of algorithmic stablecoins. As I know, it controls the supply without the need for reserves. Is it possible to develop a new algorithm to handle this problem(Depeg) and create a new algorithmic stable coin?

Topic: Problems of Algorithmic Stable Coin (Read 35 times)