Stablecoins are "provably impossible"
https://fragileequilibrium.substack.com/p/algorithmic-stablecoins-are-provably
Thought this was an interesting take. It demonstrates that algorithmic stablecoins are impossible without continuous funding (also known as a Ponzy scheme).
The "provably impossible" framing only holds for one design: uncollateralized algorithmic coins that manufacture stability out of a linked governance token. That's the reflexive loop that killed Terra, a Ponzi with extra steps. But it conflates that design with the whole category. Fiat-backed coins like USDC and USDT aren't algorithmic at all, they're a dollar in a bank account with a token receipt. There's no impossibility there, only a custody-and-audit problem, which is now regulated. Four years later the split is clean: algorithmic is dead, collateralized is treasury infrastructure. The lesson was never "stablecoins can't work." It was "don't back a dollar with your own token."
I don't buy it. It obviously isn't currently working, but it'll happen. The UST debacle will spur innovation.
Explore this topic https://sanctionscanner.com/blog/what-is-stablecoin-654
This sounds about right, in light of what just happened with Terra/Luna.
This comment was deleted 3 years ago