1/I don't understand why people keep trying to make "algorithmic stablecoins" work. You're building something that explicitly tries to recreate the EURISK peg of 2008 and will work about as well. coindesk.com/can-decentrali…
2/If you want to peg something to the USD, you can either back it with USD (e.g. USDHKD peg, or USDC) or with volatile assets & overcollateralisation (e.g. DAI, or ABSes). You can't back it with nothing and then shout "I declare this pegged". Iceland tried that!
3/One morning in October '08, the Icelandic central bank said "EURISK is now pegged at 150. We will maintain the peg by growing and shrinking the ISK money supply to hold it around 150 ISK to the EUR. Do not test us."
4/It lasted, quite literally, 24 hours. Everyone shorted the hell out of the ISK because the peg was ludicrous; destroying enough ISK to maintain the peg would have instantly cut the size of Iceland's economy in half.
5/ISK halved in value the next morning, and then nobody could trade any more anyway because all three Icelandic banks had collapsed and it was literally impossible to settle ISK trades.

6/Most algo stablecoins handwave about "algorithmic monetary policy!" or "issue another token to buyback the stable token!". No. These both break down irrecoverably if the token price goes too far from the peg; & you can only issue so much of "other token" before that breaks too
7/Either that, or you have to burn so much of the token in the process of propping up the price that the tight money supply strangles the economy (aka, the Iceland thing)
8/There is also DSD's approach, which amounts to "near enough is good enough, and also if you hold on long enough it'll converge, really", which is moving the goalposts on "'stable' coin" so far that they're all the way off the field Image
9/Incidentally DSD's current attempt at an algorithmic stablecoin is trading somewhere around 14 cents on the dollar, which coincidentally is within a couple points of the recovery on the CDS when Caesars Entertainment went bankrupt in '16
10/Anyway, long and short of it: if you're an aspiring buidler don't waste your time trying to make algorithmic stablecoins work. There's plenty more out there that's a) more interesting, and b) will not get you compared to the central bank of Iceland

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