The Art of Central Banking on Blockchains: Algorithmic Stablecoins

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Remember algorithmic stablecoins?

Following their mini hype cycle in Q4 2020, they’ve crashed violently and fallen deeply out of favor. Reflexivity propelled these early experiments to great heights on the way up, but annihilated them on the way down. Today the leaders of hype cycle including ESD and DSD sit as low as 90% below their $1 peg. Unsurprisingly many critics jumped to the conclusion that these experiments were destined to fail under their current designs. And well… they were right.

However, while these algorithmic stablecoins have stumbled out the gate, the sector is far from dead. In fact, algorithmic stablecoins are going through a renaissance as of late that has the potential to transform this industry. And if these new improved model models work, with time this industry could have a scalable, capital efficient, governance minimized, decentralized stablecoin for people to store and transact value in.

In the first of two reports on central banking on blockchains we cover algorithmic stablecoins - their market potential, their issues, their renaissance, as well as profiles of the most promising projects on or coming to market.

The Big Picture