Once again this year, we would like to sweeten the Advent season for our readers with an Advent calendar. In a slightly different form, each door contains a “knowledge bomb”, which will be supplemented with an extraordinary special prize on Christmas Day.

Behind the fifteenth door is the term “algorithmic stablecoins”. To enter the giveaway on the 24th, simply participate in the polls and like the respective Twitter posts.

Algorithmic Stablecoins

Stablecoins established themselves over the past years as essential pillars in the world of digital assets. They are involved in the highest-volume cryptocurrency pairs and are considered a safe haven in the crypto space against volatile cryptocurrencies thanks to their peg to a fiat currency. However, existing stablecoins contain significant differences in their respective collateralization mechanisms.

Algorithm-based stablecoins, unlike their centralized counterparts, are not linked to collateral. Therefore, they are also referred to as non-collateralized stablecoins. Algorithmic stablecoins represent a new type of cryptocurrency tailored to improve price stability without a centralized entity. Often, this is done by pre-programming the supply to match the demand of the asset. That this category of stablecoins has massive vulnerabilities compared to alternative types of collateralization was painfully experienced by investors in the Terra UST ecosystem this year with a total loss. Some $60 billion in market value was wiped out in a week. A fatal setback for the “AlgoStables” sector.