Luna Brothers, Inc.

This Is a good overview of the main ways to create a stablecoin in crypto.

This essay will explore the broad categories of blockchain-enabled stablecoins — including fiat-asset-backed, overcollateralised-crypto, algorithmic, and Bitcoin-backed stablecoins.

I was surprised to see the similarities between algorithmic stablecoins and how countries manage their currencies.

Algorithmic stablecoins are not much different than fiat debt-backed currencies, save for one crucial factor. Terra and others like it cannot force anyone to use UST at any price. They must convince the market with their fancy designs that the governance tokens backing the protocol will have a non-zero value that rises more quickly over time than the amount of fiat-pegged tokens issued. However, a government can always force, ultimately at the point of a gun, its citizens to use its currency. Therefore, there is always built-in demand for fiat, even if everyone knows the “assets” backing such a currency are worth less than the currency in circulation.

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