What is an Algorithmic Stablecoin?

An algorithmic stablecoin is a cryptocurrency designed to maintain a stable value relative to a specific asset or basket of assets, such as a fiat currency like the US dollar. Unlike traditional stablecoins, typically backed by a reserve of assets held in a bank or other financial institution, algorithmic stablecoins use algorithms and smart contracts to maintain stability. In most cases, algorithmic stablecoins are designed to automatically adjust their supply in response to market demand to keep the price stable.…