Stablecoin Types Vol. 3 — Algorithmic.
06 Jan 2023, 17:16
💎Stablecoin Types Vol. 3 — Algorithmic💎
In our series of educational posts, we have already addressed Fiat-backed, as well as crypto-backed stablecoins. And so far it appears they are both comparatively safe investment options, as they have collateral in the face of stable assets backing them.
🔵But what about algorithmic, also known as non-collateralized, stablecoins?
What these assets do, is follow an algorithm. With the rise in demand, new stablecoins are created to reduce the price to the normal level, and vice versa. Basically all they are based on is market supply and demand.
Their perks, of course, involve decentralization. But their downfall? What we saw happen. There is no collateral involved for liquidity, which means everyone can lose their money in case of a coin crash.
Stay tuned to find out about the last & final stablecoin type (also one that we at VNX are all about) — Commodity-Backed!🔥