This type of stablecoin tries to mirror the mechanism behind the traditional central bank model, but with smart contracts instead of humans in charge.
These smart contracts aim to adjust the circulating supply based on demand for the currency, Price levels are kept by issuing more tokens when demand is high (via interest-bearing shares), and removing tokens as demand drops via a system of redeemable bonds and automated buybacks.
Unlike collateralised models, there is no underlying asset which can be redeemed or traded. Value derives from the expectation that the system will be able to keep the stablecoin stable.
This is a highly experimental and still largely unproven concept, and its nature has led to legal backlash – with Basis, a now-defunct pioneer, has been shut down due to regulatory concerns.
Currently only a handful of such projects exist, such as Bdollar – and then, with a very limited circulating supply.
| Pros | Cons |
| Solid concept: the mechanisms of seigniorage have been successfully running for centuries in the traditional economy | Novelty: potential bugs in a smart contract may doom the project |
| Crypto-native: the Stablecoin requires no interaction with traditional systems | Attack surface: it’s unclear if the combination of smart contracts and economic incentives could react fast enough in case of a deliberate attack |
| Transparency: all transactions happen on-chain, and are auditable by anyone | Legality: in a sector that already suffers from lack of regulatory clarity, this concept may draw even more backlash |
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