Algorithmic stablecoin

An algorithmic stablecoin is a token that attempts to hold a target value primarily through automated rules that expand or contract its supply, rather than by holding equivalent cash or asset reserves. Designs may use a linked token, incentives, or arbitrage to push the price toward the target. Because stability relies on market behaviour and confidence rather than fully backed reserves, these systems can be fragile and have failed in the past, sometimes rapidly.

A common misconception is that "algorithmic" implies the same safety as reserve-backed stablecoins; the backing model is fundamentally different. This entry describes mechanics only and is not advice.