, Columnist
Terra Flops
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An “algorithmic stablecoin” sounds complicated, and there are a lot of people with incentives to pretend that it is complicated, but it is not. Here is how an algorithmic stablecoin works1:
All of this is, I think, quite straightforward and correct, except for Point 7, which is insane. If you overcome that — if you can find a way to make Luna worth some nonzero amount of money — then everything works fine. That is the whole ballgame. In theory this seems hard, since you just made up Luna. In practice it seems very easy, as there are dozens and dozens of cryptocurrencies that someone just made up that are now worth billions of dollars. The principal ways to do this are: