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ESD, DSD, and BAC Algorithmic Stablecoins Craze: Compound Founder Asks, "Aren't we all against central banks printing money?"

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ESD, DSD, and BAC Algorithmic Stablecoins Craze: Compound Founder Asks, "Aren

Algorithmic Stablecoins, unlike USDT issued by Tether and DAI issued by Maker, do not have assets backing them. Instead, they rely on market forces to determine their price. When the stablecoin is higher or lower than one US dollar, it adjusts its price stability through currency inflation by printing more money or currency contraction. The most famous case is Ampleforth AMPL.

Recently, there have been other improved cases such as Empty Set Dollar ESD, Dynamic Set Dollar DSD, Basis Cash BAC, etc., which use methods like inflation time frequency and multi-token models to prevent the continued deflationary death spiral of algorithmic stablecoins. Even recently, projects like Mithril MITH led by Machi's older brother, Huang Licheng, have corresponding algorithmic stablecoin platforms like MITH Cash emerging.

In simple terms, when the price of an algorithmic stablecoin is higher than $1, it continues to inflate the currency to induce participants to sell, thereby adjusting the price closer to $1. The inflation rate varies by platform, and users may feel like they are "making money while lying down" similar to a "ponzi scheme." Recently, Compound founder and The Block's research director Larry Cermak have both expressed their views on this trend.

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Compound Founder: Don't People Hate Central Banks for Printing Money?

Compound founder Robert Leshner praised ESD at the end of October, believing it to be a fairly comprehensive project in all aspects.

Currently, Empty Set Dollar (ESD) is the highest valued algorithmic stablecoin at $475 million, followed by DSD at only $120 million, and BAC in third place with only $67 million.

Leshner himself is puzzled, as he finds it strange that people in the cryptocurrency industry are angry about central banks printing money, yet they are playing with algorithmic stablecoins.

The Block's Larry: I'm Not Optimistic

The Block's Research Director, Larry Cermak, stated:

"The algorithmic stablecoin craze is just another way to convince fools to send money to coin speculators' farms, bringing it back to the heat of this summer. In my opinion, it will eventually fade like the NFT craze did a few months ago."

However, in the DeFi sector, there are many speculators who have seized the opportunity and made a timely exit, just like the rise and fall of the tide. It is recommended to thoroughly research and manage risks before jumping into algorithmic stablecoins. One should not easily succumb to the temptation of quick appreciation.