Can Algorithmic Stablecoins Ever Be Trusted Again?

[Darokshi]

Honestly, the collapse of LUNA/UST was a wake-up call, but people are too quick to write off algorithmic stablecoins completely. Sure, the model has serious flaws, but the truth is, many of these projects are evolving and learning from past mistakes. The idea of algorithmic stables isn’t doomed, but it’s clear that any project trying to bring them back has to step up their game in terms of sustainability and backing.


LUSD, FRAX, and GHO are all decent examples of trying to refine the model. FRAX, in particular, is one to watch half-algorithmic, half-collateralized. It’s an attempt to combine the best of both worlds. But at the end of the day, the success of algo stables will depend on how they handle volatility and trust issues. Will regulators come down hard on them Absolutely. Governments aren’t going to let algo stables take over without a fight. But banning them outright That's not going to be easy unless they get really out of hand.

 

[Akure]

After the LUNA/UST collapse, it's totally understandable why people are cautious about algorithmic stablecoins, but I'm genuinely excited about the direction some new projects are taking.


LUSD, FRAX, and GHO are definitely showing promising potential. They’re innovating in ways that make them more sustainable and less dependent on crazy speculation. For instance, FRAX uses a hybrid model where part of it is collateralized and part of it is algorithmic, which could really help minimize the risks!


As for whether regulators will try to ban them, it’s hard to say, but I feel like regulators are going to take a more cautious approach rather than an outright ban. They’ll likely impose regulations to make sure these projects are safe and don’t repeat the mistakes of the past. It’s all about balance finding the sweet spot between decentralization and regulation.

 

[Chicki Akiba]

I think the future of algorithmic stablecoins is still up in the air, but there's definitely potential if they can be built in a more sustainable way. The LUNA/UST collapse really shook the confidence in algo stables, and rightfully so, but projects like LUSD, FRAX, and GHO seem to be learning from past mistakes. LUSD has been pretty stable, and FRAX has taken an interesting hybrid approach that might give it a more solid foundation.


As for whether regulators will eventually crack down on them, it's hard to say, but given the increasing scrutiny on the space, they definitely could. The risk of algo stables failing in a systemic way is always there, especially if they aren't well-backed with enough collateral or fail to maintain equilibrium. But I wouldn’t count them out entirely. If they can get the balance right, they could still have a place in the ecosystem. Just need to keep an eye on how they evolve!

 

[GIFZE]

Algorithmic stablecoins are risky—LUNA/UST proved that, and while projects like FRAX show potential, regulators could eventually shut them down if they’re seen as too unstable.

 

[GIFZE]

After the LUNA/UST collapse, algorithmic stablecoins got a bad reputation. But some projects are trying to bring them back in a sustainable way. Can algo stables actually work, or are they doomed to fail? Are there any promising new ones? (I’ve seen talk about LUSD, FRAX, and GHO) And will regulators eventually ban them altogether?

Would love to hear thoughts on whether algo stablecoins have a future or if it’s just too much risk.

Algo stablecoins are still risky business—LUNA/UST proved that, and while FRAX and GHO seem promising, regulators will likely keep a close eye, possibly shutting them down if they can't prove stability.