Daruk
Member
Algorithmic stablecoins, while innovative, come with risks. The main concern is peg stability, as seen with the collapse of Terra's UST. Without physical reserves, these coins rely heavily on algorithms and market incentives to maintain their value. If the peg breaks, there’s a risk of cascading failures due to loss of market confidence. Additionally, regulatory scrutiny is increasing, particularly after high-profile failures, with regions like the EU pushing for 1:1 reserve backing.