Demo Lending pauses one pool
The team paused one pool after a suspected exploit. Other depositors are not known to be affected, and a post-mortem is promised.
Stablecoins: what backs them, and the risks
A stablecoin aims to hold a steady value. How well it does depends on what stands behind it and whether people can redeem it.
Three common designs
- Reserve-backed: an issuer holds assets such as cash or short-term government debt
- Crypto-backed: users lock up more crypto than the stablecoins they create
- Algorithmic: rules and incentives try to hold the price
How they fail
A stablecoin can lose its peg if people doubt its reserves or rush to exit. In 2022, the collapse of the algorithmic stablecoin TerraUSD showed how quickly confidence can disappear.
What to check
- Who issues it, and who can freeze it
- What the reserves hold, and who verifies them
- Who can redeem directly, and at what cost
Sources
[The Editor links primary sources here before publication.]
Disclosures
[AI use, holdings and commercial relationships are shown here.]