Analysis of “Seigniorage Shares” Algorithmic Stablecoins

Stablecoins have clearly reached a level of product-market fit. The total supply has grown from $5.9 billion at the start of 2020 to $26.1 billion today. This represents a 344% increase. Moreover, stablecoins have become the default means-of-exchange in various DeFi applications, such as prediction markets.

Today, most of the market is dominated by the simple centralized custodian model — stablecoins like USDC, USDT, and GUSD have an issuer and are backed by dollars in a bank account. These make for over 90% of the market.