Luna-Terra crash: A brief history of failed algorithmic stablecoins

The stunning fall of the Terra stablecoin made the overall crypto market unstable, wiping out more than $200 billion in the space. The value of Luna Terra plunged about 80 per cent, making the coins now almost worthless. It should be noted that stablecoins work on the supply and demand game. Any stable coin that is developed has to be backed by some collateral, to make its price stable.

There are three types of stablecoins: crypto-backed, where the token is collateralised by cryptocurrencies; fiat-backed, in which the token is pegged to either USD or Euro; and algorithmic coins that rely on algorithms to maintain their supply and demand, and maintain their price to a dollar.