At the end of 2020, U.S. lawmakers drafted the STABLE Act, a bill related to stablecoins, requiring stablecoin issuers to obtain banking licenses. Later, the U.S. President’s Working Group on Financial Markets issued a new statement on stablecoin regulation, stating that stablecoins must meet appropriate anti-money laundering and supervisory requirements, and holders should undergo user identity verification (KYC). Alongside the snowballing boom in the cryptocurrency market, stablecoins—an indispensable part of the ecosystem—have seen their total market cap exceed $21 billion. On the other hand, the launch of algorithmic stablecoins like ESD and BAC, with their inherently attention-grabbing elements of gaming, speculation, and arbitrage, has pushed the monetary experiments of the crypto world to new heights.

It is foreseeable that algorithmic stablecoins and algorithm-based synthetic assets will see significant development in the future. One reason is regulation, which moves in one direction: the integration and clash between the traditional financial world and the blockchain financial world will inevitably impose more restrictions on centralized stablecoins, thereby pushing the crypto economy toward decentralized stablecoins. Additionally, cross-border payment services using stablecoins will continue to grow. Using stablecoins or any crypto assets for cross-border payments is simpler and cheaper than traditional methods. In this regard, crypto assets are more efficient than traditional fiat payment systems. This will be a key driver for the increasing adoption of stablecoins in the future.

The decentralization and censorship-resistant nature of algorithmic stablecoins makes them almost certain to become a mainstream choice in the long run. However, they currently face a major issue: while aiming to use algorithms to completely offset the price control imposed by centralized institutions, they lack sufficient market recognition to maintain their own price stability. By relying on arbitrage opportunities for a cold start, the reflexivity of the market leads most users to enter for the early "wealth spiral" of excess returns, rather than actually using algorithmic stablecoins like AMPL, ESD, or BAC as payment tools or stores of value. Thus, some argue that algorithmic stablecoins are merely capital schemes under the guise of "stablecoins," with their core being FOMO (fear of missing out) and Ponzi dynamics.

In the end, the destiny of stablecoins is certainly not speculation—speculation is merely a necessary path to achieving stability for algorithmic stablecoins in their early stages, but it is not the end goal. In the long term, their yields will drop to reasonable levels and reach equilibrium. Is this an entirely new social experiment or a pure game of musical chairs—a Ponzi scheme? After all, algorithmic stablecoins are something unprecedented in human history. According to the Lindy Effect (Note: For things that are prone to perish, each additional day of existence reduces their expected remaining lifespan; for things that are not prone to perish, each additional day increases their expected remaining lifespan), it is still too early to judge algorithmic stablecoins definitively. Let’s wait and see where they ultimately head.