Re examining algorithmic stablecoins: learning from UST's failures Algorithmic stablecoin UST was once a shining star in the cryptocurrency field, aiming to maintain its peg to the US dollar through algorithmic mechanisms rather than traditional collateral. The biggest difference between UST and other stablecoins such as USDT/USDC is that it attempts to control loop feedback through free game of individual behavior, without relying on real-world asset (RWA) inputs from centralized institutions. However, the collapse of UST has sounded the alarm for the entire cryptocurrency industry and provided valuable lessons for us to re-examine the design of algorithmic stablecoins. The core of UST's stability mechanism lies in LUNA. When the price of UST exceeds $1, users can burn LUNA to cast new UST, thereby increasing the supply of UST and lowering its price. On the contrary, when the price of UST is below $1, users can burn UST to cast LUNA, thereby reducing the supply of UST and increasing its price. This mechanism aims to create an arbitrage opportunity and encourage traders to maintain UST prices at around $1. However, UST's fatal flaw lies in the fragility of its value foundation. LUNA itself lacks intrinsic value, and its price is highly dependent on UST's demand. When the market experiences panic, LUNA's price quickly collapses, causing UST to lose its anchor and ultimately leading to collapse. The collapse of UST highlights the potential risks of algorithmic stablecoins and raises questions about their stability. Although UST ultimately failed, some of the ideas embedded in its mechanism are still worthy of further investigation. UST attempts to establish a decentralized feedback loop that maintains price stability through free play of individual behavior. This feedback loop based mechanism theoretically has high anti censorship and decentralized characteristics. The mechanism of UST is actually a complex human-computer interaction system, in which individual transaction behavior affects the operation of algorithms, which in turn affect individual decisions. This model is similar to Satoshi Nakamoto's vision for the Bitcoin network to perceive real-world prices, which involves obtaining external information through decentralized means. During his lifetime, Satoshi Nakamoto has been trying to solve the problem of making the Bitcoin network aware of BTC prices or other real-world prices, in order to address the core pricing issue of BTC payments. The state channel proposed by Satoshi Nakamoto has already solved the efficiency problem of BTC payments. The fatal problem with the algorithm stablecoin UST is that the value base is selected as the air coin Luna. The human-machine interaction value feedback perception loop between Luna and UST, like the Bitcoin network, is an adaptive nonlinear complex system of decentralized distributed human-machine interaction. The key perception is the injection of individual behavior into the process of distributed human-machine interaction. So, how can we design more robust algorithmic stablecoins? A key issue is how to design a more robust value foundation for algorithmic stablecoins and how to leverage the Bitcoin network and distributed individual behavior patterns. Firstly, we need to address LUNA's' air coin 'issue. Instead of relying on a token without intrinsic value, it is better to consider introducing assets with intrinsic value as the basis of value. This can be mainstream cryptocurrencies such as Bitcoin, Ethereum, or tokenized real-world assets (RWAs) such as gold, stocks, or real estate. In addition, we can explore distributed value discovery mechanisms that utilize activities on the Bitcoin network, such as transaction volume, miner rewards, and smart contract interactions, to dynamically evaluate and adjust the value base. One possible solution is to adopt a hybrid model that combines some assets with intrinsic value with a value assessment based on network activities. Secondly, we can consider directly connecting BTC and UST to achieve distributed BTC/USDT interaction. This may involve designing a protocol that allows users to directly use BTC to mint and redeem UST without the need for intermediate tokens. This model can simplify mechanisms and improve efficiency, but it also needs to address some key challenges. To achieve direct interaction between BTC and USDT, a reliable oracle network is needed to provide accurate and timely BTC price information. This oracle network must be highly decentralized to prevent price manipulation. In addition, a complex algorithm needs to be designed to dynamically adjust the issuance and redemption mechanism of UST based on the price fluctuations of BTC and the supply and demand relationship of UST. This algorithm must be able to cope with market fluctuations and prevent UST from losing its anchor. When designing algorithmic stablecoins, we also need to consider the following key factors: Security: It is necessary to integrate the process of distributed human-computer interaction into the real world in order to bring about the logic of security. This means that the security of stablecoins relies on a distributed system that can interact with the real world and perceive risks. This system needs to be able to monitor market dynamics, identify potential threats, and take corresponding measures to protect the stability of stablecoins and users' assets. Anti manipulation: Algorithms must be designed to resist market manipulation. This may require the introduction of various checks and balances mechanisms, such as trading restrictions, price restrictions, and circuit breakers. Transparency: The operating mechanism of the algorithm must be transparent so that users can understand its working principle. This helps establish users' trust in stablecoins. Scalability: Stablecoins must be able to handle a large number of transactions and support future growth. This may require the use of efficient consensus mechanisms and scaling techniques. Overall, designing a successful algorithmic stablecoin is a highly challenging task. The failure of UST provides valuable lessons for the development of stablecoins. While pursuing decentralization and innovative mechanisms, we must always keep in mind the importance of value foundation and risk control. The use of the Bitcoin network and distributed individual behavior patterns provides valuable ideas for solving value based problems. However, to implement these ideas, many technological and economic challenges need to be overcome, and extensive research and development must be conducted.