Alisya,

Help me out with the logic here. Having a stable coin requires three things (1) a stable price against some target, e.g. USD. (2) a market maker willing to exchange coins in both directions. (3) a general belief that this market maker will CONTINUE to provide liquidity.

If your stable coin is not collateralized then it seems the first time selling of the coin outstrips buying of the coin, there is little reason to expect the market maker will continue to provide liquidity. Indeed if they do not have the collateral, they will be UNABLE to provide liquidity.

Knowing this it seems the only people who would invest in an uncolateralized stable coin would be planning some very targeted and brief usage of the coin, else they will get caught holding the bag. Indeed eventually SOMEONE gets left holding the bag. Right?

How can a non-collateralized stable coin be stable?

thanks in advance for clarity here.