Vitalik's New Theory: Algorithmic Stablecoins Are True DeFi, and Will Reshape the Stablecoin Landscape in the Future?

According to Gate Market Data, Ethereum’s price today is $2,078.26, with a market capitalization of $252.82 billion, and a trading volume of $2.7871 billion in the past 24 hours. Vitalik’s latest view is that Ethereum’s founder pointed out: “If we have high-quality algorithmic stablecoins backed by ETH as the underlying asset, even if 99% of liquidity is actually provided by CDP (Collateralized Debt Position) holders, the ability to transfer counterparty risk to market makers is an important feature.”

Core Perspectives

Vitalik Buterin explicitly states that he believes “Algorithmic Stablecoins are the true DeFi.” This view directly challenges the currently dominant centralized stablecoin model in the market. He specifically points out that depositing USDC into lending platforms like Aave for yield does not fall under the true decentralized finance category. This assertion emphasizes the importance of a decentralized underlying architecture, rather than merely using decentralized protocols at the interaction layer.

The core design of algorithmic stablecoins focuses on effective risk distribution rather than completely eliminating risk. Vitalik notes that even if an algorithmic stablecoin is supported by real-world assets (RWA), as long as over-collateralization and diversification ensure sufficient collateral in the event of a single RWA failure, it constitutes an effective risk mitigation for holders.

Controversy Over Decentralization

The fundamental difference between centralized and decentralized stablecoins lies in their operational mechanisms and risk structures. Centralized stablecoins like USDC and USDT rely on fiat reserves held by centralized issuers, while algorithmic stablecoins maintain price stability through smart contracts and algorithmic mechanisms.

Vitalik believes that true decentralized finance should be able to transfer counterparty risk to market makers, rather than relying on a single centralized entity. This risk transfer mechanism is a key feature in the design of algorithmic stablecoins, even when most liquidity is provided by CDP holders.

By mid-2025, the total market cap of stablecoins is expected to grow by over 50% year-over-year, reaching approximately $255 billion. However, algorithmic stablecoins account for less than 2% of the total stablecoin market cap, still far below the peak of over $22 billion in early 2022.

Technical Model Comparison

There are various models of algorithmic stablecoins, each with its unique mechanisms and risk characteristics.

Pure algorithmic models like Ampleforth (AMPL) maintain peg solely through supply adjustments, without any collateral backing. Dual-token models, exemplified by Terra (UST and LUNA), use two tokens to support each other, but this model experienced a catastrophic collapse in 2022.

Partial collateral models like Frax (FRAX) combine on-chain supply control with reserve assets and are currently the most widely adopted type of algorithmic stablecoins. This model supports each stablecoin partially with collateral such as USDC or ETH, with the rest stabilized through algorithmic expansion or contraction.

Circuit breakers and dynamic parameter mechanisms are increasingly common in newer algorithmic stablecoins. For example, Ethena’s USDe incorporates circuit breakers to limit minting during market volatility. These mechanisms serve as protective measures, helping to stabilize user expectations and prevent negative feedback loops during downturns.

Ethereum’s Collateral Value

Vitalik emphasizes prioritizing the development of ETH-backed algorithmic stablecoins. This view is closely related to Ethereum’s central role in the decentralized finance ecosystem.

According to Gate Market Data, as of February 9, 2026, Ethereum’s price is $2,078.26, with a market cap of $252.82 billion, accounting for 10.04% of the market. Ethereum’s price has fluctuated by -0.3% in the past 24 hours.

Historical price data shows that Ethereum experienced a significant correction from late January to early February 2026. Despite short-term volatility, market forecasts suggest that by 2031, Ethereum’s price could reach $4,481.25, representing a potential return of +49.00% compared to the current price.

Market Development Trends

The stablecoin market is undergoing rapid evolution, with a market cap surpassing $316 billion. Changes in the regulatory environment are driving industry transformation, especially with the introduction of the GENIUS Act, which clarifies regulatory frameworks. This regulatory progress is prompting traditional financial institutions like Western Union, Klarna, and Sony Bank to shift from “integrating USDC” to launching their own dollar stablecoins through white-label partnerships. This shift reflects corporate motivations around economic benefits, behavioral control, and accelerated deployment.

The stablecoin issuance market has formed a clear layered structure: financial institutions prioritize compliance and trust, fintech companies focus on product delivery and distribution, and DeFi projects optimize composability and yield. This layering creates different needs and expectations for stablecoin design among participants.

Long-term Development Path

Vitalik believes that the stablecoin industry should gradually move away from using the US dollar as the primary unit of account toward more diversified indices. He suggests that future stablecoins should track more resilient indicators such as global commodity baskets, energy prices, or custom consumer price indices, rather than solely anchoring to fiat currencies. This idea echoes the experiment of Reflexer’s low-volatility token RAI, which attempts to be non-pegged to any fiat, though its market cap has performed far below expectations, indicating limited market acceptance for non-fiat-anchored stablecoins.

With the rise of AI Agent economies, the role of stablecoins is also changing. AI agents cannot open traditional bank accounts, making USDC and similar stablecoins their natural payment channels. Google has initiated work on the Agent Payments Protocol (AP2), involving over 60 payment and tech companies, aiming to establish industry standards for AI agent payments.

The future of the stablecoin market may no longer be dominated by a single USDC or USDT. As RWA tokenization surpasses $23 billion and is expected to reach $16 trillion by 2030, algorithmic stablecoins are gaining more attention. Price forecasts for Ethereum suggest that its average price in 2026 could reach $2,095.27, with a range between $1,320.02 and $2,283.84. As Ethereum’s role as the underlying collateral for algorithmic stablecoins increases, its price performance will directly impact the stability and adoption of these decentralized stablecoins. Even though algorithmic stablecoins currently account for less than 2% of the total stablecoin market cap, Vitalik’s perspective injects new momentum into this field. Market participants and builders now face clear challenges and opportunities: either continue relying on centralized models or truly embrace the principles of decentralized finance.