How Stables Work & Break
How stablecoins hold a dollar, why they break it, and the vocabulary Pharos uses to name the risk.
The record so far
27 depegs, reconstructed in full. 13 of the coins were delisted and never recovered.
- 6
- Survived
- 8
- Wounded
- 13
- Died
clawed back to the dollar
still trading, structurally scarred
delisted, never recovered
Case Studies
How a peg breaks. Long-form retrospectives of real depegs: what happened, why the design produced it, and how far the price fell.
$0.87
peg low
Reserve banking shock
USDC and the Silicon Valley Bank weekend
A fully-reserved dollar stablecoin lost its peg for two days in March 2023, not because its backing failed, but because one of the banks holding that backing did.
March 2023Survived$0.01
peg low
Algorithmic collapse
TerraUSD: the death spiral that erased $18 billion
An uncollateralized mint-burn stablecoin propped up by a 20% yield unwound in six days, hyperinflating LUNA and dragging UST to a dime.
May 2022Died$0.89
peg low
Redemption-terms shock
USD0++ depeg: when Usual changed the redemption floor
A governance decision, not a backing failure, repriced Usual's locked USD0++ to roughly 89 cents and set off a deleveraging cascade across Morpho.
January 2025Wounded
Mechanisms
How a peg is produced. Every active stablecoin runs one of 10 designs. There are 379 coins in total, each defending the dollar differently and failing differently under stress.
Custodial Cash and Cash-Equivalents
129 live
Centralized issuers custody dollars in bank accounts and short-term Treasuries; tokens are minted and redeemed on demand.
Tokenized Treasury
49 live
Regulated funds hold short-duration Treasuries; the token is a fund share that accretes NAV instead of trading exactly at $1.
Crypto-Collateralized (CDP)
71 live
Overcollateralized vaults issue stablecoin debt; positions liquidate when collateral falls below a safety ratio.
Hedged Synthetic Dollar
36 live
Offsetting economic exposures target a stable net value; implementations range from spot-plus-perp hedges to on-chain lending with matched borrow-and-stake legs.
Reflexive / Unbacked
4 live
The peg is held by protocol-level mint/burn rules and arbitrage incentives rather than by 1:1 reserves.
Tokenized Credit Fund
40 live
Regulated funds hold private credit, CLO tranches, or other non-Treasury debt; the token is a fund share whose NAV reflects credit losses and quarterly redemption gates.
Allocated Commodity Claim
0 live
The token is a title claim on specific vaulted metal rather than on dollars; it tracks the commodity price and can usually be redeemed for physical delivery in whole-bar lots.
UCITS Physical Securities and TRS Fund
2 live
The token represents a proportional fund interest; physical securities and total-return swaps target the share class's return, with separate NAV, counterparty and recovery risks.
Shared Reserve Liability
10 live
Several protocol-issued liabilities draw on one reserve pool; exchange rights do not establish exclusive allocation, legal priority or complete liability coverage.
Protocol Position Liability
38 live
Protocol-issued tokens rely on bridge, vault or module positions; the local claim and position continuity remain distinct from the underlying assets' backing.
Glossary
The vocabulary, version-pinned. Every Pharos term defined and anchored to the methodology section that uses it, 16 entries deep.
- PSIv3.64
- Pharos Stability Index. A 30-minute ecosystem-wide condition score, 0 to 100, that subtracts penalties for severity, breadth, and stress breadth, then adds a clamped trend term. The result maps into six condition bands from BEDROCK to MELTDOWN. PSI is conservative by design: one small depeg should not move the index, but simultaneous broad stress should. Always uppercase.
- DEWSv6.31
- Depeg Early Warning System. A forward-looking per-coin stress score, 0 to 100, recomputed every 30 minutes from eight weighted sub-signals: price deviation, source divergence, liquidity erosion, pool imbalance, supply velocity, blacklist activity, mint/burn pressure, and yield anomalies. PSI condition and same-peg contagion can amplify the score before it lands in a band. Always uppercase, never spaced.
- PegScorev6.31
- Composite peg-stability score, 0 to 100. PegScore combines time-at-peg (50%) and event severity (50%) over a window capped by the coin's actual age, then enters the safety grade through a power-curve multiplier at exponent 0.40. The multiplier prevents a structurally strong asset with a bad peg from receiving an inflated grade. One word, capital P, capital S.
Where to go next