How Stables Work & Break
How stablecoins hold a dollar, why they break it, and the vocabulary Pharos uses to name the risk.
The verdict so far
27 depegs, reconstructed in full. 13 of these coins never came back.
- 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$0.10
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 six designs — 316 coins in total, each defending the dollar differently and failing differently under stress.
Custodial Cash and Cash-Equivalents
111 live
Centralized issuers custody dollars in bank accounts and short-term Treasuries; tokens are minted and redeemed on demand.
Tokenized Treasury
46 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)
88 live
Overcollateralized vaults issue stablecoin debt; positions liquidate when collateral falls below a safety ratio.
Hedged Synthetic Dollar
27 live
Spot crypto plus an equal short perpetual position adds up to a roughly dollar-stable claim; yield comes from funding rates.
Reflexive / Unbacked
8 live
The peg is held by protocol-level mint/burn rules and arbitrage incentives rather than by 1:1 reserves.
Tokenized Credit Fund
36 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.
Glossary
The vocabulary, version-pinned. Every Pharos term defined and anchored to the methodology section that uses it, 16 entries deep.
- PSIv3.5
- Pharos Stability Index. A 30-minute ecosystem-wide condition score, 0–100, 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.
- DEWSv6.094
- Depeg Early Warning System. A forward-looking per-coin stress score, 0–100, 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.
- PegScorev6.094
- Composite peg-stability score, 0–100. 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