  Centralized monetary policy, leading to persistent inflation, is often
inconsistent, untrustworthy, and unpredictable. Algorithmic stablecoins enabled
by blockchain technology are promising in solving this problem. Algorithmic
stablecoins utilize a monetary policy that is entirely rule-based. However,
there is little understanding of how to optimize the rule. We propose a model
that trade-off the price for supply stability. We further study the comparative
statics by varying several design features. Finally, we discuss the empirical
implications for designing stablecoins by the private sector and Central Bank
Digital Currency (CBDC) by the public sector.
