Seigniorage

In its monetary sense, seigniorage is income associated with issuing money, with measurement depending on the framework used. For backed stablecoins, it also refers to returns an issuer earns on reserves. It is not equivalent to total business profit: distribution, compliance and operating costs matter.

Returns depend on reserve composition, interest rates and product agreements. Issuer income does not mean the holder is entitled to it. Redemption obligations and restrictions on remunerating holders follow legislation and documentation.

Algorithmic seigniorage designs use supply expansion and contraction and incentives to attempt to maintain a peg. This differs from earning interest on external reserves and can fail if demand or confidence disappears.