A ratchet is not a stablecoin — and not its opposite
People hear “the price only rises” and file the idea under stablecoin, or under its opposite. It is neither. The difference is in which number is fixed.
Two numbers, not one
A stablecoin has one number the design cares about: the market price, and it is held at a level. Everything the issuer does — reserves, arbitrage, redemption at par — serves that level. The design succeeds when the price does not move.
A ratchet has two numbers, and the design cares about the relation between them. The first is the cost of entry: the price at which the contract creates a new coin, set by a formula and never lowered. The second is the backing per coin: the reserve divided by the supply, defended from falling below a set share of its record. The market price is not one of the two. It lives between them, and the design succeeds when it stays there — not when it stays still.
So “the price only rises” is imprecise. What only rises is the cost of entry. What is defended is the backing. The market price is bounded by both and pushed by neither.
What that changes for someone who saves
With a stablecoin, saving means holding a claim on a fixed number of dollars, and the claim loses purchasing power at whatever rate dollars do. The design does not pretend otherwise; it is not what a stablecoin is for.
In a ratchet, saving takes a different form: a position. You deposit collateral at today’s cost of entry and get a right to convert it, later, into coins at that price. The deposit comes back in full whenever you ask. If the market price is later above your entry price, converting and selling yields more than you put in; if not, you redeem and lose only the time. Every later entrant gets that right at a higher price than you did, because the cost of entry never falls. That is the ratchet: not a promise about the market, but a rule about who gets in cheaper — nobody who comes after you.
What it changes for someone who pays
A stablecoin is the better unit of account: a price in it is a price in dollars. A ratchet coin trades in a corridor, so a price quoted in it is a price inside a band. For everyday amounts that band is narrow — set by pool fees, a fraction of a per cent to a couple — but it is not zero.
What the ratchet adds is a floor that use itself can raise. If the holders set a transfer fee, every transfer burns a sliver of the supply while the reserve stays; backing per coin rises with turnover. A merchant who accepts the coin and holds it is on the receiving side of that channel. A stablecoin has no such channel; its floor is its par, and par does not move.
What it changes for someone who trades
A stablecoin, when it works, offers nothing to trade: the price is a level. A ratchet offers a band with two published edges. Above the cost of entry, minting a coin is cheaper than buying one, so nobody pays more than that for long. Below the backing by more than the redemption fee, redeeming pays more than selling, so nobody sells lower for long. Traders who act on those edges are paid for holding the corridor, and they stop being paid when it is narrow — which is what keeps their number in proportion.
What stays exactly the same
Collateral. Both hold external assets in reserve; neither backs itself with its own coin, which is where algorithmic designs have failed. A ratchet reserve in stablecoins is a claim on the same dollars a stablecoin is.
Solvency. A ratchet coin is a share of the reserve, not a debt against it. Whatever the reserve holds, the claims on it sum to exactly that. Redemption pays the share and leaves the fee; an outflow of holders lowers the reserve and the supply in the same proportion and leaves backing per coin where it was. There is no run to start.
Honesty about the market. Neither design controls demand. A stablecoin can lose its peg if its reserve is doubted; a ratchet coin can sit at its floor for a long time if nobody wants to enter. What the ratchet guarantees is the direction of one number and the defence of another. The rest is the market’s, and it says so.
The one-line version
A stablecoin fixes the level. A ratchet fixes the direction of the cost of entry and defends the backing beneath it. If you want a unit that does not move, you want the first. If you want a deposit that comes back in full with a right to convert at today’s price, and a coin whose floor is defended and can be raised by use, you want the second. They are not rivals; the second is designed to sit beside the first.