Define “Seigniorage” in the Context of an Algorithmic Stablecoin

Seigniorage is the profit made by a government by issuing currency. In an algorithmic stablecoin, it refers to the profit generated when the stablecoin trades above its peg, typically $1.

The protocol may "mint" new stablecoins to be sold for a profit, which is then used to fund the protocol's treasury or reward users. This mechanism increases the stablecoin supply to push the price back down to the peg, capturing the profit from the expansion.