Crypto glossary
Seigniorage
Seigniorage is the profit from issuing money; for stablecoin issuers it is mainly the interest earned on reserves backing tokens that pay holders nothing.
Historically, seigniorage was the gap between the face value of coins and the cost of minting them. For modern central banks it is the income earned on the assets bought with the money they create, such as government bonds, while banknotes pay no interest. That income is usually handed over to the state.
Fiat-backed stablecoins reproduce the model in private hands. Users hand over dollars and receive non-interest-bearing tokens; the issuer invests the dollars in Treasury bills and keeps the yield. When short-term rates are high, this makes stablecoin issuance one of the most profitable businesses in crypto, and it explains why banks, payment firms and exchanges want their own coins or a share of revenue.
The word also names a family of algorithmic stablecoin designs, such as Basis or TerraUSD, that expanded and contracted supply by minting and burning a second "share" token, with holders of that token capturing the issuance profits. Those designs relied on demand staying high and tended to collapse once confidence fell.
Example
An issuer with 50 billion dollars of tokens in circulation and reserves earning 4% in Treasury bills makes about 2 billion dollars a year in interest, none of which goes to token holders.