In May 2026, Pharos rated the stablecoin pmUSD a D. Just three days later it crashed to $0.116. One user with over $1M in pmUSD saw this warning from Pharos and would later DM them a thank-you having gotten out of pmUSD just in time.
Pharos is a free stablecoin safety scoring tool that continuously monitors and tracks stablecoins, including peg stability, liquidity, and dependency risk.
You might recognize Brice as the CoFounder of Polaris, which we covered in a recent DeFi Frontier episode with his CoFounder Robert Mullins — watch it here! The team from Pharos was kind enough to join us on a new episode to share some tips for using Pharos to avoid getting rekt on the next failed stablecoin.
Step 1: Check the safety score before you deposit. Every stablecoin on Pharos gets a letter grade across multiple dimensions. There’s no hard rule to what grade guarantees safety but the team insists sticking to stablecoins with at least an A or B grade will save you from the most obvious stablecoin failures.
Step 2: Set up their Telegram bot, the PharosWatchBot, for real-time alerts on your favorite stablecoins. You can configure custom alerts, such as “notify me if this stablecoin depegs more than 100bps, notify me if the safety score changes.”
Step 3: This one’s very simple but solid advice: watch for founder for red flags. According to Bryce, if a founder is actively misdirecting or misleading, get all your funds out immediately and never touch anything they're involved in again. This alone protects you from the worst future mishaps and for some reason in crypto, investors have the memory of a goldfish.
Step 4: Understand the Reserve Composition behind every stablecoin you touch. No more guesswork digging through docs. Pharos does the hard work of uncovering the actual backing for stablecoins and monitoring it in real-time. On the podcast, I learned in real-time that Ethena USDe has nearly no delta-neutral basis trade backing it anymore, having thought myself it was still more backed by the basis trade that made the stablecoin so popular last cycle.
Step 5: Understand who holds minting authority for stablecoins. One of Pharos's most critical scoring dimensions is who can mint new tokens and under what conditions. Unlimited or unchecked minting authority is a major red flag, meaning the supply can be inflated without warning, diluting your position or destabilizing the peg. Pharos tracks this and factors it directly into the safety score. If minting is controlled by a single key, a small multisig, or an opaque governance process, treat it as a serious risk before depositing. This has been the source of so much pain this past year with exploited stablecoins attackers such as Resolve USR’s single-EOA minter.
There’s lots more great advice they offer up in the podcast but you’ll have to listen to the rest of this new episode of The Edge Podcast and check out Pharos yourself at pharos.watch.
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