Stablecoins: Reducing the Volatility of Cryptocurrencies

Ayten Kahya (), Bhaskar Krishnamachari () and Seokgu Yun
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Ayten Kahya: University of Southern California
Bhaskar Krishnamachari: University of Southern California
Seokgu Yun: SovereignWallet Network Pte. Ltd

A chapter in Handbook on Blockchain, 2022, pp 445-461 from Springer

Abstract: Abstract In the wake of financial crises, stablecoins are gaining adoption among digital currencies. We discuss how stablecoins help reduce the volatility of cryptocurrencies by surveying different types of stablecoins and their stability mechanisms. We classify different approaches to stablecoins in three main categories (i) fiat or asset backed, (ii) crypto-collateralized, and (iii) algorithmic stablecoins, giving examples of concrete projects in each class. We assess the relative tradeoffs between the different approaches. We also discuss challenges associated with the future of stablecoins and their adoption, their adoption and point out future research directions.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spochp:978-3-031-07535-3_14

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DOI: 10.1007/978-3-031-07535-3_14

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