This paper explores and compares stablecoins — a category of cryptographic token that seeks to maintain stable value to a reference asset. Three approaches are recognised: off-chain collateralised (IOU), on-chain collateralised, and non-collateralised (algorithmic). Further distinction within this taxonomy stems from the type of collateral used, algorithm design, and the degree of decentralisation and regulatory posture. Contrasted versus ‘normal’ cryptocurrencies such as bitcoin and ether, a different, complementary set of use cases are put forth, and potential adoption is estimated. Early evidence of performance (stability) is analysed, and a trust framework for fiat-backed, regulatory compliant stablecoins is established.
January 2019
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