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Reducing the Volatility of Cryptocurrencies -- A Survey of Stablecoins

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  • Ayten Kahya
  • Bhaskar Krishnamachari
  • Seokgu Yun

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.

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  • Ayten Kahya & Bhaskar Krishnamachari & Seokgu Yun, 2021. "Reducing the Volatility of Cryptocurrencies -- A Survey of Stablecoins," Papers 2103.01340, arXiv.org.
    • Handle: RePEc:arx:papers:2103.01340
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    References listed on IDEAS

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    1. Bullmann, Dirk & Klemm, Jonas & Pinna, Andrea, 2019. "In search for stability in crypto-assets: are stablecoins the solution?," Occasional Paper Series 230, European Central Bank.
    2. Francesca Carapella & Jean Flemming, 2020. "Central Bank Digital Currency: A Literature Review," FEDS Notes 2020-11-09-1, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Kliber, Agata, 2022. "Looking for a safe haven against American stocks during COVID-19 pandemic," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).

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