Stable Cryptocurrencies - First Order Principles
Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao · 2019
The emergence and proliferation of stable cryptocurrencies necessitate the establishment of first order design principles for stable cryptocurrencies. After highlighting the benefits of stable cryptocurrencies for monetary policy making, overall market stability, and their impact on the emergence of decentralized commerce, the authors introduce First Order Principles for stable cryptocurrency design and their essential functions. The core design features and their interoperative feedback effects revolve around: (1) burning coins through bonds vs. reserves, (2) transaction vs. holding taxes, (3) repegging, and (4) governance. Key Words: Stable Cryptocurrencies, Liquidity, Corruption, Cost, Speculation, Inflation, Price Stability, Transparency, Feedback Effects, Market Stability, Stability Mechanisms, Monetary Policy, Emerging Technology, Crypto Economics, Token Models, Incentive Design, Velocity, Supply, Demand, Tokens, Blockchain, Distributed Ledger Technology JEL Categories: K20, K23, K32, L43, L5, O31, O3 * Professor of Mathematics, Metropolitan State University (Minneapolis, USA) ** Professor of Law, University of St. Thomas School of Law (Minneapolis, USA) *** Professor of Finance, Metropolitan State University (Minneapolis, USA) 0 Electronic copy available at: https://ssrn.com/abstract=3402701
Cite: Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies - First Order Principles (2019). SSRN: https://ssrn.com/abstract=3402701. https://doi.org/10.2139/ssrn.3402701
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