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Stablecoins: Reducing the Volatility of Cryptocurrencies

In: Handbook on Blockchain

Author

Listed:
  • Ayten Kahya

    (University of Southern California)

  • Bhaskar Krishnamachari

    (University of Southern California)

  • Seokgu Yun

    (SovereignWallet Network Pte. Ltd)

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.

Suggested Citation

  • Ayten Kahya & Bhaskar Krishnamachari & Seokgu Yun, 2022. "Stablecoins: Reducing the Volatility of Cryptocurrencies," Springer Optimization and Its Applications, in: Duc A. Tran & My T. Thai & Bhaskar Krishnamachari (ed.), Handbook on Blockchain, pages 445-461, Springer.
    • Handle: RePEc:spr:spochp:978-3-031-07535-3_14
    DOI: 10.1007/978-3-031-07535-3_14
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