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DeFi & Collateral

Stablecoins as DeFi collateral, yield and composability.

5 of 33 indexed papers · the whole library

Paper Venue Year
Cryptocurrencies and Decentralized Finance (DeFi) Igor Makarov, Antoinette SchoarSurvey of crypto and DeFi market structure, including the central role of stablecoins as settlement assets.
Key findings
  • Stablecoins are the primary settlement and collateral asset across crypto and DeFi.
  • DeFi remains highly interconnected and reliant on a few large stablecoins.
 Brookings Papers on Economic Activity (NBER WP 30006) Top-tier journal 2022
Leverage and Stablecoin Pegs Gary B. Gorton, Chase P. Ross, Sharon Y. RossAnalyses how leverage and secondary-market liquidity determine whether a stablecoin holds its peg.
Key findings
  • A stablecoin holds its peg when arbitrageurs can profitably trade it back to par; deep liquidity is key.
  • Leverage built on stablecoins can amplify depeg dynamics.
 NBER Working Paper 30796 2022
Stablecoins as a tool to mitigate the downside risk of cryptocurrency portfolios Antonio Díaz, Carlos Esparcia, Diego HuélamoThis paper empirically assessed the ability of three stablecoins to mitigate the downside risk of a traditional cryptocurrency portfolio. The findings indicated that dollar-backed stablecoins are particularly suitable as a hedge for crypto investors.
Key findings
  • Dollar-backed stablecoins have low conditional correlations with cryptocurrency portfolios.
  • All stablecoins considered have high diversification capacities by systematically reducing portfolio tail risk.
 The North American Journal of Economics and Finance 2022
DeFi risks and the decentralisation illusion Sirio Aramonte, Wenqian Huang, Andreas SchrimpfBIS analysis arguing DeFi retains points of centralisation and carries familiar financial risks.
Key findings
  • DeFi exhibits a 'decentralization illusion': governance and infrastructure remain concentrated.
  • Stablecoins are a key channel linking DeFi to the traditional financial system.
 BIS Quarterly Review, December 2021 2021
Stablecoins 2.0 Ariah Klages‐Mundt, Dominik Harz, Lewis Gudgeon, Junyou Liu, Andreea MincaThe work provides a foundational theory for stablecoins through a risk-based functional characterization of their economic structure. It matches economic models to custodial systems and characterizes risks in non-custodial stablecoins.
Key findings
  • Stablecoins have varying risks according to their design.
  • A model framework unifies existing models from economics and computer science.
  • Unique risks in non-custodial stablecoins emerge.
 None 2020
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