This is a chapter from the Token Economy book series. All subchapters are collapsed under their subchapter headings to make the page more readable. Find copyright information on this text and about the book an the end of the page.
Stability of value is one of the most important functions of money so it can fulfill its purpose as a unit of account and a reliable store of value. However, Bitcoin and other protocol tokens traditionally don’t come with an inbuilt stability mechanism. Stable tokens have been explicitly designed for the purpose of bridging this gap. They represent a store of value, medium of exchange, and unit of account that has a stable value against another currency, commodity or index, and are expected to resolve a major bottleneck to mass adoption of tokens as a medium of exchange.
Disclaimer: Many of the stable-token examples mentioned below are subject to frequent updates or current events. Certain details described in the following chapter might be out of date at the time of reading this book. This chapter has, therefore, been structured to paint a big picture of the complexities regarding the mechanism design of stable tokens, independent of the current developments of specific stable token projects.
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Intro
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Inflation & Exchange Rates
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Fiat-Collateralized & Commodity-Collateralized Stable Tokens
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Crypto-Collateralized Stable Tokens
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Algorithmic Stable Tokens
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Central Bank Digital Currency
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Interdependencies & Building Blocks
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Impossible Trinity
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Challenges & Outlook
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Chapter Summary
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Footnotes
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References & Further Reading
This is an excerpt from the book “Token Economy: Money, NFTs & DeFi”
RIGHTS
Copyleft 2023, Shermin Voshmgir
Creative Commons CC-BY-NC-SAÂ
NON-COMMERCIAL USE
This license only allows reusers to distribute, remix, adapt, and build upon the material in any medium or format for noncommercial purposes only, so long as attribution is given to the creator. If you remix, adapt, or build upon the material, you must license the modified material under identical terms.
COMMERCIAL USE
For commercial use contact:Â hello@token.kitchen
BibTeX
@book{title={Token Economy: Money, NFTs & DeFi}, author={Voshmgir, Shermin}, year={2023}, publisher={Token Kitchen} }