Year: 2025
Type: article
Abstract: Stablecoins serve as the backbone of many decentralized finance (DeFi) ecosystems, offering price stability in an otherwise volatile cryptocurrency market. This paper analyzes the economic design of stablecoins- both algorithmic (un- or under-collateralized) and asset-backed (collateralized)- and employs game-theoretic models to examine their susceptibility to speculative attacks. We present mathematical frameworks illustrating peg- maintenance mechanisms, discuss equilibrium conditions for stable pegging, and use real-world examples of USDC, DAI, and Terra-Luna to highlight the key success and failure factors. Policy and protocol design recommendations are provided to help mitigate risks of de-pegging and bank-run dynamics.
Authors: Ayush Gupta, Girik Gupta
Language: English
Subfield: Information Systems
Field: Computer Science
Domain: Physical Sciences
Open Access status: diamond
OpenAlex ID: W4407782464