What is Stablecoin?: A Survey on Its Mechanism and Potential as Decentralized Payment Systems

TL;DR

This survey analyzes various stablecoin mechanisms, emphasizing the potential of non-collateralized stablecoins as decentralized payment systems, and highlights the lack of standardized mechanisms for their stability.

Contribution

It classifies stablecoins by collateral type and intervention layer, and discusses their potential and current limitations as decentralized payment systems.

Findings

Non-collateralized stablecoins have high potential as DPSs.

No standard mechanism exists for stablecoin stability in practical DPSs.

Different intervention layers influence stablecoin mechanisms.

Abstract

Our study provides a survey on how existing stablecoins-- cryptocurrencies aiming at price stabilization-- peg their value to other assets, from the perspective of Decentralized Payment Systems (DPSs). This attempt is important because there has been no preceding surveys focusing on the stablecoin as DPSs, i.e., the one aiming at not only price stabilization but also decentralization. Specifically, we first classified existing stablecoins into four types according to their collaterals (fiat, commodity, crypto, and non-collateralized) and pointed out the high potential of non-collateralized stablecoins as DPSs; then, we further classified existing non-collateralized stablecoins into two types according to their intervention layers (protocol, application) and confirmed details of their representative mechanisms. Utilizing concepts such as Quantity Theory of Money (QTM), Tobin tax, and speculative attack, our survey revealed the status quo where, despite the high potential of non-collateralized stablecoins, they have no standard mechanism to achieve the stablecoin for practical DPSs.