Truthful and Faithful Monetary Policy for a Stablecoin Conducted by a Decentralised, Encrypted Artificial Intelligence

TL;DR

This paper introduces a mathematically rigorous framework for a decentralised stablecoin managed by an AI that ensures stability, truthfulness, and security, surpassing heuristics used in existing stablecoins.

Contribution

It demonstrates the feasibility of decentralising a central bank's functions with secure, mathematically proven properties using interdisciplinary methods, enabling complex monetary policies.

Findings

Proves decentralised central bank independence.

Shows benefits of combining mechanism design with control theory.

Enables complex monetary policies beyond current cryptocurrency rules.

Abstract

The Holy Grail of a decentralised stablecoin is achieved on rigorous mathematical frameworks, obtaining multiple advantageous proofs: stability, convergence, truthfulness, faithfulness, and malicious-security. These properties could only be attained by the novel and interdisciplinary combination of previously unrelated fields: model predictive control, deep learning, alternating direction method of multipliers (consensus-ADMM), mechanism design, secure multi-party computation, and zero-knowledge proofs. For the first time, this paper proves: - the feasibility of decentralising the central bank while securely preserving its independence in a decentralised computation setting - the benefits for price stability of combining mechanism design, provable security, and control theory, unlike the heuristics of previous stablecoins - the implementation of complex monetary policies on a stablecoin, equivalent to the ones used by central banks and beyond the current fixed rules of cryptocurrencies that hinder their price stability - methods to circumvent the impossibilities of Guaranteed Output Delivery (G.O.D.) and fairness: standing on truthfulness and faithfulness, we reach G.O.D. and fairness under the assumption of rational parties As a corollary, a decentralised artificial intelligence is able to conduct the monetary policy of a stablecoin, minimising human intervention.