Open AccessComputer Science Abstractions To Help Reason About Decentralized Stablecoin Design
Author(s) -
Ben Charoenwong,
Robert M. Kirby,
Jonathan Reiter
Publication year - 2023
Publication title -
ieee access
Language(s) - English
Resource type - Journals
ISSN - 2169-3536
DOI - 10.1109/access.2023.3317891
Subject(s) - aerospace , bioengineering , communication, networking and broadcast technologies , components, circuits, devices and systems , computing and processing , engineered materials, dielectrics and plasmas , engineering profession , fields, waves and electromagnetics , general topics for engineers , geoscience , nuclear engineering , photonics and electrooptics , power, energy and industry applications , robotics and control systems , signal processing and analysis , transportation
Computer science as a discipline is known for its penchant for using abstractions as a tool for reasoning. It is no surprise that computer science might have something valuable to lend to the world of decentralized stablecoin design, as it is in fact a “computing" problem. In this paper, we examine the possibility of a decentralized and capital-efficient stablecoin using smart contracts that algorithmically trade to maintain stability and study the potential new functionality that smart contracts enable. By exploiting traditional abstractions from computer science, we show that a capital-efficient algorithmic stablecoin cannot be provably stable. Additionally, we provide a formal exposition of the workings of Central Bank Digital Currencies, connecting this to the space of possible stablecoin designs. We then discuss several outstanding conjectures from both academics and practitioners and finally highlight the regulatory similarities between money-market funds and working stablecoins. Our work builds upon the current and growing interplay between the realms of engineering and financial services, and it also demonstrates how ways of thinking as a computer scientist can aid practitioners. We believe this research is vital for understanding and developing the future of financial technology.