Collateralized Stable Coin

In this research we have tried to deepen the concept of collateralized stable coin going to analyze the fundamental aspects that make this category of digital coins so fascinating. 

Collateralized Stable Coin Summary

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A collateralized stablecoin is a stablecoin that is entirely or almost entirely backed by collateral held in a reserve. There are several projects and protocols born in recent years in this area that differ in different aspects and internal dynamics.

In this research we have tried to deepen the concept of collateralized stable coin going to analyze the fundamental aspects that make this category of digital coins so fascinating. Specifically, we have analyzed both the protocol that manages the assets and the way that the underlying assets are held as collateral to understand if this mechanism could be really effective for the stability of coins and therefore the usefulness in the world of Decentralized Finance.

Given the different internal mechanisms of the protocols, it was necessary to adopt a model as general as possible to define the pros and cons and then to judge the parts that make it up as a whole. The framework used takes into consideration the three aspects considered fundamental to define the integrity of a protocol: Market Design (digital environment), Mechanism Design (structural rules of the environment) and Token Design (mechanism and incentive policies of the token).

We analyzed the various metrics within the framework and selected some of them. These metrics are considered to be the most important metrics that influence the robustness of the design for such collateralized stablecoins. The research is divided into three main parts that start with the analysis of the metrics used then goes through a discussion part and the final recommendation part.

The discussion serves to transform the data collected and the quantitative metrics into qualitative concepts to be exposed and analyzed in order to define common traits to be improved in the various protocols. These concepts are then exposed in the recommendations that define guidelines and suggestions to improve the user experience and the ecosystem around the protocol to make them as effective and efficient as possible.

At the end, in Appendix 1 and 2, we find the current status of the field with the definition and introduction to the operation of these protocols and any changes in the production version in the post writing and data collection period. As a rapidly expanding and developing field, it is only fair to define the context in which these protocols were evaluated.

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