I recently saw the following tweet: This is a real problem, so let’s talk about it. ICE First, let me describe how ICE works. ICE is like a debt instrument that is part of the icewater stablecoin model. The icewater protocol includes a controller that can adjust the supply of…

How can the decentralized blockchain help solve a collective action problem? Two options that have been considered are known as ragequit and assurance contacts. How to they compare? Prisoner’s Dilemma To begin, let me introduce one of the most famous problems in game theory: the prisoner’s dilemma. In this hypothetical problem, two…

Consider the following two forms of decentralization: There is no executive power. Actions of an organization are determined by voting. There is no centralized enforcement mechanism. Cheating is prevented by decentralized methods. Many people in the blockchain world think of #1 when they think of what decentralization, but #2 is…

I recently had a conversation with someone who made a case against crypto. I am paraphrasing here, but the argument went something like this: Crypto is primarily good for illegal transactions and for avoiding taxes The rise of crypto threatens traditional law and institutions Therefore you should not support/invest in…

The objective of this post is to describe 1) why blockchain networks should have a stable native currency, 2) why being a native currency is good for a stable currency, and 3) different categories of stable currencies. …

Recently, Vitalik asked an interesting question: can a stablecoin “safely” wind down to zero users? He makes the following useful point: In principle, if demand decreases extremely slowly, the volcoin’s expected future fees and hence its market cap could still be large relative to the stablecoin, and so the system…

The context: we want to create an internal AMM because keeping an order book requires too much computation and storage. Let’s assume we are working with a simple, constant product AMM (google it, or read this if you aren’t familiar with them). The problem: an AMM has a slope representing…

You have probably heard that Bitcoin is the new gold. But we can do better than that. I say Bitcoin is the new Bull. Crypto is the new cattle. Why cattle? Because cattle were the primary form of wealth for people who practiced nomadic pastoralism. A large part of human…

In the aftermath of the Terra collapse, those of us interested in stablecoins should start to take stock of what was learned. One of the lessons you will hear is that a stablecoin should be backed by external collateral. Before we assess this advice, let’s start with some preliminary definitions: …