CHAPTER 7

Stablecoins, Tokens and Decentralised Finance

The new financial plumbing

Opening question

“Is a stablecoin as safe as a dollar in the bank?”

In this chapter

What stablecoins are and the three main designs: fiat-backed, crypto-backed and algorithmic
How reserves and redemption hold the peg, and what makes a stablecoin safer or weaker
What happens when a peg breaks, with the TerraUSD and USDC episodes
Tokens and token economics: utility, governance and supply schedules
DeFi lending: over-collateralised loans, health factors and liquidations, with a worked example
Automated market makers, price impact and impermanent loss
Where DeFi yield really comes from, and the risks behind it
Stablecoins and DeFi seen from Vietnam and Asia

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This chapter is in the full book

Chapter 1 is free to read online. The full text of chapter 7 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Forex and Crypto Investing: From Theory to Practice (Volume 3, NXW Investment Library).

Read Chapter 1 free Get the full book — contact@nxw.vn

Sections of this chapter

7.1 The new financial plumbing

7.2 Stablecoins: three designs

7.3 Reserves and redemption

7.4 Depegs: when the peg breaks

7.5 Tokens and token economics

7.6 DeFi lending

7.7 Automated market makers

7.8 Where does DeFi yield come from?

7.9 The risks of the new plumbing

7.10 Stablecoins and DeFi in Vietnam and Asia

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