“incentivize behaviors that benefit the system”
I’m going to go out on a limb here and make the claim that this doesn’t just apply to issuers of a coin but also to users who wish to hold the coin for whatever purpose.

I mean it can’t be issuers who are the only ones forced to pay the price for volatility. Users themselves either have to offset volatility in terms of fees paid to issuers OR in terms of time created by limited redemption windows or hard / soft daily limits as to how much stable coin can be redeemed for an underlying asset.

That’s why a multi-tiered user base where different classes of users pay different fees or have different redemption windows makes a TON of sense as a way of making stable coin creation attractive to issuers because they know that they won’t be bearing the full brunt of a volatile market. Volatility threatens to liquidate an issuers collateral position in a fractional system which imposes some mandated reserve level that must be maintained.

Fees charged by issuers can in no way be high enough to offset this risk of liquidation completely.

Written by

Incentives architect for TandaPay

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store