What is Stablecoin?: A Survey on Price Stabilization Mechanisms for Decentralized Payment Systems

Since the first theoretical concept of blockchains was proposed, over 100 digital currencies have been issued by online platformers as cryptocurrencies and traded by online consumers mainly in emerging countries. From the perspective of online payment systems, several studies have regarded blockchains as decentralized payment systems (DPSs), enabling international payment with lower cost and higher traceability with sophisticated peer-to-peer protocols in contrast to other centralized systems. Despite the advantages, DPSs are not chosen by the owners of online shops due to the high volatility of cryptocurrency prices. Stablecoins are cryptocurrencies with price stabilization mechanisms to match the price of another currency with lower volatility. Our motivation is to gather various price stabilization mechanisms for the purpose of comparing them from the perspective of implementation and enterprise usage. After dividing the methods into four collateral types (fiat, crypto, commodity, and non-collateralized) and two layers (protocol and application), we show that non-collateralized stablecoin on the application layer is the simplest approach for implementation. Moreover, we discuss their connection with traditional economic studies on Hayek money, Seigniorage Share, and Tobin tax. Some current stablecoin projects are also discussed and compared. This is the first survey of stablecoins to the best of our knowledge.