# kaal:claim:3396522-010

**Claim.** Fiat currency collateralization is expensive and inefficient because the entire backing value must be held liquid; anything less opens arbitrage opportunities of the Soros type.

**Type.** mechanism  **Support.** argued

**Holds when.**

- assumes the backing must remain fully liquid to prevent arbitrage

**Source quote.**

> Fiat currency collateralization is expensive and inefficient because all of the value that is backing the cryptocurrency needs to be liquid, otherwise arbitrage opportunities, such as the Soros attack, are possible.

**From.** Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, *Stable Cryptocurrencies* (2019), IV. Stable Cryptocurrencies, page 24

**Cite as.** Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies (2019). SSRN: https://ssrn.com/abstract=3396522

**Verify.** sha256 of source PDF `ef5031b16aa53476ed618f0bdf92601cd4affb893692c701134bd9cba3ea8acf` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Calcaterra%20et%20al.%20-%202019%20-%20Stable%20Cryptocurrencies.pdf

**Failure mode.** illiquid-collateral-arbitrage  (family: liquidity-and-market-structure-failure)

**Topics.** defi, consensus-and-security, tokenomics

**Keywords.** collateralization, liquidity, arbitrage-attack, stablecoins, peg-design

**Related claims.**

- restated_by: https://wulfkaal.github.io/claims/3402701-002
- restated_by: https://wulfkaal.github.io/claims/3782216-029

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.