# kaal:claim:3782216-029

**Claim.** Maintaining a full reserve is too expensive to be efficient, because every unit of reserve value backing the currency must be held liquid or arbitrage attacks become possible, and liquidity forgoes investment returns.

**Type.** failure  **Support.** argued

**Holds when.**

- fiat collateralized and algorithmic stablecoins

**Source quote.**

> The maintenance of a c::% reserve is too expensive to be efficient, and signals the need for more sophisticated mechanisms. All of the value in the reserve which backs the cryptocurrency needs to be liquid, otherwise arbitrage opportunities, such as the Soros attack, are possible

**From.** Craig Calcaterra, Wulf A. Kaal, *Decentralized Finance (DeFi)* (2021), Basic Design

**Cite as.** Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216

**Verify.** sha256 of source PDF `f1739743aa06bbc1641cd65da790d531b69d8628ea3f5cc3fcad1bf5a1242373` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Calcaterra%20and%20Kaal%20-%202021%20-%20Decentralized%20Finance%20%28DeFi%29.pdf

**Failure mode.** full reserve cost  (family: liquidity-and-market-structure-failure)

**Topics.** tokenomics

**Keywords.** stablecoins, reserves, opportunity-cost, collateral

**Related claims.**

- restates: https://wulfkaal.github.io/claims/3396522-010

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