# Hot money

`kaal:entity:hot-money`

**Status.** derived

This node is assembled mechanically from the 6 claims that carry the concept tag `hot-money`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

6 claims across 2 works, 2019 to 2021.

**2019**

- [3402701-017](https://wulfkaal.github.io/claims/3402701-017) [condition/argued] -- Reserves, not bonds, are the necessary mechanism for currency instability caused by hot money, that is money frequently moved between institutions or currencies to maximize gain.
  > Reserves are necessary to address the instability of a currency due to hot money
  Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies - First Order Principles (2019). SSRN: https://ssrn.com/abstract=3402701
- [3402701-018](https://wulfkaal.github.io/claims/3402701-018) [mechanism/argued] -- Because most of the value of contemporary cryptocurrencies comes from speculation on future uses that do not yet exist, the vast majority of cryptocurrency is technically hot money, and reserves are the best defense against the resulting price fluctuations.
  > Therefore the vast majority of cryptocurrencies are technically hot money. The best way to prevent price fluctuations due to hot money is to use reserves
  Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies - First Order Principles (2019). SSRN: https://ssrn.com/abstract=3402701
- [3402701-025](https://wulfkaal.github.io/claims/3402701-025) [definitional/speculative] -- Defining the energy of money as the product of economic momentum and velocity gives a basis for discussing economic frictions and for distinguishing genuine from artificial network energy, which is what guards against hot money instability.
  > With clearly specified definitions of energy we can discuss "frictions" in an economy due to inefficiencies, and we can distinguish "genuine" versus "artificial" network energy to guard against the instability arising from hot money
  Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies - First Order Principles (2019). SSRN: https://ssrn.com/abstract=3402701

**2021**

- [3782216-031](https://wulfkaal.github.io/claims/3782216-031) [condition/argued] -- Contrary to the industry practice of full backing, a full reserve is not always necessary, because a currency also has intrinsic worth derived from the authentic economic activity it represents.
  > On the contrary, we argue that a c::% reserve is not always necessary, as is the case with any currency which has an intrinsic worth.
  Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216
- [3782216-032](https://wulfkaal.github.io/claims/3782216-032) [condition/argued] *(failure mode)* -- Determining what fraction of a currency is hot money is necessary for efficiently defending its stability: overestimating the hot money ratio makes the currency costlier to use, and underestimating it makes the currency insecure.
  > Therefore, determining the fraction of a currency that is hot money is necessary for efficient defense of its stability. A currency that overestimates this hot money ratio will cost more to use. A currency that underestimates the ratio will be insecure.
  Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216
- [3782216-033](https://wulfkaal.github.io/claims/3782216-033) [condition/argued] -- Because the tension between efficiency and security demands a careful estimate of the hot money ratio, a sophisticated decentralized governance system is crucial for any efficient stablecoin.
  > The tension between these two values of efficiency and security motivates a careful esti- mate of the hot money ratio. This means a sophisticated decentralized governance system is crucial for any efficient stablecoin.
  Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/hot-money.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.