{
 "@context": "https://schema.org",
 "@type": "DefinedTerm",
 "@id": "https://wulfkaal.github.io/entities/overcollateralization",
 "identifier": "kaal:entity:overcollateralization",
 "name": "Overcollateralization",
 "termCode": "overcollateralization",
 "inDefinedTermSet": {
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 },
 "author": {
  "@type": "Person",
  "name": "Wulf A. Kaal",
  "identifier": "https://orcid.org/0000-0003-0757-275X"
 },
 "dateModified": "2026-07-29",
 "canonicalForm": "https://wulfkaal.github.io/entities/overcollateralization.md",
 "sha256": "fc850d281450c30b3f9a00b4b3744956968a8930ae67aee23ab83e6595ebcda3",
 "additionalProperty": [
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   "@type": "PropertyValue",
   "name": "status",
   "value": "derived"
  },
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   "name": "claim_count",
   "value": 5
  },
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   "name": "work_count",
   "value": 3
  },
  {
   "@type": "PropertyValue",
   "name": "year_span",
   "value": [
    "2019",
    "2021"
   ]
  },
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  }
 ],
 "subjectOf": [
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3402701-004",
   "identifier": "kaal:claim:3402701-004",
   "text": "Cryptocurrency-backed tokens must be overcollateralized well beyond 100 percent of current value because the backing basket can fall, which makes them even more expensive than fiat-backed tokens.",
   "abstract": "Any cryptocurrency-backed token must be backed with much more than 100% of the current value of the cryptocurrency in case the basket of other crypto currencies' value drops",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies - First Order Principles (2019). SSRN: https://ssrn.com/abstract=3402701",
   "datePublished": "2019",
   "claim_type": "condition",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "backing assets are volatile cryptocurrencies"
   ],
   "source_pdf_sha256": "72ed2581b4cac2bd18a5b2640be959487a3cbc34c86ab5e5664924bcdb53c8e0",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3782216-023",
   "identifier": "kaal:claim:3782216-023",
   "text": "Decentralized derivatives must be capitalized at least fully because the platform and its anonymous users cannot be trusted, a requirement that would be impossibly onerous in traditional markets and that leaves the market for decentralized options extremely shallow.",
   "abstract": "the inability to trust the platform or the anonymous users requires these decentralized derivatives to be capitalized at least c::%, which would be impossibly onerous in traditional markets.",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216",
   "datePublished": "2021",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "decentralized options and derivatives markets at the time of writing"
   ],
   "source_pdf_sha256": "f1739743aa06bbc1641cd65da790d531b69d8628ea3f5cc3fcad1bf5a1242373",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3782216-030",
   "identifier": "kaal:claim:3782216-030",
   "text": "Cryptocurrency backed stablecoins are even more expensive than fiat backed ones, because stability is being sought with far more unstable collateral.",
   "abstract": "Cryptocurrency-backed tokens are even more expensive than fiat backed tokens, because the stability is achieved with much more unstable cryptocurrencies.",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216",
   "datePublished": "2021",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "crypto collateralized designs such as MakerDAO"
   ],
   "source_pdf_sha256": "f1739743aa06bbc1641cd65da790d531b69d8628ea3f5cc3fcad1bf5a1242373",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3782216-036",
   "identifier": "kaal:claim:3782216-036",
   "text": "The inability of anonymous participants to trust one another is crippling the DeFi market and forces decentralized markets into overcollateralization, giving traditional markets a fundamental advantage.",
   "abstract": "the inability to trust each other due to the requirements of anonymity is crippling the deFi market. So traditional markets have a fundamental advantage. Decentralized markets are overcollateralized.",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216",
   "datePublished": "2021",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "current decentralized markets, before decentralized reputation exists"
   ],
   "source_pdf_sha256": "f1739743aa06bbc1641cd65da790d531b69d8628ea3f5cc3fcad1bf5a1242373",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3949098-001",
   "identifier": "kaal:claim:3949098-001",
   "text": "Decentralized finance is structurally disadvantaged against traditional finance because decentralized products must be backed with full collateral, typically 100 percent and 200 percent on secondary layers such as MakerDAO, a collateralization burden that would be unthinkable in traditional markets.",
   "abstract": "Decentralized markets are overcollateralized, giving traditional markets a fundamental advantage. To enable a decentralized financial transaction, such as a loan or insurance policy, decentralized products typically need to be backed with 100% collateral.",
   "citation": "Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098",
   "datePublished": "2021",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "digital asset markets as of 2021",
    "decentralized loans, insurance and similar products",
    "absence of alternatives to collateral"
   ],
   "source_pdf_sha256": "04297905564a6092b2db7640561f58fd374d3114c79527357bad09d11b909819",
   "status": "current"
  }
 ],
 "description": "5 claims in the published works of Wulf A. Kaal carry the concept tag 'overcollateralization'. Derived node: a roster, not an adjudicated definition."
}