# Overcollateralization `kaal:entity:overcollateralization` **Status.** derived This node is assembled mechanically from the 5 claims that carry the concept tag `overcollateralization`. 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 5 claims across 3 works, 2019 to 2021. **2019** - [3402701-004](https://wulfkaal.github.io/claims/3402701-004) [condition/argued] -- 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. > 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 Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies - First Order Principles (2019). SSRN: https://ssrn.com/abstract=3402701 **2021** - [3782216-023](https://wulfkaal.github.io/claims/3782216-023) [failure/argued] *(failure mode)* -- 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. > 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. Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216 - [3782216-030](https://wulfkaal.github.io/claims/3782216-030) [mechanism/argued] *(failure mode)* -- Cryptocurrency backed stablecoins are even more expensive than fiat backed ones, because stability is being sought with far more unstable collateral. > Cryptocurrency-backed tokens are even more expensive than fiat backed tokens, because the stability is achieved with much more unstable cryptocurrencies. Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216 - [3782216-036](https://wulfkaal.github.io/claims/3782216-036) [failure/argued] *(failure mode)* -- 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. > 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. Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216 - [3949098-001](https://wulfkaal.github.io/claims/3949098-001) [failure/argued] *(failure mode)* -- 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. > 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. Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098 ## 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/overcollateralization.md | sha256sum **Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.