[Analysis] (In)Stability for the blockchain: deleveraging spirals and stablecoin attack - Klages-Mundt, et al

Non-custodial stable assets like MakerDAO's Dai ($DAI) face two inherent risks: market collapse or Oracle/governance manipulation. In this theoretical study of non-custodial stablecoin risk out of Cornell University, Klages-Mundt and Minca focus on the stable and unstable domains of stablecoin markets and ways to solve price pegging issues with coins like Dai. Klages-Mundt and Minca propose a theoretical system for correctly pegging Dai based on Ether ($ETH) price movements. The duo also analyze governance risks for stablecoins and find that stablecoin market failures are triggered by feedback loops and volatility in non-stablecoin crypto markets. To the last point, Klages-Mundt and Minca propose capital infusions as a possible solution to crisis volatility.