L6 - Stablecoins Flashcards

1
Q

What are the three primary functions of money?

Money is defines as all means that fulfill the three primary functions of money

A

a) Medium of exchange
b) Store of value
c) Unit of account

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2
Q

Secondary functions of money

A
portability
divisibility
no double spending
anti-counterfeiting
price stability
acceptance 
fungibility
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3
Q

types of money

A

commodity money
covered money (metal standard)
fiat money

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4
Q

commodity money

A

Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods.

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5
Q

covered money

A

he silver standard is a monetary system in which the standard economic unit of account is a fixed weight of silver.

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6
Q

fiat money

A

Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.

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7
Q

What is the definition of currency?

A
  • widespread use
  • can be used as legal tender

The official currency is of a country is the money or the monetary system, which has widespread use and which is usually designated by the state as legal tender

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8
Q

What is legal tender?

A

Legal tender is the money that is required by law to legally fulfill a debt.

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9
Q

What is a currency peg?

A

A currency peg is a policy in which a national government sets a specific fixed exchange rate for its currency with a foreign currency or a basket of currencies.

The Swiss National Bank pegged its Swiss franc to the euro on Sept. 6, 2011,

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10
Q

Who is responsible of supervision of the currency (legal tender)?

A

It is in the hands of the ministry of Finance or the Central Bank

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11
Q

Is Bitcoin money?

A
  • functions of money are only partially fulfilled (particularly unit of account and medium of exchange are problematic)
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12
Q

unit of account meaning

A

Unit of account is one of the money functions. A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions.

Money acts as a standard measure and a common denomination of trade. It is thus a basis for quoting and bargaining of prices. It is necessary for developing efficient accounting systems.

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13
Q

Bitcoin as digital gold?

A
  • bitcoin supply/reserves are limited (comparable to gold)
  • high price volatility argument against digital gold
  • bitcoin has no fundamental value
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14
Q

Definition of a stable coin

A
  • linked to other asset
  • can be exchanged at fixed rate

A stablecoin is a crypto token whose value is linked to the value of other assets such as a currency, a basket of currencies or bonds and which is exchangeable into that asset at a fixed exchange rate

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15
Q

What is one of Bitcoin’s largest problems?

A

High price volatility. —> Bitcoin is not used as a means of payment

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16
Q

Two approaches to achieve price stability

A
  • 1-to-1 deposit with corresponding fiat currency (anchor currency) to guarantee a fixed exchange rate
  • algorithmic money supply control to always keep supply and demand in balance
17
Q

what is US-Dollar Tether

A

USDT, pegged to USD

18
Q

CBDC definition

A

Central Bank Digital Currency is a form of legal tender, which can be issued in digital form by the central bank. CBDC can, but does not have to , be based on blockchain technology or distributed ledger technology (DLT).

19
Q

three possible configurations of CBDC

A
  1. Wholesale CBDC (indirect)
  2. Retail CBDC (direct)
  3. Hybrid CBDC
20
Q

Are stablecoins really stable?

A

No they are not as stable and trustless as they pretend to be.