TOWARDS A STABLE TOKENIZED MEDIUM OF EXCHANGE

The Institut Louis Bachelier and The Blockchain Perspectives Joint ResearchInitiative are pleased to invite Alexander Lipton,  Chief Technical Officer, Sila Inc and Connection Science Fellow, MIT. 

 

Abstract: Existing banking and payment systems, while still working, are obsolete and not perfectly aligned with the constantly changing requirements of the modern world. While open access Internet protocols have unleashed a wave of creativity and growth in numerous fields, banking is not one of them. The reason stems mostly from the fact that successful open access protocols for money and identity, while sorely needed, are conspicuously absent at present. We argue that a regulatorily compliant, fiat-backed tokenized medium of exchange, can help to fill this gap. The corresponding tokens can be viewed as an electronic analogue of cash, with all its pluses and minuses. While such tokens can have numerous fintech applications, we consider just a few representative examples. Experience shows that all decentralized crypto coins are inherently unstable, which makes them less than useful for commercial applications. Unfortunately, building a successful stable token is hard. Contrary to the often made claims, it is not possible to build a truly decentralized stable token, so that any potentially successful stable coin has to be partially centralized. The degree of decentralization can vary. We describe three approaches including fully collateralized custodial tokens, partially collateralized custodial tokens, and dynamically stabilized tokens, and conclude that only fully collateralized tokens can be stable, even under extreme circumstances.

 

Alexander Lipton is Co-Founder and Chief Technical Officer of Sila, Partner at Numeraire Financial, Connection Science Fellow at MIT, and Visiting Professor of Financial Engineering at EPFL. He is a Board Member at Zilliqa, and sits on Advisory Boards of several FinTech Companies.
In 2016 he left Bank of America Merrill Lynch, where he served for ten years in various senior managerial roles including Quantitative Solutions Executive and Co-Head of the Global Quantitative Group. Earlier, he held senior managerial positions at Citadel Investment Group, Credit Suisse, Deutsche Bank, and Bankers Trust. In parallel, Alex held academic appointments at NYU, Oxford, Imperial College, and the University of Illinois. Previously, Alex was a Full Professor at the University of Illinois and a Consultant at Los Alamos.
In 2000 Alex was awarded the first ever Quant of the Year Award. He published eight books, including, most recently, “Financial Engineering – Selected Works of Alexander Lipton”, and more than a hundred scientific papers.

Inscriptions