Currency Stability Using Blockchain Technology

Arbitrary speculative attacks on currencies can arise from self-fulfilling expectations. This is a well-studied source of currency crises. In this paper, we show that blockchain distributed ledger technologies, such as those which support Bitcoin and Ethereum, can be adapted to eliminate self-fulfilling speculative attacks on a currency. We show how to develop a stable currency peg, such as Pesos to Dollars, using a cryptocurrency. We show the peg is immune to speculative attacks arising from self-fulfilling prophecies and estimate the size of reserves and transaction costs needed to support the peg.