Stablecoins as Base-Layer Money
Stablecoins are usually analysed as instruments — as claims with an issuer, a reserve and a redemption mechanism. We analyse them instead as settlement infrastructure, and argue that the properties that matter in that role differ sharply from the ones the instrument literature emphasises.
Instrument versus infrastructure
Most analysis of stablecoins asks whether the peg holds — a question about the instrument. Once a stablecoin is the denominator for lending, derivatives and settlement across an ecosystem, a different set of properties dominates: finality characteristics, behaviour under congestion, composability of the transfer primitive, and the blast radius of an issuer-level freeze.
These are infrastructure questions and they are largely absent from the instrument literature.
Finality is the binding property
For a settlement asset, probabilistic finality is a materially different product from deterministic finality, regardless of how well the peg is holding. Primitives that settle against the asset inherit its finality characteristics, and we show that several widely-used designs quietly assume a stronger guarantee than the underlying chain provides.
Freeze as systemic risk
Issuer-level freeze capability is generally discussed as a compliance feature. Viewed as infrastructure, it is a systemic dependency: a frozen balance inside a collateralised position propagates to every primitive holding a claim on that position. We map the propagation and find it reaches considerably further than the direct holders.
Denomination is not neutral
The choice of settlement asset shapes what can be built on top of it, in the same way the choice of a base currency shapes a financial system. This is the argument the paper is really making, and it is why we treat stablecoin selection as an infrastructure decision at the lab rather than a preference.