Lesson 15 — Risk in the Wild

Risk in stablecoins isn’t a monster or a myth; it’s a location. Before anything gets loud, learn to ask one quiet question: where does the risk live in this design—on a balance sheet, inside code and its oracles, behind policy levers, or in the crowd that must keep showing up? Stablecoins don’t remove risk; they place it. If you can name the room, you can decide how much of yourself to bring inside.

Start with the room that feels safest because it speaks bank. Fiat-backed stability reads like comfort—cash and short bills across more than one custodian, redemptions that act like they’ve seen Fridays before. Many holders reach for dollars at once. The assets exist, but do they become this dollar by this time? If yes, desks eat the discount and the chart forgets it ever wobbled. If not yet—long paper, a sleepy rail, limits mid-flight—the market prices the wait. It isn’t panic; it’s a clock.

Step into the room that wears its rules on-chain. Over-collateralized designs make the trade explicit: more in than out, oracles that see the world, liquidations that pay debts before stories. Most weather is routine—ratios breathe, keepers drowse, the peg holds almost without attention. Then a faster wind: a print drops, oracles catch up a beat late, several vaults cross a line together. For a minute it feels brittle. What you’re watching isn’t belief breaking; it’s throughput—auctions clearing, discounts widening just enough to move size, then narrowing as the backlog is eaten. Good systems surface pain early so tomorrow’s dollar doesn’t inherit it.

Now the room that replaces collateral with choreography. Elastic designs try to steer $1 with rules and incentives. Above a dollar, expansion is cheap and elegant. Below a dollar, contraction needs a buyer for an IOU. When the audience is present, the loop is self-healing. When the audience thins, the promise becomes the risk—today’s contraction implies tomorrow’s issuance, and the market does that math in advance. If no funded backstop (fees/treasury) buys the dip, the thermostat keeps turning while the room keeps cooling.

Policy lives across all rooms. Some rails can freeze when courts or compliance speak; for certain jobs that’s a feature, for others it’s disqualifying. Privacy is not default; it’s craft—tools and process that keep necessary eyes in and unnecessary eyes out. And contagion is just proximity with a new name: a brittle bridge, a failing venue, a loud rumor—neighbors feel each other.

Carry this

• Name the room (balance sheet, contract, policy, crowd).
• Choose designs that put pain where you can afford it.
• Size use so a bad day is a lesson, not a legend.