Where you are. Fifteen lessons have produced a crowd of instruments: stablecoins, tokenised deposits, central bank money in token form, wrapped bonds, tokenised credit, native securities. They get discussed as though they were versions of one another. They are not, and this lesson is the sorting.
Somebody offers you two tokens. Both are called digital dollars, both trade near a dollar, both settle instantly on a shared ledger.
One is a stablecoin. The other is a share in a money market fund, tokenised. If you cannot say what differs, you cannot say what you are holding, and the difference only shows up on the day it matters.
The idea in one paragraph
Two independent questions have been getting muddled all through this subject. The first is what the instrument promises: a fixed one dollar, or a value that floats with a portfolio. The second is what form it takes: an entry in a traditional register, or a token on a shared ledger. Those questions are orthogonal, all four combinations exist, and the first one is the one that decides what happens to your money. A stablecoin and a tokenised money fund share the second answer and differ on the first, which makes them different instruments that happen to travel the same way.
Wider than the screen; scroll it sideways.
Three tokens, three promises
The exercise runs a stablecoin, a tokenised money fund and a tokenised bill over the same sixty days.
The stablecoin sits at exactly one dollar throughout, because that is its promise and the issuer is sound. The fund share accrues, ending a little above a dollar, and it never goes backwards, because accrual is a one-way thing. The bill earns the same yield and is also marked to market, so it moves in both directions on its way up.
All three are tokens. Only one of them promises you a dollar back.
| instrument | start | end | falls on any day? |
|---|---|---|---|
| stablecoin | 1.0000 | 1.0000 | no, by promise |
| tokenised money fund | 1.0000 | 1.0066 | no, accrual only rises |
| tokenised bill | 1.0000 | 1.0058 | yes, marked to market |
n = 3 trials · sixty days, one seed, three promises
Why the fund is the better comparison
Module 4 introduced the money market fund and this module has been circling back to it ever since, which was deliberate.
A fund holds short safe paper, aims to be worth about a dollar a share, and is honest that the value floats. A stablecoin holds short safe paper, promises exactly a dollar, and is honest that it is a promise. Same assets, and a completely different contract with the holder.
The fund industry’s own history is the useful part. Breaking the buck is a fund’s word for its share price falling below a dollar, and the reason the phrase exists is that it happened, rarely and consequentially. That is the same failure lesson 8 simulated, in an industry with fifty years of regulation, disclosure and crisis experience behind it. The parallel is not a rhetorical device; it is where the vocabulary for judging these instruments already exists.
Check yourself
1. What are the two questions this lesson separates, and which one matters more?
What the instrument promises, fixed or floating, and what form it takes, traditional or tokenised. The first matters more: it decides what happens to your money. The second decides only how it moves.
2. A stablecoin and a tokenised money fund hold similar assets. What differs?
The contract with the holder. The stablecoin promises exactly a dollar and keeps the return on the assets; the fund share is worth whatever the portfolio is worth and passes the return to the holder. Same assets, different promise, different instrument.
3. In the simulation, why does the fund share never fall while the bill does?
Because the fund’s share price accrues its yield, and accrual only ever goes forwards. The bill earns the same yield and is also marked to market, so its price moves with rates in both directions on its way up. One reports an accrued amount, the other reports a current price.
4. Somebody offers you a token that pays a yield and claims it is as safe as a stablecoin. What have they told you?
That it is not a stablecoin. Paying holders a return is exactly the property that makes an instrument a fund rather than a fixed-value token, as lesson 4 explained. The yield is the tell, whatever the marketing says.
Do this
Run all three and match each path to its promise.
python3 code/three_tokens.pyThe starter leaves you the daily step for all three: the stablecoin holds its promise, the fund share accrues the daily yield, and the bill accrues the same yield and is marked to market. The assertions check that the stablecoin never moves, that the fund’s accrual never goes backwards, and that the bill falls on at least one day.
The completed version is in solutions/three_tokens.py.
What you can now do. You can place any instrument in this module on the two-question grid, say what its holder is actually promised, and spot the tell that separates a fund from a fixed-value token. The last lesson assembles the whole issuer and stresses it.