Stablecoin sharpening to Tether
Produced by Odaily
Author | Qin Xiaofeng
Editor | Lu Xiaoming
Produced by Odaily
Author | Qin XiaofengTether Editor | Lu XiaomingRecently, the stablecoin market has been in trouble again.Stablecoin overlordStuart HoegnerExposure to misappropriation of user funds, filling
Crypto Exchange Bitfinex Loses $850 MillionPeckShield; General Counsel of Tether and Bitfinex
It is confirmed that 74% of USDT is backed by cash and equivalents.TetherAccording to the data, due to the New York prosecutors' accusation of Tether's misappropriation of USDT fraud, the demand for USDC, PAX and other stablecoins surged, and more than 50 million US dollars were issued on April 26 alone.
On the other hand, there have been some new changes in the stablecoin market recently, such as the issuance of stablecoins on multiple public chains. Will public chains become the new main battlefield for stablecoin competition? Who will have the last laugh with stablecoins anchored to different assets (legal currency, cryptocurrency, real assets)? Can stablecoins be used only as a hedging tool, and can cross-border payments support a broader market?
Accused by New York prosecutors, regulated stablecoins such as GUSD and PAX are safe and sound. Will regulation be the key to future success?
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1. Stablecoins have little demand for public chainsIOSTBefore April 2019, all mainstream stablecoins in the cryptocurrency market were issued based on the ERC20 standard (USDT was also issued based on the Bitcoin omni protocol), that is, they were issued on the Ethereum public chain.TRONHowever, in April this year, this situation was broken, and stablecoins began to enter other public chains.
April 4,
Announced the issuance of stable currency iUSD based on USDC and TUSD, in other words iUSD is the IOST version of USDC and TUSD; on April 9,DapptotalAnnounced the launch of the TRC20-based stablecoin USDT, which is the TRON version of USDT; on May 1, ONT announced the release of the stablecoin PAXO based on the Ontology OEP-4 protocol, which is the ONT version of PAX.
Liu Changyong, founder of Zhimi University, believes that traffic is an important reason why the early stablecoin chose Ethereum. In addition, another reason for choosing Ethereum is that there are less options, and other public chains have not yet come out at that time.
Li Jun, CEO of Ontology, believes that the main reason for stabilizing coins to enter other public chains is to obtain traffic. At present, the ecology of major public chains has begun to develop, and the active users of DApps have increased rapidly, some even surpassing Ethereum. according to
According to the data on May 6, the active users of major public chains are ranked as follows: EOS (74132), TRON (43746), ETH (11597), and IOST (7559).
With Ethereum starting to be fully loaded, other public chains are still a blue ocean, giving stablecoins plenty of room for competition.
"With the development of the public chain ecology, the public chain's DEFI (decentralized finance), pledge custody, etc. all need stable currency for valuation and fiat currency deposit." Li Jun explained that after the exchange, the next stable currency The main battlefield will be the public chain. "Three major application scenarios determine the future of stablecoins - which stablecoins are mainly promoted by leading exchanges, which stablecoins are mainly promoted by large leading public chain ecology, and which stablecoins are selected by traditional enterprises for denomination when they carry out decentralized business."
However, Liu Changyong does not agree with Li Jun’s point of view. He believes that the public chain is only the carrier of stable coins. The public chain is open, and stable coins do not need to compete for the public chain; on the contrary, the public chain needs to compete for success that can bring huge traffic of stablecoins. "Mature stablecoins are the object of competition for public chains. One of the battlefields of public chains is stablecoins, not the other way around."
Lin Jiapeng added that due to the unequal relationship between the public chain and the stable currency, it may be necessary for the public chain to make a profit in order to promote cooperation. "The public chain may spend its own money to buy stable coins, and then issue such stable coins on its own chain."
At present, except for ONT, TRON and IOST, other public chains have not announced cooperation with stablecoins.
"The success of stablecoins is mainly to compete for the market, and the market is mainly exchanges, so the battlefield of stablecoins is still in exchanges." Liu Changyong said.
2. Cross-border payment will become a major trend
When it comes to the role of stablecoins, it will first be mentioned as a bridge between fiat currencies and cryptocurrencies.
Tether, the USDT issuer, was established as early as 2014, but its real growth happened precisely after China's "September 4th Notice" in 2017. At that time, the way to directly purchase cryptocurrencies with fiat currency and the hedging function of fiat currency (there were fiat currency trading pairs before) were cut off, and people had to turn to stable currencies such as Tether for transactions.
image description(the time when the stablecoin appeared)At present, the market believes that the future functions of stablecoins may extend towards cross-border payments.
Cross-border payments through cryptocurrencies will greatly save transfer time and costs. The transfer time depends on network congestion, and the transfer can be completed in as little as a few minutes. In addition, the transfer fee is also greatly reduced. May 1,
bitcoin whaleJP Morgan "Loaded" uses SegWit technology to transfer a large amount of 40,000 BTC (230 million US dollars), and only charges a handling fee of 3.93 US dollars, while the cost of traditional cross-border payment fees is 0.25%-0.3% (580,000 US dollars-690,000 US dollars) .FacebookHowever, compared with stablecoins, other cryptocurrencies are not suitable as carriers of cross-border payments due to their high price volatility. Therefore, stablecoins will occupy a dominant position in cross-border payments in the future.
Some financial giants have also begun to set foot in this field. On February 14, the US banking giant
Take the lead in launching a stable currency - JPM Coin (Morgan Coin), which is used to support customers' instant payment services; in addition,
It is also in contact with dozens of financial institutions and online merchants, including Visa, MasterCard, and First Data, to launch a cryptocurrency-based payment system.
However, compared with traditional financial institutions such as JP Morgan Chase, new entrants need to solve regulatory and compliance issues."More depends on the attitude of the governments and banks of various countries." Vincent Chen, chief operating officer of Hopex, explained that since cross-border payments involve converting stablecoins into legal tenders, compliance and supervision are key factors for stablecoins to do well across borders. An important condition for overseas business. "On the one hand, it is the exchange channel of legal currency, and on the other hand, it is whether it will challenge the existing foreign exchange control policy and the tax issues arising from the entire cross-border service (e-commerce, logistics, transaction and other application scenarios)."Previously, OK Group also planned to enter the cross-border payment, but it was finally stranded due to compliance issues (license). According to an early employee of OK, OK’s stable currency plan was proposed a few years ago, and the main direction at that time was cross-border payment. In the end, the plan was stillborn because cross-border payment involved financial license issues, and OK did not obtain the license at that time.
OK Group
Announced the launch of the stablecoin OKUSD. The stablecoin’s partner, Prime Trust, is licensed by the Nevada Department of Financial Institutions’ banking regulator.
"However, even if stablecoins are constrained by legal currency, supervision and breakthrough supervision are always a dynamic game development. Stablecoins still have stronger cross-border liquidity than legal currencies." For cross-border payments of stablecoins, Liu Changyong still expressed express optimism.
3. Fiat currency stable currency will eventually be proud of the world
The so-called asset-backed type refers to anchoring various assets, including legal currency (US dollar, Japanese yen, euro), encrypted assets (ETH, BTC), physical assets (houses, gold, diamonds, etc.); A series of code-written rules dynamically adjust the supply according to the demand for stablecoins to maintain the exchange rate.
according toBlockchainimage description
(Proportion of two types of stablecoins)
according to
According to the report, there are currently 54 stablecoin projects in the market, of which only 26 (45%) are active, and only 5 are algorithmic stablecoins. The stablecoins listed on major exchanges are all asset-backed and mainly anchored to the U.S. dollar.
"The U.S. dollar is the most globalized legal currency, and cryptocurrency transactions are based on the U.S. dollar price, which is a user habit." Lin Jiapeng explained.
"The stability obtained by anchoring the US dollar comes from the stability of the US dollar, and it is difficult to achieve such stability by anchoring encrypted assets. Once the encrypted asset market fluctuates sharply, the entire system may face collapse." Liu Changyong said, "Anchoring physical assets mainly The problem is that the liquidity of the collateral is too poor to achieve effective redemption. There have been banknotes mortgaged by land in history, but they have actually failed and are not feasible.”
Take DAI as an example, which is a stable currency generated by anchoring ETH assets. Due to the increase in ETH pledges in the bear market, a large amount of stable currency DAI was generated and flowed into the secondary market for realization, resulting in the price of DAI being below $1 for a long time. In order to encourage users to repay loans, reduce the circulation of DAI in the market
, MakerDAO, the issuer of DAI, has raised the stable rate 5 times in the past two months - the rate was 3.5% at the beginning of March, and it is currently 19.5%.
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4. Keeping the legal currency channel unblocked is the lifeblood, and we need to embrace supervision
According to PAData data, Tether's market share fell by 25% in 2018. Currently, Tether has a market share of 79%.
image description
Relative market share of mainstream stablecoins; data source: CoinMarketCap
The USDT issued by Tether was originally the overlord of the stable currency world, and has since been questioned because of its opacity, but it still ranks first in the market.Lin Jiapeng said frankly that as an exchange, they are actually more willing to choose compliant stablecoins, because compliance will make stablecoins more transparent and the volatility of currency prices will be smaller."At present, we are still more optimistic about stablecoins regulated by the government, such as GUSD. Because GUSD is regulated by the US government, it has the ability to resist risks that other currencies in the cryptocurrency market cannot match." Ma Ji also believes that compliance There will be a market for stablecoins in the future. "The launch of regulated stablecoins is also a more secure choice for users."
New York Department of Financial Services
At the same time, two stablecoins based on Ethereum were approved, Gemini Dollar (GUSD) issued by Gemini and Paxos Standard (PAX) issued by Paxos, which are currently one of the few regulated currencies in the market of stablecoins.
On the contrary, Tether, which did not obtain a local license, was restricted by the New York authorities, stopped borrowing from Bitfinex, and required the disclosure of USDT-related documents.
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Postscript: Will USDT withdraw from the arena?
Despite Tether's accusations this time, documents show that only 74% of USDT is backed by cash and equivalents.
However, both Liu Changyong and Lin Jiapeng believe that the current 74% reserve is good news.
"The market originally had a psychological expectation that it would be over-issued, and it was even expected to be over-issued by 2 to 3 times, but it turned out that the over-issued amount was not serious." Lin Jiapeng explained.
Liu Changyong believes that a rational attitude is to recognize the partial reserve system, and 100% reserve is not the key to the success of stablecoins. "If a 100% reserve is required, the issuer's normal profit channels will be blocked, and it will force it to make fakes."
What's more, Tether is still the stable currency with the largest number of users. For exchanges, USDT will not be removed rashly.
