Cypherpunks and super-sovereignty: written on the eve of the launch of 134 stablecoin projects
Editor's Note: This article comes fromNPC source plan (ID: gh_8f53b5712d81)Editor's Note: This article comes from
NPC source plan (ID: gh_8f53b5712d81)
NPC source plan (ID: gh_8f53b5712d81)
, Authors: Xiaohan, Chengzi, Leo, xy, Blake, Ryan, reprinted with authorization by Odaily.
The birth of the encrypted world stems from the geeks' pursuit of utopia. They hope to use a decentralized and trustless way to build an open society that does not have to rely on the government, enterprises, organizations or any third parties. But with the development of the encrypted world, stablecoins, a thing that does not conform to the fundamentalism of cryptocurrencies, have occupied most of the attention and resources in 2019. So we began to look at stablecoins, thinking about its birth, current situation and future.
Why Stablecoins
Status and Case Analysis of Stablecoins
Given the known limitations, what is the future of stablecoins
secondary title
"What is a stablecoin"
For stablecoins, it is difficult to find an authoritative and convincing definition at present. We try to explain it in a more understandable way from the literal meaning: the first nature of stablecoins is to be used as currency. To quote Marx's classic definition, money is a particular commodity that acts as a general equivalent. The second is stability. The so-called "stability" in the industry is more considered to be stable relative to the high volatility of Bitcoin, that is to say, to maintain a relatively stable purchasing power for other commodities. In modern times, the legal currency represented by the U.S. dollar and the renminbi serves as a special commodity that meets the requirement of "general equivalent", so most stablecoins choose to be linked to the main legal currency.
1. Serve as a medium of exchange for purchasing goods;
2. Stable value (relatively stable purchasing power, etc.);
secondary title
"Types of Stablecoins"
image description
Source: BLOCKDATA "An overview of the current state of stablecoins" report
According to the definition of stable currency given above, the mainstream stable currency on the market is the concept of stable currency in a narrow sense, that is, the fiat currency, mainly the US dollar, is used as a valuation scale to measure the stability of stable currency. Obviously, the current encryption world It did not succeed in establishing its own currency ruler, but followed the system of the real world.
secondary title
"Why is there a stablecoin craze?"
2019 is considered to be the first year of stablecoins. We believe that the main reasons why such a trend broke out are as follows:
1. Cryptocurrency trading lacks good deposit and withdrawal channels
Most countries in the world, including China, one of the most active countries in cryptocurrency trading, have cut off the channel for direct exchange between domestic legal currency and cryptocurrency. At the same time, the cryptocurrency market has seen a sharp rise, so stablecoins have become huge Access channels for large amounts of funds.
The emergence of stable currency (more on-chain USD) is conducive to global transactions and value measurement, while the original legal currency and financial system are not conducive to capital flow and transactions in the global market.
3. Blockchain, as a new value network, begins to intervene in the value system of traditional finance
In the traditional financial architecture, legal currency runs on traditional financial infrastructure such as the banking system, while the blockchain is an emerging global network that can carry value. In the process of continuous development of the blockchain industry, a large amount of real value needs to be introduced, and legal currency is the best value proxy at this stage (Of course, other assets such as gold can also be introduced, but it is far less direct and effective than legal currency, so we can Seeing that most stablecoins anchored to gold have not been successful). The explosion of stable coins is that the blockchain paradigm is more advanced than the existing financial infrastructure, which means that a large part of stable coins have moved the value of the original legal currency from the traditional financial network to the blockchain network. The blockchain paradigm represented by Ethereum is flatter, more open, and more resistant to censorship, which is conducive to value transfer and generates less transaction friction.
secondary title
"The State of Stablecoins"
The core content of the BLOCKDATA report is the analysis of the status quo of stablecoins. The report surveyed 226 stablecoin projects, of which 66 have been launched, 134 are under development, and 26 projects have been closed (Ps: the text description is 26 , but only 25 are shown on the graph).
Among the 226 projects, 65% are mainly off-chain asset mortgages (legal currency or commodity mortgages, and commodities are mainly gold).
Source: BLOCKDATA "An overview of the current state of stablecoins" report
Of the 66 projects that have been launched, 50% of the projects are issued on the Ethereum (Ethereum) blockchain, followed by BitShare (8), and then Stellar (6).
Source: BLOCKDATA "An overview of the current state of stablecoins" report
The main reason why Ethereum can occupy "half of the stablecoin projects" that have been launched is that the infrastructure of Ethereum is complete, allowing exchanges to issue stablecoins in the easiest way, and Ethereum has acquired a large number of hardware and software wallets The support of ERC20 standard stablecoins (such as TUSD, GUSD, PAX, ERC 20 USDT) can be directly stored. In addition, the network agglomeration effect also makes stablecoin projects on Ethereum more active than other blockchains.
Among all the current stable currency projects, Tether has the most obvious head effect, and its total market value ranks fourth among cryptocurrency projects. According to the data of Stablecoinswar, among the stablecoin projects counted by the website, UDST’s market value accounted for 80.26%, the currency circulation speed was as high as 456.71%, and the transaction volume accounted for as high as 95.13%, far surpassing USDC, which is second in value. Most stablecoins are mainly circulated in exchanges. Although there is a phenomenon of exchange volume, we can still intuitively feel that the acceptance of USDT is far higher than that of other stablecoin projects.
image description
Source: https://www.stablecoinswar.com/ | Interception time: 2019/10/16
-1- Off-chain asset-backed stablecoin——USD mortgage (Take USDT as an example)
source:
USDT is Tether USD (hereinafter referred to as USDT), a token based on the stable value currency US dollar launched by Tether, 1 USDT = 1 US dollar. At the beginning of its establishment, Tether claimed to strictly abide by the 1:1 reserve guarantee, that is, for every USDT issued, its bank account will have a USD 1 fund guarantee.
USDT went online in 2015 and was originally issued on the Omni Layer of Bitcoin, so it is called Omni USDT. In 2018, Tether issued ERC-20 USDT on Ethereum, and then issued corresponding versions of USDT on Tron and EOS. According to tether.to data, among the USDT supply, the supply of Omni network is 2.145 billion, the supply of Ethereum network is 2.024 billion, and the amount of USDT issued on other blockchains is very small. Observing the transaction volume of USDT on the chain in the past seven days, there were 11,522 transfers on the Tron chain, 570,298 transfers on the Ethereum chain, and 181,181 transfers on the Omni chain. It can be seen that most of the USDT transactions are located on Ethereum.
source:
https://tronscan.org/#/ | Time: 2019/10/16
https://usdt.tokenview.com/ | Time: 2019/10/16
https://wallet.tether.to/transparency | Time: 2019/10/16
image description
Source: https://coinmetrics.substack.com/ | Interception time: 2019/10/09
As for the on-chain part, Omni is an upper-layer protocol based on Bitcoin. With the protection of the Bitcoin blockchain, Omni USDT has sufficient security, but whether ERC 20 USDT, TRC USDT, and EOS USDT in Ethereum can be secure? How to ensure the security of stablecoins and prevent double-spending attacks is still in doubt.
-1.1- The impact of USDT on Ethereum
image description
With the active transactions on the ERC 20 USDT chain, the daily gas usage and handling fees continue to soar.
image description
image description
Source: Etherscan.io | Interception time: 2019/09
In response to the increasing congestion of the network, Ethereum miners and mining pools voted on the Gas Limit of the Ethereum block, increasing the upper limit of the Gas Limit for each block.
image description
Source: Etherscan.io | Interception time: 2019/09
-2- Off-chain asset-collateralized stablecoin—gold collateral (taking Paxos Gold and Digix Gold as examples)
Compared with stablecoins anchored to the U.S. dollar or other national currencies on the market, there are fewer stablecoin projects anchored to gold. Among them, Paxos, following PAX, was approved by the New York Department of Financial Services (NYDFS) to launch the gold-anchored token PAX Gold. Paxos has three compliant stablecoin projects, namely Paxos Standard (PAX), PAX Gold (PAXG), and Binance USD (BUSD).
Digix Gold is another gold-backed stablecoin project based on the Ethereum blockchain. Digix has two tokens: DGD and DGX. DGD is the security token of DigixDAO, whose value depends on the stability of the system, while DGX is a commodity token used to represent the physical storage of gold. The supply of DGX is proportional to the gold reserves in its physical warehouse. However, by analyzing the market performance of Digix Gold tokens, its price has not remained stable with gold, fluctuates greatly, and is usually traded at a price lower than gold.
image description
But it is worth mentioning that if this set of mechanisms can be established, it means that the "gold aggregation standard" will be reproduced in the world of cryptocurrencies. The global economic crisis caused by the bubble has a reference function. In other words, the gold-collateralized stablecoin can become the anchor of all other cryptocurrencies, just like the U.S. dollar was anchored to gold under the Bretton Woods system, and other sovereign currencies were anchored to the U.S. dollar.
At present, the traditional economy is pursuing a "no anchor" legal currency system. Unless the economy collapses completely, the chances of overthrowing and rebuilding are very small. But in the new encrypted world, it is possible to build a more stable native economic system on flat ground. In addition, in a special period, when the centralized credit endorsement becomes unreliable, the value system still needs hard currency such as gold as the value store and measurement standard, and the cryptocurrency that is benchmarked against gold can play a role of high liquidity through the gold standard. Uses of digital gold. Tokens linked to precious metals such as gold can not only divide indivisible precious metals into smaller denominations, which are more convenient to carry and transport, but also greatly improve the transfer speed and efficiency of assets.
But it is worth noting that among the projects surveyed by BLOCKDATA, the stablecoin backed by the dollar is the most active and the least worn out, while 67% of the stablecoin projects that are dead are backed by gold. Perhaps the current gold-anchored stablecoin project still needs to find a way to break through.
image description
Source: BLOCKDATA "An overview of the current state of stablecoins" report
-3- On-chain asset-collateralized stablecoins—between collateralized and algorithmic (take Reserve as an example)
Reserve's design idea is between collateralized and algorithmic stablecoins, aiming to establish a stable and distributed stablecoin and digital payment system. The system mainly interacts with three types of tokens, Reserve Stablecoin (RSV), Reserve Equity Token (RSR), and Collateral Token.
RSV was originally a stable currency anchored to the US dollar, maintaining a 1:1 relationship with the US dollar; RSR is an expedient within the Reserve ecosystem, which can participate in voting on governance proposals to maintain the stability of RSV prices; collateral tokens are for The package of tokens held in the smart contract to guarantee the value of RSV acts as collateral, mainly for various on-chain assets. In addition, although Reserve Dollar (RSD) is not mentioned in the Reserve white paper, the project party stated that in the early stage of Reserve development, that is, the project is in the centralized stage, RSD will be issued to replace RSV as a stable currency.
Reserve is conceived in three steps. The first step is to establish a centralized stablecoin collateralized by US dollars. The second step is to become a decentralized stablecoin that anchors a basket of assets (similar to SDR), but its value is still stable relative to the US dollar. The third step is its Stablecoins are no longer pegged to the U.S. dollar and no longer take into account fluctuations in the value of the U.S. dollar, but can still maintain a stable independent stage. At present, Reserve has only progressed to the first step, and the second step is expected to be realized in 2020-2021.
Reserve held an IEO on Huobi on May 22 this year. The total amount of RSR tokens was 100 billion. Only 3% of the total amount was released initially, and 97% of the tokens were in the hands of the project party and other investors. In the short term, most of the tokens in the private placement round will be unlocked within 3 months, of which the foundation owns 58.6% of the tokens, which are stored in hot wallets, which can be decided by the team at their own discretion, and there is a possibility of selling them at any time. possible. In the long run, the seed round tokens, partner tokens, team and advisor tokens will be unlocked after the mainnet is launched, and the mainnet is expected to be officially launched in 2020.
From the perspective of Reserve's roadmap, in Q2 2019, it has completed the initial centralization 1:1 guaranteed by the US dollar, and the technical implementation of the trust company holding RSD. There is no data on the pledged assets and stable currency issuance on the Reserve network. It is about to release RSV and launch the mainnet in Q3 of 2019 and 2020 in turn. Considering its development difficulty, balance and design details, the current progress is slower than other stablecoin competitors.
-4- On-chain asset-backed stablecoin—cryptocurrency mortgage (take MakerDAO's Dai as an example)
Among the stablecoin projects that are collateralized by encrypted assets on the chain, the most well-known one should be MakerDAO's Dai. Dai is a stable currency issued by MakerDAO that is 1:1 with the US dollar, and its market value ranks 57 on CoinmarketCap. MakerDAO users can obtain the stablecoin Dai with a pledge rate of 150% by staking ETH.
Dai is the most active part of the DeFi ecosystem, and various derivatives have emerged based on Dai:
1. xDai, running on the PoA (Proof of Authority) sidechain, allows seamless transfer of xDai in a short period of time. Today xDai runs on the DPoS blockchain using the PoSDAO consensus algorithm.
2. iDai, the first tokenized lending pool. It has two distinguishing features: compound interest calculations are performed per second; if the underlying asset pool suffers losses, its exchange rate will drop. Therefore, it is very suitable for building risk management derivatives on iDai.
3. cDai, a real-time Dai savings account. The protocol of Compound has been upgraded to v2. Depositing assets in Compound can obtain cToken, which represents the amount of funds provided by users and the accumulated interest.
4. gDai, using Fulcrum to lend assets, and using GasStateNetwork, Kyber, and Uniswap to allow users to pay Gas fees with Dai, so that there is no need to reserve ETH in the wallet as a transfer fee. gDai was built by CryptoManiacsZone at the ETHBoston Hackathon.
5. zkDai uses ZKSNARKs to protect the privacy of transactions.
In addition, there are derivatives of Dai such as idleDai, LSDai, pDai, aDai, etc. Most of them are still in the development stage.
Dai-based derivatives reflect the composability of the DeFi ecology, reflecting the staged victory of the asset-backed stablecoin on the chain. Currently, the MakerDAO Foundation is actively promoting the use of Dai in third world countries. Dai is listed on the Pundi X payment platform and will be deployed in Brazil, Argentina, Colombia, and Venezuela.
-5- Unsecured PoW stable currency on the chain——(Meter's first)
First of all, Meter, through the research on the cryptocurrency economic game model and consensus algorithm, realized that the current mainstream cryptocurrency confuses the economic consensus of currency issuance and the bookkeeping consensus to prevent double spending, and these two consensuses are in a mature market. It would be more efficient to do it separately.
Secondly, starting from the "trilemma" of stablecoins, that is, the principle of "independent monetary policy, maintaining a fixed exchange rate with other currencies, and free capital flow, these three cannot exist at the same time, and can only meet two goals at most", Meter proposes that the design of the stablecoin issuance model can also not be bound to legal currency, but through an algorithm, it can be strongly bound to the value that maintains stable purchasing power in the real world for a long time, so that a completely decentralized virtual commodity can be created As a general equivalent in the crypto world.
Meter found that the price index of industrial electricity in the history of the United States, from the 1960s to the 2010s, was calculated according to the actual purchasing power (excluding inflation), and was almost stable at a level, which was more stable than the legal currency.
image description
Meter adopts a dual-token economic model, one is not to mortgage legal currency or other assets, but refers to the issuance mechanism of Bitcoin, the stable currency MTR generated through mining; the other is the equity token MTRG of the Meter network, which is used for governance Meter's decentralized community, and stably builds the stable currency MTR for global transactions and payments. MTRG does not act as a collateral for the issuance of stablecoins, but uses its cash flow and scarcity to cold-start the demand for stablecoins.
Different from the way of fixed circulation of Bitcoin, the circulation of Meter stable currency changes with the change of PoW computing power, but at the consensus level, the mining cost of each coin is guaranteed to have a good consistency. Meter anchors the mining cost of MTR with the power consumption of one MTR mining, and fixes its production cost as 1 Meter = 10kWh, allowing miners to reach a consensus on the currency value in the market through competition. If the price of MTR rises, the computing power will increase, which will lead to an increase in the supply of MTR, and the increase in supply will lead to a decrease in the price of MTR. Miners will reduce their computing power due to the decrease in income, and keep MTR relatively stable through the behavior of miners seeking profit In addition, Meter separates the miners who produce tokens from the bookkeepers of transactions, and the bookkeeping consensus is completed with PoS, which can ensure the safety and efficiency of the system.
The design of Meter chooses the idea of completely decentralized super-sovereign commodity currency, and uses mining costs to establish a consensus. It does not require oracle machines, physical assets or other encrypted assets as collateral, and is associated with electricity to ensure sufficient flexibility and flexibility in the currency supply. stability of value. Since the PoW process permanently transfers the value of the real world to the chain, Meter proposes that using this native encrypted asset stablecoin as the base currency to build a decentralized financial system can be safer and has no volume limit. Although Meter is facing insufficient circulation and needs to be patient to witness the liquidity promoted by its rising money supply, but on the eve of the large-scale explosion of stablecoins, this kind of decentralized practice deserves our attention.
secondary title
"Limitations of Stablecoins"
The status quo of stablecoins discusses the innovations of different types of stablecoins to achieve price stability or solve existing problems. However, due to various factors, there is no stablecoin that can satisfy both security and practicality in the current market. .
1. With the increasing supervision, the compliance issues of stablecoins are involved
With the growing scale and influence of stablecoins, governments and even international organizations have begun to make frequent regulatory remarks. The Financial Action Task Force on Anti-Money Laundering issued cryptocurrency regulatory recommendations, proposing to review countries on anti-money laundering/anti-terrorist financing in June 2020. The IMF's new article "Digital Currencies: The Rise of Stablecoins" mentions that stablecoins will lead to more illicit activities. In this context, Canada, the United Kingdom, Japan and other countries have increased their scrutiny of their cryptocurrency businesses.
Currently, the main application of stablecoins is to provide transaction pricing. In such scenarios, the abundance of liquidity and trading pairs is far more important than whether there is enough collateral behind the stablecoin, and USDT is a typical example. But it is foreseeable that the cake of unlicensed stablecoins headed by USDT is increasingly touching the nerves of supervision. The intensified situation between iFinex and NYAG reflects the determination of supervision to enter the market on a large scale, and compliance has become the core of stablecoins. one of the demands.
However, the cost and difficulty of compliance are also increasing. From Facebook’s Libra’s repeated encounters, it can be seen that the cost of lobbying regulators is high, and regulators are not happy to see that stablecoins are independent of the existing banking system. shadow banking system. In addition, the emergence of strong stablecoins may also trigger a ban on countries with weaker currencies. In September this year, the Central Bank of Argentina ordered restrictions on the purchase of U.S. dollars by its citizens. No company is allowed to accumulate U.S. dollars. Then the current mainstream U.S. dollar-collateralized stablecoins have encountered obstacles in Argentina. Also within reason.
2. The balance between "centralization" and "decentralization" is hard to find, and anti-censorship construction is worth looking forward to
Although the vision of the blockchain is to establish a decentralized network where everyone can enter and exit freely without trusting a third party, in order to pursue this goal, the performance of the product will be sacrificed to a large extent, leading most of the publicity to pursue "decentralization". "Centralization" projects are facing the dilemma of landing into a box. For the usability of the product, it is justifiable to demand higher TPS or other services, but they want to balance the relationship between "centralization" and "decentralization", and eventually become the same as the permissioned network. Far less efficient "geeks" than the Internet.
As the "third application of the blockchain", stablecoins must compromise on "centralization". Whether it is collateralized by fiat currency, physical assets or encrypted assets, it is difficult to escape the spiral of centralization. Take fiat currency-collateralized stablecoins as an example. Due to the centralized entity of such stablecoins, it is equivalent to users placing their trust in the hands of the issuer when using them. In order to avoid problems such as opaque auditing and doubtful actual assets encountered by USDT, and to erode USDT’s market share, the current direction of improvement for issuers is to rely on third-party audit companies and obtain compliance licenses (such as BitLicense) to win users trust.
In addition, there will be on-chain problems in the transfer of off-chain funds. The user transfers the physical value to the stablecoin issuer, but it does not mean that the value is completely transferred to the chain. During this process, the user transfers the ownership of physical assets and obtains a credit certificate that has a risk of redemption with the legal currency of the physical world. Leaving aside the completion of its currency function, the most important guarantee promised by the “decentralization” of the blockchain is the security of users’ assets, and the above-mentioned process obviously deviates from this purpose.
In addition, cryptocurrency-collateralized stablecoins require oracle machines to provide data. There are two core issues with the oracle machine: one is that the data source is still generated by centralized exchanges, and the API data provided by these exchanges can only guarantee the accuracy as much as possible, but the user is responsible for the risk; the second is the assets that the oracle machine can pay It does not match the assets carried. If the data of the oracle machine is wrong, it may cause the collapse of the entire financial system.
The revolution of cryptocurrency lies in empowering a single node to protect the node - individual assets from infringement. If the perpetrator is the decision-making center, cryptocurrency is inherently anti-censorship that other things do not have. That is, an important safeguard to protect assets from the intervention of these evildoers. However, with the development of the first point of compliance mentioned in the limitations, the construction of stablecoins in anti-censorship has become a direction worth looking forward to.
3. The price of stablecoins collateralized by commodities and cryptocurrencies is subject to volatility, and there is a hidden risk of market collapse
Taking stablecoins mortgaged by cryptocurrencies as an example, encrypted assets such as BTC and ETH are not high-quality mortgage assets due to their violent price fluctuations, and there is currently no widely recognized valuation system. In the case of large price fluctuations, stablecoin projects using encrypted assets as collateral are prone to confidence risks. In order to ensure that assets on the chain are fully mortgaged for liquidity, "over-collateralization" is introduced as a risk hedging solution.
For example, if ETH with a mortgage value of $200 is generated, but only 100 stablecoins of $1 are generated, then the stablecoin has 2 times the collateral. When the price of ETH drops by 25%, the mortgage ratio is 1:1.5, and the stable currency can still maintain the price of 1 US dollar. However, if there is a sharp depreciation of cryptocurrencies, there is a risk of liquidation of stablecoins. On September 24, 2019, the price of ETH plummeted, causing the total amount of loan liquidations in DeFi to be used as collateral assets to reach 3.8 million US dollars. To deal with this situation is to mortgage as much as possible, which will also make the capital utilization rate low. In theory, realizing multi-asset mortgage can relatively disperse risks, but at present, encrypted assets such as BTC and ETH have high price correlation, which cannot effectively disperse risks.
4. On-chain or off-chain collateral, it is difficult to avoid systemic risks
The stablecoin collateralized by fiat currency transfers the risk to the bank and account, and there is a risk of assets being deducted. For stablecoins mortgaged by cryptocurrencies, such as Maker, users mortgage ETH to exchange Dai, then use Dai to buy ETH, and mortgage ETH again to obtain Dai, forming a positive feedback effect. But at this time, if ETH depreciates sharply and is lower than the liquidation value, the mortgaged ETH will be forced to liquidate and used to buy back Dai. If the collateral is too large in the circulation of the corresponding collateral, there will not be enough buyers when the collateral is auctioned and liquidated, which will cause systemic risks.
Therefore, MakerDao has set a limit of 100 million US dollars for DAI issued by ETH as collateral. Such stablecoins also have problems on the demand side. At the beginning of this year, the price of Dai was lower than $1 for a long time. MakerDAO reduced the supply of Dai by continuously increasing the stability rate to push the price of Dai back to $1. It can be seen that the actual operation of the entire stabilization system will be very complicated.
Haseeb Qureshi, managing partner of Dragonfly Capital, explained the unsecured algorithmic stablecoin in his titled "Stablecoin: Designing a Price-Stable Cryptocurrency", which operates by using smart contracts to simulate central bank issuance transaction prices It is a currency of 1 US dollar, and the price is stabilized at 1 US dollar by controlling the circulation of the currency. If the current currency price is $2, it means that the price is too high and the circulation is too low. New coins can be minted through smart contracts, and then auctioned on the market to increase the supply and bring the price down to $1. Smart contracts bring in additional profits, the so-called seigniorage. Seigniorage can be understood as the income from issuing currency. A $100 banknote may cost only $1 to print, but it can buy $100 worth of goods, of which $99 is seigniorage and an important source of government finances. If the current stable currency price is $0.5, you need to buy stable currency to reduce the supply on the market. If the existing seigniorage is not enough to support the purchase of stable currency, you can issue shares to share holders to promise to enjoy Future seigniorage. This reduces the supply and the price of the currency re-stabilizes at $1.
But it is worth mentioning that the existence of seigniorage itself is an extension of the logic of legal currency, and the collection of seigniorage in the legal currency system is guaranteed by the state machine through the army and power. Just imagine in a system, if some users can get stable coins at a cost close to 0 through seigniorage, while other users need to buy stable coins at a price of $1, in a decentralized environment where there is no country to enforce Here, it is difficult to reach a systematic consensus on the currency price.
It is precisely for this reason that there are basically no unsecured algorithmic stablecoins in the market. Basis, a representative of such projects, died down in late 2018 by refunding investors. Fundamentally speaking, the "collateral" of an unsecured algorithmic stablecoin is a stake in the future growth of the system. If the system cannot continue to grow under extreme circumstances, its peg mechanism cannot be maintained. If selling pressure persists for too long, it can trigger a death spiral.
secondary title
"The New Battlefield for Stablecoins"
BLOCKDATA's stable currency report pointed out that since 2017, 134 projects have been announced to the public, but they have not yet been officially launched. 2019-2020 may be the year with the most stablecoins. The large-scale launch of stablecoins means that competition has intensified and the fight has become fierce.
Fiat-backed stablecoins will still occupy a mainstream position in the next 2-3 years, and the degree of regulatory intervention will increase significantly.
If we observe most of the stablecoins backed by fiat currency in the market, the logic behind them is very similar to the fiat currency created under the international monetary system. The current international monetary system is developed on the basis of the gold standard. During the First World War, gold was used by participating countries to purchase arms, and the free export and cashing of bank notes were stopped, which led to the collapse of the gold standard system. After World War II, the Bretton Woods system was established, and the U.S. government re-pegged the U.S. dollar to gold. However, in August 1971, as the United States unilaterally announced the decoupling of the U.S. dollar from gold, the Bretton Woods system existed in name only. The complete end of the gold standard marked the beginning of the free-floating phase of fiat currencies.
Yuval Harari, author of "A Brief History of the Future", once said: "Money is the most common and effective system of mutual trust that has ever existed. Even those who do not believe in the same gods or obey the same king are willing to use the same money.” The former gold standard is easier to understand. After all, “gold and silver are naturally not currency, but currency is naturally gold and silver.” But why do we still believe that legal currency can buy what we need after the abolition of the gold standard? That's because the legal currency, as the currency that the country gives to its compulsory circulation in legal form, is endorsed by national credit, and its value comes from the stability of the government and the relationship between supply and demand. Behind the legal currency is "full trust and credit" in the government.《Libra：Therefore, compared with other types of stablecoins, fiat currency-collateralized stablecoins have a distinct advantage in that centralized custody brings the greatest price stability. In the next 2-3 years, stablecoins collateralized by legal tender will still be the mainstream. Although USDT is currently the number one stable currency of this type, this is mainly due to its first-mover advantage. USDT, which lacks supervision and opaque auditing, wanders in a gray area, playing the role of a "stealer". With the growth of Tether's market value, the big cake of stablecoins has also attracted more and more eaters, such as USDC, PAX, GUSD, etc., which are compliant stablecoins anchored to the US dollar. These stablecoins aim at the defects of USDT. Through regulatory intervention and audit transparency, the value anchoring of stablecoins to fiat currencies has been enhanced, and they have begun to erode USDT's market share. In the future, fiat-backed stablecoins will surely flourish, but they need more reliable issuers, a better auditing system and a more mature regulatory framework.Libra's attempt as a new type of financial infrastructure heralds the emergence of a globalized strong currency in the future.
In addition to the vigorous development of fiat currency-backed stablecoins, the proposal of Facebook Libra has brought the encryption world to a subtle fork. Libra states that its goal is to issue "stablecoins built on a secure, stable open-source blockchain, backed by a reserve of tangible assets and governed by an independent association," beginning with the blunt statement that it aims to establish a simple global Monetary and financial infrastructure that benefits billions of people around the world. It is true that once Libra is launched, it can greatly reduce the time and cost of cross-border transactions, including international payments and settlements, as well as foreign exchange, and may also trigger the restructuring of the global financial system. For the innovation part brought by Libra, please refer to the previous published by NPC
A new type of financial infrastructure attempt"
, so I won’t go into details here.
The birth of Libra not only proposes an innovative financial infrastructure attempt, but also has a more significant impact on making countries feel a sense of crisis about sovereign currencies. Although Libra claims to be 100% legal currency reserves, due to the diversity of reserves, the currency value of Libra will actually fluctuate with any legal currency, and may even fluctuate greatly. Since Libra members provide Libra and various currency exchanges, the actual mortgage Material positions and targets will also vary. When the Libra Committee adjusts the reserve currency and reserve ratio, it is essentially adjusting monetary policy. If people generally use tangible assets and transact directly with Libra, then Libra has the potential to pose a huge threat to sovereign currencies. At that time, the Libra Association will become the de facto currency issuer, with the right to issue currency for 2.7 billion people around the world, which will make it difficult for countries to implement monetary policies, and make the Federal Reserve and other central banks redundant. The concept of Libra does herald the possibility of a more globalized strong currency in the future.
Traditional financial means are failing, and the idea at the beginning of the construction of the encrypted world is thought-provoking. The design of a super-sovereign free competition currency may be the ultimate direction of stablecoins.
