Original Author: Xiao Xiaopao

Original source: Wall crack altar official account

Let’s talk about stablecoins today. For those who have been exposed to cryptocurrency for a long time, it is no longer a new word. But for small partners in the non-encrypted field, especially the non-financial field, there is a high probability that they don’t know why, or even don’t know why.

So let’s do a comprehensive review today: starting from the small history of stablecoins, when did they appear? Why does it appear? And the various categories that were derived later - when we talk about which stablecoin are we talking about?

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Outline of this issue

1. A small history of stablecoins: Why are there "stablecoins"? What exactly are we talking about when we talk about "stablecoins"?

2. Before discussing "stable currency", what is "stable"? What counts as "stable"?

3. The concept of "stable" of stable currency comes from why it is accepted as a unit of account for other assets. Can "algorithms" play a similar role?

4. What are the types of "stable coins"? What is the source of "stable" for stablecoins?

5. What is the difference between the last "stable currency" craze and this one (represented by luna)? (The difference between "relying on algorithm stability" in the era of "Ponzi 1.0" vs "Ponzi 2.0")

6. Out of hundreds of algorithmic stablecoins, why is only Terra (currently) alive and well?

7. Use "trot coin" to describe the working principle of the terra mode algorithm stable currency.

8. Why is the Terra model similar to the operation of the central bank and foreign exchange reserves?

9. What kind of "stable encrypted digital currency" is a good solution?

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Transcript

Trot (02:39):First of all, we need to review the concept and history of stablecoins. When did stablecoins appear? Why does it appear?

Will（04:54）：Today, stablecoins can almost be said to be a cornerstone of the entire digital economy. But the word "stable currency" itself is very strange. The current "stable currency" is actually an expression that uses the US dollar as the denomination unit.Why was it called "stable currency" in the first place? Why not "some currency"? Or just call it "some kind of dollar" or "dollar drawing rights"?

After calling "stable currency", it will bring some misunderstandings-is it "the pursuit of stability" that is called "stable currency"? If it becomes unstable, is it not called a "stable currency"? So let's talk about history.

Stablecoins first appeared in 2013-14. Among the stablecoins we see now, the largest is USDT-created by the founders of the Bitfinex digital currency exchange. The original intention is very simple, mainly for two reasons:Early digital currency exchanges around the world followed a more traditional model, similar to Alipay for e-commerce. If you want to buy or sell something, first recharge the money, and then I will record an account for you and give you a "symbol" issued internally (similar to Alipay, Tencent Pay), and you can shop directly without having to transfer money from the bank every time you shop .The current stock exchange also operates in this way.

This is an early model of stablecoins, but it will definitely encounter regulatory problems soon: countries all over the world will have license requirements for "hosting users' legal currency assets", which is very normal and correct. But this will directly cause users to be very troublesome when depositing and withdrawing funds (recharging, withdrawing cash)-because every fund has to be reviewed. Large transfers are also subject to various restrictions in relatively mature western countries.

The early pioneers discovered this problem-it is really laborious to do this. If it costs hundreds of dollars to do this, the cost of manual review is too high. So I conceived a new model, a bit like my country's stock market. As you may know, the stock market in my country is different from that in foreign countries. Brokers do not take custody of user funds, but let banks take care of them through a method called "third-party custody". We used to be brokerage escrow funds, your money is directly sent to the account of the brokerage, and they help you trade. Later, I encountered some regulatory problems, such as some brokerages misappropriating users' funds to secretly speculate in stocks.

So it became the current model-your money is still in custody in the bank, and the bank connects with the broker to keep an account; the broker uses this account number to make transactions. At the final settlement, your money will be transferred or transferred back.You will find that this process is very similar to the current stablecoin structure of USDT and USDC - your dollar assets are placed in a custodian institution, which issues a "symbol" on the blockchain to you, and you use this "symbol" "You can do transactions anywhere in the world (as long as the blockchain is supported), including centralized exchanges.In this way, exchanges, or every platform for buying and selling digital assets, can completely avoid the trouble of KYC and various audits when depositing and withdrawing, opening and canceling accounts.

This earliest model is the reason for the emergence of stablecoins. But that doesn't explain why it's called a "stablecoin".

The reason why it is called "stable currency" is that after the supervision of "fiat currency custody" by various countries in the world, the function of "fiat currency transaction" in digital currency exchanges will be offline-because there is no license, only OTC OTC market can be developed. Trade fiat currency.

Without the on-site trading of fiat currency, what is left in the "on-site"? Only the so-called "coin-to-coin transactions" are left. For example, "BTC" to "ETH" trading pair.But there is no legal currency in the market, and there is no unified standard for rising and falling——The mutual rise and fall of BTC and ETH cannot measure the change of your wealth, because their prices against the U.S. dollar may both "fall", so the rise and fall of each other is meaningless. At this time, the "value measure" feature of currency emerges.

How to deal with it? USDT becomes the solution. Although the subjective purpose of the original design was to solve the problem of deposit and withdrawal troubles, its appearance suddenly provided a "value scale" for the currency transaction model on the market - because USDT is also a digital currency, not a legal currency accounting symbol.

Therefore, everyone feels that in the past, we only had various "coins" such as "Bitcoin", and USDT assumed the role of the original legal currency, so they are collectively referred to as "stablecoins".Therefore, whether it is "by mistake" or "intentional", because of the emergence of stablecoins such as USDT and later compliant USDC, the fiat currency or its "symbol" has been brought back to the on-site trading , all of a sudden the standard financial market model was established again.

So objectively speaking, the emergence of stable coins is the cornerstone, or source of water, of the prosperity of the entire digital currency world.

Trot (12:08):I have also experienced this background. Many years ago, if you wanted to trade Bitcoin or other currencies, you would encounter the problem of deposit and withdrawal. If I bought Bitcoin, got a profit, and want to "cash out", I need to withdraw the money and exchange it back to fiat currency. However, if the timing of the "withdrawal" is not well timed, or if it takes a long time to process, the "earnings" may all fall back before the "withdrawal".

Like traditional financial transactions, with a position in stocks or derivatives, I need to put part of the funds in "parking", such as the bond market. In fact, these bonds also function as a "stable currency". On the premise that the assets do not leave the market, they are temporarily parked in a relatively stable place, so that they can enter immediately when they encounter market opportunities. The emergence of Tether back then did indeed bring great convenience to those who "moved bricks" and could seize some market opportunities.

When did "stable currency" appear as a theory or concept?

I saw two papers. Also appeared around the same time (2014). one is"Hayek Money: The Cryptocurrency Price Stability Solution" (Hayek Money: The Cryptocurrency Price Stability Solution); Another is "Cryptocurrency Stabilization: The Concept of a Seigniorage Share" by Robert Sams(A Note on Cryptocurrency Stabilisation: Seigniorage Shares) - both are trying to build a stable cryptocurrency scheme.

The first article focuses on the deflationary characteristics of Bitcoin, and believes that the 21 million upper limit cannot undertake the function of currency.There may be a need for a “supply elastic” cryptocurrency built on rules.This paper proposes a word that I find particularly interesting——"Rebase", I think it is better to translate it as "rebase", which corresponds to the debase of the US dollar. "Adjusting the peg" is to use "supply and demand" to change the share of all holders, and use "supply and demand" to adjust the "stability" of the cryptocurrency.

The one by Robert Sams is also very important. First of all, this person is very interesting. He used to be a trader of hedge fund interest rate derivatives, and later started a business in the field of OTC clearing and settlement. He proposed a framework, which is also the design framework of many stablecoins now - on the basis of the previous "rebase supply adjustment", anotherThe concept of "Seigniorage Shares". It is equivalent to issuing two coins at the same time, one as a stable currency, and the other is to regulate the "stability" of the stable currency. It is like a big sponge, absorbing all the benefits brought about by "adjusting" inflation, or the debt brought about by deflation.

In fact, everyone is trying to find a "stable" solution around Hayek's ideas. Everyone knows that Hayek dissed the gold standard, and believed that the gold standard was only used reluctantly when there was no mechanism to restrain the government. We should be able to find a stablecoin solution that is private, reliable, and linked to real economic activities.

Will（17:19）：This leads to the second phase of stablecoins. From 2013 to 2014, two things happened: one is the emergence of Ethereum. The other thing is MakerDAO set up.

In fact, MakerDAO has already appeared before Ethereum appeared-this is related to those two papers. MakerDAO is a typical "supply-side anchor model", and my feeling is that it matches Hayek's logic. The positioning of this project itself is called "to be a decentralized central bank". This early concept is quite good. In the years when MakerDAO was formed, I had contact with some early participants, and I still had some ideals.

There are also two interesting allusions, which made me feel that the Chinese really have a relationship with the encrypted world. MakerDAO’s stablecoin is called DAI because the founder understands Chinese, so he came up with several alternatives when naming it—one is “DAI”, which means “loan” in Chinese; the other is called “JIAO”. That is, "Jiaozi" in the Northern Song Dynasty. In the end, "DAI" won, and "loan" perfectly matched the logic of finance.

In addition, DAI also played a very important role, which is to pay tribute to Dai Wei. Dai Wei is the founder of the B-money concept and is actually the originator of digital currency. Satoshi Nakamoto also quoted Dai Wei's paper at the beginning, and MakerDAO's DAI also meant to pay tribute to Dai Wei. This becomes a "dual meme". At the same time, the smallest unit of gas in Ethereum is called "wei", which is Dai Wei's "Wei". It is also to pay tribute to Dai Wei.

Trot (21:03):So MakerDAO is also based on Hayek's logic. So what is "stability" under this logic? What counts as "stable"? In what dimension can we be considered to have entered the discussion of stable currency?

Will（21:43）：The concept of stable currency itself is indeed very important, but I think the concept of "stability" is a little tricky.

The stablecoins we see today are very simple. The logic is to maintain an equivalent value with the U.S. dollar or maintain a fixed exchange rate relationship. If Hayek's ideas are really practiced, orAssuming that there is no U.S. dollar in the world—because the U.S. dollar is a currency that is not so consistent with Hayek’s philosophy—it can be used as an anchor yardstick, so how should stablecoins be defined? For whom is it "stable"?

There are still so many currencies in the world. Let’s assume that every country is a project, or a private company that issues its own currency, which is the country’s sovereign currency. Obviously, there will be no relationship between it and the U.S. dollar. Always 1:1 bound. That being the case, aren't the currencies of these countries "stable coins"?

It should definitely be called a stablecoin as well. If I issue a yen stablecoin, is it because the exchange rate between the yen and the US dollar fluctuates, and the yen stablecoin is not called a stablecoin? The yen has fluctuated violently in the past two days, and the yen is heading towards 150. Does that mean that the yen cannot be called a stable currency?

It certainly cannot be said that, so we have to see what "stable currency" is aimed at.

If it is stable anchored to the U.S. dollar, then as long as the fluctuation of the U.S. dollar exceeds a certain range, it is unstable-many stablecoin projects now have this problem, and they can only anchor to the U.S. dollar, not the Japanese yen. Conversely, if you go to Japan, even if the yen fluctuates by 50% against the U.S. dollar, will the prices in Japan fluctuate by 50%? of course not. In other words, within the scope of the Japanese economy, the yen is a stable currency, and it is stable.

The core of the word "stable currency" is still based on which frame of reference to look at. The "frame of reference" here is close to the concept of physics:From the perspective of the US dollar’s ​​frame of reference, even if the US dollar depreciates wildly every day, it is still a stable currency; but from the perspective of Japan’s domestic economy, the Japanese yen is actually a stable currency, and the US dollar will fluctuate against it.

From these two perspectives, the biggest problem with stablecoins is:Do you want to bind a certain fiat currency that is relatively stable? Still want to build an economy, an ecological environment, from which the production and consumptionbehavior to support its price stability? These two things are actually very different.

What’s interesting is that almost all stablecoin projects nowadays should essentially aim at the second thing—hope to create a project, an ecological environment, or hope that a chain can be like a country, whether it’s mines or tokens, It has functions such as use, consumption, and production in the ecosystem. This angle is "stable",However, they are without exception forced to the first option - must anchor the dollar - this is a very interesting paradox.

Trot (26:15):This is what I want to focus on today. Because I have a different logic: For me, "stability" is a subjective feeling. The yen has fluctuated greatly in the past two days. If it is anchored to the dollar, it is to look at the yen from the perspective of the dollar. , It must be jumping up and down. But people living in Japan do not feel that there has been a change. I still have to trust the yen every day and use it to buy food and pay rent. It is also a relative concept, just like people outside the train see me moving very fast, but I feel very stable in the train. This is because I am in a very stable state in the "ecology" of "train".

Following this logic, if it is in a stable environment created by oneself, a value symbol can also be relatively stable. But my own ecology is not the only ecology in the world, and I must use other systems as a reference.

It seems that when you reach middle age, you will feel that your life will be "stabilized" and the "volatility" in your life will decrease. But if you look at the world, this subjective "period of stability" may be undergoing "great changes" - just like the current geopolitical macro, the economy is unstable, so this "turbulent period" is fluctuating. It’s just that regarding your own life trajectory, you feel that everything is relatively “settle”—this is a relatively stable environment in the “ecosystem” of your own “life”.

If you realize that "stability" is not absolute, what are the solutions on the market now, or what are the ways you try to make it as "stable" as possible?

Will（28:49）：This comes back to financial logic.

I would like to simply make a "two-dimensional" classification: one dimension is "centralization" and "decentralization"; the other dimension is from the dimension of "full pledge" and "non-full pledge". In this way, stablecoins can be divided into a "2×2 four-quadrant matrix". Here are four categories:

(1) Centralized full pledge; (2) Centralized non-full pledge; (3) Decentralized full pledge; and (4) Decentralized non-full pledge.

Among these four types of stablecoins, one does not actually exist—(2) Centralized non-full pledge. Because of "centralized non-full pledge", it cannot be justified in the world of digital currency or blockchain. It is actually the traditional banking model, which is a fractional reserve system. However, this kind of setting is meaningless in the blockchain world-believe in a centralized system that is not fully pledged, and I still need to recognize the stability of the currency it issues-this is meaningless.

Of the remaining three:(1) Centralized full pledge: stable coins such as USDT and USDC.A bank account is used to pledge a sufficient amount of U.S. dollars, and then a corresponding number of stable coins are issued on the chain. The stable currency of this model is actually the symbol of the dollar on the chain, or it is called "digital dollar" or "encrypted dollar". (Of course there is a small detail here. Is USDT fully pledged? This matter has always been a mystery, but we cannot say. Because its logic is fully pledged, if USDT itself says it is not fully pledged, then "solve the case" " up.)

The logic of this stablecoin is full pledge, and the source of "stability" is the "anchor of the supply side". You can exchange a USDT or USDC back to a dollar in your bank account at any time, which is a dollar-based digital symbol, which is a 100% supply-side anchoring system.

Its stability is of course 1:1 of natural guarantee, and it will never change. Whether the price of BTC rises or falls, or even the U.S. dollar rises and falls against other mainstream currencies in the world, it will not affect its 1:1 ratio—its stability comes from 100% exchange behavior. This is why today, institutions that can issue stable coins can actually register as a money changer. They do not need to register as stock brokerage companies, exchanges, or other licenses with higher-level and stricter regulatory requirements.

The logic of this stable currency is relatively simple. The remaining two decentralized stablecoins are interesting.

The third type (3) Decentralized full pledge: In essence, there is only excess pledge, but in fact there is no full pledge.Because of the decentralized pledge, it is impossible to pledge the US dollar. It is meaningless for me to use USDC to pledge to issue a USDT, and I get nothing except consuming gas fees in vain.

Decentralized assets have price fluctuations relative to the U.S. dollar. If you only pledge in full, that is, if you achieve 1:1 when pledging, then once the price of pledged assets falls, you will of course have to provide more pledged assets. make up. This is just like when the price of our house falls, the bank will urge you to pay the security deposit; the same is true for stocks. If you use stock pledges to borrow money, you will have to pay more security deposits when the stock price falls.

Therefore, there is a restriction on the pledge of decentralized digital assets: your pledge must be higher than the number of stablecoins you issue, which is the same as the logic of lending—the currency is actually a kind of debt, and it is enough for you to mortgage it. Amount of assets, and then borrow something.From this perspective, the "decentralized full pledge" model only has the concept of "over pledge".

The representative of this model is MakerDAO, the "decentralized central bank". In other words, I can put BTC, ETH and other assets into a smart contract to derive DAI. For example, according to the highest pledge rate of 70%, swap out 70% equivalent DAI. This actually achieves a "new dollar" in the world.

It is different from "centralized staking". "Centralized pledge" is to put the same amount of "old dollars" into it to generate "new dollars" (mapped on the chain), it is not created out of thin air. The DAI model actually creates a "new dollar" with digital asset pledges, so it really plays the role of a so-called "decentralized central bank".Rather than the role of a commercial bank.

last mode(4) Decentralized non-full pledge: It sounds a little weird, how can people believe in "not fully pledged"? In other words, the money I got didn't have enough assets to support it, and I couldn't get it back when I wanted to exchange it for something. Just like the original Bretton Woods system, one dollar cannot be exchanged for gold, so what is the gold standard?

But how did the concept of under-staking come about?

Let's go back to the topic of "anchor" we discussed last time.The "decentralized non-full pledge" stable currency must not be the "anchor of the supply side"-this conclusion is very clear. There must be a new logic for the non-full amount. This new logic is called "algorithmic stablecoin" in the industry, which means it is stable.This requires him to provide a "demand-side anchor" we talked about last time, so that this logic can be established. We will discuss this logic in detail later.

Therefore, the algorithmic stable currency will probably become a combination of "anchor on the supply side" and "anchor on the demand side".Where is the joining point? That is, what is the pledge rate. If your pledge rate is 50%, that is to say, you have 50% of the underlying assets used for pledge to derive currency, and the other 50% has no corresponding underlying assets, which should be managed by the demand side.

Trot (38:03):very clearly. But science students feel too strongly. I want to neutralize it, and I will give you an example with my "trot coin".

Among so many algorithmic stablecoins, Terra is the largest one, and it is still alive. Let me use my own understanding to recap the working principle of the algorithmic stablecoin of Terra’s model.

I invented two tokens: USD Coin and Trot Coin.The trot coin is placed on the exchange, and the price is determined completely according to supply and demand: it may be 1 cent, or it may be 100 yuan, who knows. The price of U.S. dollars will always be $1: If it falls to $0.99, I will issue more trot coins myself to buy U.S. dollars until the price returns to $1. And vice versa, if USDCOIN goes up to $1.01, I send out more USDCOIN, then use them to buy trotcoins, all the way back to $1.

This process is actually very similar to the operation of the central bank. The currency adjustment of the central bank is actually a kind of "stabilization by algorithm", which also maintains the value of currency by adjusting the money supply. At first glance, there is no problem; but at first glance, the head starts to twist.

First of all, there is a premise for this operation: trot coins must always have value, no matter how low the price is, it cannot be 0. Even if it is 1 cent, if I send a 10 million USD coin and buy 100,000 USD USD coins, the price can still be pushed up. But if the price of trot coins is 0, it will be useless for me to send hundreds of millions more.

Therefore, if the trot coin has no value, it cannot support the dollar currency. After all, the trot coin was sent out of thin air by patting my head. It is worthless and has no reason to be particularly valuable.

However, at first glance, then think about it again: In fact, there is nothing wrong with it.Isn't Bitcoin also "made up", it is worth a lot of money now.

So, in the current era (I call it the Ponzi 2.0 era), this kind of:"First create a digital currency out of thin air, then find a way to get people to buy it, and then find a way to maintain it, and it will become a long-lasting value store for a long enough time" - a precedent, operability, and repeatability idea, not whimsical.

Of course during this process,The "Ponzi" factor must be introduced to dress it up: for example, if you deposit USD currency, I will pay you a 20% yield with trot currency - this interest rate, of course, is also an interest rate created out of thin air - the purpose is to excite everyone Get up, for the deal.

But it is still very "virtual". Maybe one day, everyone wakes up and suddenly realizes at the same time that the logic of the whole thing is made up by Xiao Pao, and I will stop playing; thenEveryone sells USD coins and trot coins together, the more everyone sells, the harder it is for me to just print trot coins to defend the price. The more unstable the exchange rate, the less confident everyone is and the more they sell—a self-reinforcing positive feedback death spiral occurs. This happens a lot.

One way is to emulate the country's foreign exchange reserves: Think of yourself as a small country with a central bank that maintains foreign exchange reserves and uses these reserves to maintain the price of the dollar currency. When Xiaopaobi is growing gratifyingly, buy bitcoins as your own foreign exchange reserves. This adds another layer of credit, even if you don't believe in trot coins, you always believe in Bitcoin, right?

Later, I can further strengthen my foreign reserves, such as taking advantage of the rise of trot coins, buying more bitcoins, ethereums, and anything else useful in encryption technology; then U.S. treasury bonds, gold bars, and other things on the balance sheet of the central bank — Who knows, maybe one day Soros will attack me, and I will have to spend a lot of bitcoin and gold to defend. And these are real ammunition, not made up by myself.

In any case, the final state I expect is: Persist for ten years, the dollar coin and trot coin are deeply integrated into a vigorous and active encryption ecology, everyone defaults to one dollar, so I don't have to work so hard to defend the exchange rate, trot coin It also maintains its own value, and the entire system also maintains its own value-you can retire after success.

This is basically how TerraUSD and Luna work. It uses Luna, which is equivalent to Trotcoin, to regulate its own stable currency TerraUSD.Over the past three months, the Luna Foundation has bought $1.5 billion in bitcoin and several other cryptocurrency reserves, allaying concerns that TerraUSD will lose its peg.

I think the discussion about stablecoins can fall into the framework of dissipative structures. It’s just that the new era has a very strange feeling: I always feel that the current Ponzi structure seems to have reached a new stage, or a new era, and the logic of our previous understanding, at least the order of development is different.

We always say that the US dollar is not Ponzi? The order of development of these Ponzis (let’s call it the old Ponzis first) is——You must first have sufficient support to back up, and then let everyone slowly accept it. After accepting it, slowly remove the support and become a pure Ponzi. But because it has been accepted long enough, it can last.

However, the algorithmic stablecoin represented by Terra (let’s call it a new generation of Ponzi) seems to be developed in the reverse order—first set up a Ponzi structure, and clearly tell you that I have nothing, and this is the currency I created myself. ; Then try to find ways to increase usage, so that everyone can slowly accept it; then slowly increase its back up, and diversify, such as buying more bitcoins; finally, as long as there are enough ways to play and everyone can continue, it will continue to exist .

Will（47:33）：I understand your above summary, which means that there is a new Ponzi model. I think it is completely correct and reasonable. I still use the logical framework of "anchor of demand" and "anchor of supply" to analyze

As I mentioned last time, I think the "anchor of demand" spear is a more reasonable monetary framework than the "anchor of supply", because people's demand for money is always there: life, consumption, financial management, and spirituality The needs of the world, etc., these needs will be transmitted into the demand for currency.And the "anchor of supply" has the biggest logical loophole. What is the value of the anchor itself? The anchor of the gold standard is gold, but is gold valuable? Can gold support the development of human economy? Actually it is impossible. So from this perspective, the anchor of demand is a currency anchor system that is more advanced than the anchor of supply.

what you just saidThe "New Ponzi Model" is actually anchoring the currency from the demand side; and the "Old Ponzi Model" is that I first tell you from the supply side that I have sufficient anchoring; then I "withdraw a little bit" The part that goes down is actually gradually transformed into "needs" to manage.In essence, this is the problem. It is nothing more than a question of whether to open 37, open 28 or open 55.

As soon as the "New Ponzi Model" comes up, it manages from the demand side first, and even tells you that I am "zero supply-side anchoring" and 100% anchoring on the demand side. As long as you agree and feel that there is such a demand, and take me If the currency meets your needs, the value of the currency exists and is supported.

But here comes the question: what "needs" are you anchoring with?There are actually two kinds of human needs: one is active needs and the other is passive needs. Active needs are the needs of life, eating, drinking, consumption and entertainment, that is, the needs in the field of economics. But don't forget that there is another kind of "passive" need - like paying taxes.

For example, the MMT theory, which has been lively recently, has a very important theoretical support, that is, "legal currency is tax currency" (although taxation is not its only support), the logic of "seigniorage share" in the two papers just now is actually the same Partial "passive demand side". If a country really issues two coins as described in this paper, one is "legal currency" and the other is "share currency"; then "share currency" should be able to share all taxes in this country, not just "seigniorage" ".All tax shares of the country, except for consumption, the remaining balance is divided into "share currency". This is equivalent to a country issuing its own "stock". From this perspective, if a country implements the "dual currency model", it is actually logically logical.

Now all stablecoin projects, including projects like StepN, are"Dual currency model": one is "utility token", which is equivalent to "legal currency" in the ecological environment; the other is "security token", which is equivalent to "share currency" in the ecological environment.When a project starts from scratch without any other services, products, consumption, economic capacity, what demand can it create?The answer is that it can create a demand for "share coins" out of thin air.

In fact, Trotcoin still stands from the perspective of the real economy. Small partners who hold coins can get signed books, listen to podcasts, and read articles. These are still consumer needs. But none of those needs exist because your platform hasn't been built yet.From the first day, when you want to send out the "legal currency" in your system, there will only be one demand, which is to buy your own "share" - this is the only demand you can create from scratch .

This matter of course depends on whether others believe that this "share" can bring him benefits in the future. If he believes it, he will buy it, and demand is created.

The combination of Terra/Luna, or even the combination of GMT/GST, it doesn’t matter what the platform does, because the actual role of the platform in the future will naturally create corresponding demand to support the currency price (whether it can support it well or not can only be said separately) ; but they can create another demand of "buying my share can make money" at the same time. When this demand is created, it corresponds to that part of the currency value. This is the "cold start".

Trot (54:41):Although we may feel that this matter is very "new" and very exciting. But the ancestors have done it many times in history.

For example, Guan Zhong, Qi Guo respected the king and wanted to find money for the finances of the Zhou Dynasty. Teacher Guan Zhong came up with an idea and proceeded in three steps: First, he announced to the world that there is white thatch in the Jianghuai area, which is very precious and rare; Send troops to enclose the land and control all the white thatch in Jianghuai; then send a message saying that Zhou Tianzi is going to Mount Tai to worship the gods. If you want to participate, you must bring a mat made of Jianghuai white thatch. If there is no such mat, or the mat is not Jianghuai white thatch is woven, so there is no way to go to worship the gods with the emperor.

The third step is that when the countries sent people to Jianghuai to fetch white thatch and start weaving mats, he sent troops to wait there. If he wanted to fetch grass, he would exchange it for gold first, and a bundle of grass cost 100 gold. So once Zhou Tianzi offered sacrifices to the gods on Mount Tai, he collected all the gold in the world within three days, and the treasury of the Zhou Dynasty was full.

In fact, Guan Zhong also created a kind of "passive demand" out of thin air: the white thatch worships the gods.

The same is true for StepN. I have been thinking for the past two days, if you have 9 pairs of shoes, you can earn a lot of money by walking every day, which can reach 3,000 Hong Kong dollars-basically you don’t need to work. But if everyone does this, who will support it and who will support it?

Therefore, its token economic system must be valuable, or it must have uses. Only by constantly creating demand, let everyone consume your tokens all the time, and newcomers support existing players. Otherwise, sooner or later, there will be a shortage of food. The further extension of these few examples is often a concept of "demand-side currency anchor".

Will（58:30）："New Ponzi" may be a better way than simply relying on "supply-side" management, but it does not mean that it can get rid of the Ponzi structure. If the design is not good, it will easily enter the death spiral.

Going back to the perspective of dissipative structures, one of the basic characteristics of these modes that cannot violate the dissipative structure is: to have energy exchange with the external world, the energy injection of the external world is what the dissipative structure can achieve. The core of survival and development. For any digital currency project, including these stablecoins, or even the entire digital currency ecosystem, the injection of the "old dollar" has still played a huge role so far. At least for a long time, without the injection of "old dollars", the entire digital economy would not have the opportunity to grow and develop. In the end, it still depends on what kind of dollar injection logic the digital economy satisfies, which has become a more macro demand.

Do people have greater needs for the virtual world than for the real world? Sooner or later that might be the case. Our life may be more "virtual". If the demand at this level expands, the entire external energy injection will continue, and this economy can grow. Otherwise, it will return to the so-called "endogenous structure". In fact, it cannot "fly off the ground by pulling my hair".

Finally, I would like to add that among the three types of stablecoin models we have just summarized,"Decentralized over-collateralization" actually reduces the total amount of assets in circulation on the market. Because one bitcoin is put in, only 0.7 equivalent dollars come out, which actually reduces the total amount of circulating assets, that is, the utilization rate of funds is too low.Everyone thinks this is problematic, so the logic of "not fully pledged" appears. But "non-full pledge", or even "zero pledge", are all "inner circulation" systems.

Therefore, the expansion of the entire digital economy so far has actually relied on the first model: "centralized full pledge", which plays the role of introducing the "old dollar" into the "new dollar" in the digital economy . I think this mode is still the most important mode for quite a long time.

Trot (01:03:19):It's a paradox: if you're overcollateralized, you can't grow as fast as Tether. But if it develops with a "sub-collateralized" method like Tether, it is unstable-this seems to be a paradox in the field of stablecoins.

One last question: why do we need stablecoins? Or what significance does stable currency have for the future development of web3, metaverse, or virtual economy?

Will（01:04:32）：Continuing the last topic above, the greatest effect of centralized stablecoins on the entire web3 and other economies is that it is a process of "energy injection".

We have always emphasized that the prerequisite for the web3 system to become a dissipator is the injection of new energy. From this perspective, I think the value of centralized stablecoins will never disappear, until one day the assets in the virtual world can be fully priced, or can be issued directly in the virtual world in some other form of currency.

We do not rule out that when a virtual economy is large enough to be too big to fail, it can be endogenously generated, such as MakerDAO’s over-collateralized approach, or it can be stabilized through Terra’s algorithm, or under-full-collateralized Each way to issue some decentralized stable coins.This model is equivalent to the dual currency system of "central bank-commercial banks" in the entire economy.

Considering the credit, the central bank can use the method of "over-collateralization" to increase its credit. These assets serve as a "supply-side anchor" for commercial banks, and then let commercial banks use each project or each economic development. Demand, to achieve "partial reserve" or "incomplete mortgage" approach, to issue its "demand-side stable currency".

I think this model may slowly form in the future, when we will see a system like MakerDAO become a "decentralized world central bank". Terra is considered stable, and everyone still looks at it as a project, but you will gradually find that they actually correspond to "banks" in the real world, and you also need to look at their credit, qualifications, solvency, etc. . At the same time, because it has partial economic needs, everyone does not care whether it is fully pledged.

Once that day comes, you'll find one more interesting thing:Will the role of the central bank as a "lender of last resort" in the real world still exist in the decentralized world?In the end, the lender is actually an active behavior. The central bank will save you if it is willing to save you. If this happens in the decentralized world, its behavior pattern cannot be changed. Is there any institution that can issue additional currency through some special means to save a local economy like Tether that may lead to a payment crisis and a death spiral, or a local bank? I am more pessimistic.

I have always believed that the concept of "local currency" is difficult to realize in the end - the dissipative structure has a size,The real world is a "big dissipative structure" surrounded by several "small dissipative structures". The external energy of the "small dissipative structure" is actually the external energy provided by the "large dissipative structure". And outside of the "big dissipative structure", we don't know what provides energy to him - layer by layer, you will find that when a dissipative structure has no "external", it can only "inner" "Growing currency", that is, purely relying on credit, purely relying on Ponzi - which is now the Federal Reserve.

Under this premise, is it possible that the "small dissipative structure" will eventually go to heat death? Or the fate of death? The possibility is relatively large.