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With The Rise Of Stablecoins, Can Crypto finally realize its potential?

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Can stablecoins help the encryption industry take off in a real way? GETTY

In the last two years it has been a wild race for cryptocurrencies. From the 2017 surge to the crash of 2018, entire sectors that surround the space have increased and contracted within a few months. Despite the increased attention and investment in the crypt space, there are unresolved issues affecting the sector and hamper its potential impact on a macro scale. Stablecoin is a new form of digital currency whose price is linked to another resource: the solution to the problems of the encrypted sector? And if so, which digital currency applications can enable stablecoins?

Cryptocurrency has lost its mark

The main problem affecting the cryptocurrency industry today is price volatility. This volatility is both a driver and the result of a lack of public trust (institutional or individual) in the cryptocurrency as a reliable and balanced currency option. Why is there a lack of trust? Poor and undefined regulation certainly plays a role – the public is disconcerted by the lack of a structured framework that drives its adoption of cryptography and therefore considers it a speculative investment. However, lack of trust is also a by-product of how the industry has shaped and framed itself to date.

In the search for the cryptocurrency industry to market the digital currency as a new frontier – a previously unexplored and fundamentally different space – it ventured too far from traditional currencies. Cryptic companies have long focused on what they are not: traditional, physical, centralized. But in this process, they have not been able to fully appreciate that the resources of the real world such as the fiat currency or precious metals have reached what appears today elusive to cryptocurrencies: a history of trust and durability. This is the real and lasting value of any currency, and must be better integrated into the digital currency model in both trading and storage: a proposal that is undoubtedly demanding. Like the BIS, an organization of the world's central banks, he noted in his Annual economic report 2018:

Sustainable episodes of stable money are historically an exception far more than the norm. In fact, trust has failed so frequently that history is a currency cemetery. Museums around the world devote entire sections to this cemetery – for example, Room 68 of the British Museum shows stones, shells, tobacco, countless coins and pieces of paper, along with many other items that have lost their acceptability as an exchange and they found their way to this room.

Although cryptocurrencies offer incremental value beyond traditional currencies such as transparency, convenience and speed, without a stronger foundation based on trust and durability, cryptocurrencies will not realize their full potential. The cryptocurrency industry must begin to consider itself more like the next evolution of the currency, taking what came before and developing above, contrary to the new currency imagination, breaking down what came before and building from scratch.

Cryptocurrencies like bitcoins can create & nbsp; combined with rather than instead of traditional resources like GETTY gold

Rise Of The Stablecoin

Stablecoin – a new form of cryptocurrency anchored to another resource such as the fiat currency (the US dollar, euro, etc.), precious metal or another cryptocurrency – theoretically represents the cryptographic sector's response to the problem above. Stablecoins can be considered the low-risk and reliable cryptographic option (unproven). Their value lies in their ability to efficiently store and transfer rather than increase wealth and fill the gap between physical and digital currency.

There are two types of stablecoin: collateralized and uncollateralized / algorithmic. Collateralised stablecoins are backed by real assets (fiat or raw materials) or backed by other cryptocurrencies, while non-collateralized stablecoin are algorithmically coupled.

The different types of stablecoinsJonathan Moed

For every currency backed by real resources, an equivalent value in US dollars or gold as an example is set aside in a bank. Trust is built and maintained in collaboration with a centralized financial institution. This means that coins backed by real resources should be fully and easily repayable for the associated resources and that coins should not be created and disseminated, except when this is true. The most popular (and in general) stablecoin supported by the real world, Tether, maintains an overwhelming percentage of total stmoben market capitalization, although this share has declined significantly – about 10 percentage points – in October 2018. Other notable advocates in the real world the stablecoins include TrueUSD, USD Coin and new operators Paxos Standard and Gemini Dollar.

Encrypted coins are supported by other cryptocurrencies. Since cryptocurrencies are less stable than real assets, crypto-collateralised currencies are over-guaranteed. Considering that a stable currency with a US dollar pledge would be 1: 1 (US $ 1 for 1 stablecoin), a stablecoin supported by ethere could be anchored 2: 1 (worth $ 2 for $ 1 of stablecoin) to ensure stability even with great fluctuation. The primary crypto-collateralized stablecoin, Maker Dai, is pegged to the US dollar, but supported by ethereum.

The definitive type of stablecoin, uncollateralized or algorithmic stablecoin, is completely decentralized and stabilized by algorithms that determine its value. These algorithms maintain the value and stability by controlling the supply of non-collateralized stablecoin, narrowing it and growing it as needed. Basecoin is an example of a non-collateralized stablecoin: when the value of the coins falls below US $ 1, the currency contracts (the holders of coins buy the bonds using their coins, after which the used coins are destroyed) to increase the price, and the opposite applies when the value exceeds US $ 1.

How stable are the scalpels?

Stablecoin are at the beginning of their evolution and as such they operate and are seen by most as untested works. The extent to which these coins are or may become truly "stable" – coherently and precisely anchored and supported by their associated asset – will determine whether they are judged to be the last crypto-cryptography, or as a legitimator of cryptocurrency. Reaching stability is not an easy task, regardless of the type of currency. In many less mature economies, even the legal currency is rich in volatility. Look no further than Argentina, Venezuela and Turkey in recent months as recent examples of wildly fluctuating fiat coins. Furthermore, as the annual BIS report attests, sustainable currency stability is an exceptional event throughout history.

The Stablecoin have already had their share of growing controversy and pain in their short life span, and the jury does not care whether these struggles must be attributed to the immaturity of the coins or to fundamental defects in their construction.

Guaranteed coins in the real world, in theory the most proven model of stablecoin, given their centralized reserve of value, have not yet proven to be reliable. The Tether has been specifically attacked due to questions related to its accounting and to the process by which each of its coins is supported by US dollars 1: 1. The company has been consistently reluctant to provide audit of its reserves, and is accused of manipulate the value of other cryptocurrencies due to a suspicious relationship between it and the Bitfinex exchange (the two companies share executive leadership).

October 15th, Tether broke his 1: 1 ratio with the US dollar, with a USDT token that falls below US $ 1, jeopardizing its stability. Also, last week, the news broke that Tether had has destroyed $ 500 million tokens, a tactic that many believe is the way in which the company intentionally contracts the offer. The USDT token has recovered from its downside, but questions remain and its share of the total market capitalization of stableco has been very successful. In addition to Tether, the other stablecoin collateralized in the real world have and continue to fluctuate slightly above or below US $ 1, enough to question whether a real draw is possible 1: 1. Even though real-world guaranteed coins are able to to stabilize, the cryptic purists argue that the fact that the coins guaranteed by the real world require a third central part clashes with the very premise of the cryptocurrency.

The market capitalization and the Tether USD price have been very successful in October 2018CoinMarketCap

As for the other types of stablecoin, one could argue the opposite of the previous point: that the crypto-collateralized stablecoins undermine the very premise of the stablecoin. While they offer more decentralization than the collateralised stablecoins of the real world, because these coins block a historically volatile cryptocurrency to another, what can we say that the currency that serves as a supporter could not fluctuate enough to undermine the stability of the sustained currency? Following this line of thought, algorithm-based coins are even further from a proven and real support model, and are much more complex than the real world's stablecoins. Holders of non-collateralised tokens have no right to any underlying assets in case of a chip break.

No single stablecoin has been able to achieve the balance between centralization and decentralization, while maintaining speed, transparency, simplicity and, consequently, confidence. Despite this, the number of new projects and investments grew only in 2018. Stablecoin projects, of which about 50 under development or development, have raised investment capital of 350 million dollars, attracting the attention of financial institutions inside and outside the cryptic world. The main exchanges have begun to embrace stablecoinsand Tether is positioned at the eighth place in the market capitalization among all the cryptocurrencies at the time of writing, despite its recent problems. This is a testament to the wide-ranging potential of the stablecoin. If true stability is achieved (or a more real stability than existing alternatives), stablecoins could serve to unlock the potential of cryptocurrency and to extend its application and impact.

Cases of use of Stablecoin

The main use case for stablecoin in its current conception is a tool to circumvent the restrictions arising from the clash between traditional financial institutions and crypto institutions. Many cryptographic exchanges can not deal directly in fiat currency, so the stablecoins behave like a valid substitute: a medium of exchange and a reserve of value. They allow investors to have more control over their funds, moving effectively between cash and encryption and storing their funds in reserve without compromising their value, especially during periods of volatility. Stablecoins also offer access to the much needed liquidity to trade that they can not access through banks using traditional means.

This use case scratches the surface of what a truly stable currency can enable: the next generation of financial products and services built on the blockchain and transacted exploiting the advantages of digital money. This includes insurance products, credit networks and better and fairer loans, smart contractual dividend payments and more. These products may not currently be feasible on a large scale due to the volatility associated with standard cryptocurrencies, however stablecoins could change them, giving credibility to Existing products and catalyzing research and development of new products.

At an even broader macro level, achieving a stable currency could help citizens in developing countries gain reliable access to price-stable cryptocurrency assets. As noted above, in the course of history, currency depreciation has caused chaos in unstable economies. For those citizens who hold a currency in crisis (or even in the presence of high rates of inflation), the idea of ​​transferring wealth into a stable cryptocurrency is an attractive proposition that essentially replaces a volatile currency with a currency substitute more stable.

A new approach

The potential impact of stablecoins is too great to ignore, yet they are not currently at the height of this promise. How can stablecoin evolve? How can they increase their stability and & nbsp; subsequent adoption? A solution pursued by a small number of stablecoin companies is creating hybrid stablecoin models that combine multiple types of support.

Time, a Canadian-Swiss company backed by a consortium of private equity funds focused on precious metals, is adopting such an approach and is planning to launch its stablecoin in USDVault by the end of 2018. There are other stablecoins that use multiple simultaneous mechanisms to strengthen stabilization & nbsp; as multiple legal currencies, but the USDVault token is unique as it is the only dollar anchored & nbsp;is stablecoin with gold back – a formidable combination. In addition, tokens are fully redeemable in US dollars or gold.

The value proposition of USDVaultTime

As Vault co-founder and CEO Ranjeet Sodhi explains: "LBMA gold gold (physical gold) is only purchased when a customer buys the USDVault token by sending their funds to our fiduciary partner. they are sent to a trust through our trust partners and this trust then buys an equivalent amount of gold bullion (which is kept in fully insured Swiss deposits) .The trust also performs gold coverage and in parallel orders Vault. to issue the USDVault token on the client's portfolio. "This process ensures not only greater stability, but also greater transparency since all transactions are supervised by third-party trust partners, avoiding problems currently casting a shadow on Tether .

The USDVault token will initially be aimed at institutional investors, with the goal that individual investors will soon follow. Tokens will be available either directly via Vault or through partner exchanges. The company plans to charge fees for issuing, redemption and small vaulting to generate revenue.

Time will tell if the dollar-peg model, the gold-backed model can get what other stablecoin models have not been able to do, but throwing more-dollar coins like USDVault is a step in the right direction. With the launch of new and better stablecoin projects, everyone will be able to learn from its predecessors and competitors and incorporate best practices to minimize risks and maximize stability.

The future of Stablecoins

Stablecoin have already achieved a crucial goal for the crypto industry: highlighting the need to identify ways to improve confidence in crypts. Because stablecoin projects strive to generate & nbsp; trust, patience and support are required both by the cryptic industry and the centralized banking sector. This comes in the form of financial support to ensure liquidity, regulatory support with the awareness that the stablecoin are the closest things to the actual collateral resources existing in the encrypted world and the support of cryptographic exchanges in the promotion of stablecoin on their platforms.

If these conditions are met, it is quite possible that along the way, the currency solution of the future will be the same in cash and encryption, centralization and decentralization, speed and security. All in the name of reaching the top of the currency: true and lasting stability.

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Can stablecoins help the encryption industry take off in a real way? GETTY

In the last two years it has been a wild race for cryptocurrencies. From the 2017 surge to the crash of 2018, entire sectors that surround the space have increased and contracted within a few months. Despite the increased attention and investment in the crypt space, there are unresolved issues affecting the sector and hamper its potential impact on a macro scale. Stablecoin is a new form of digital currency whose price is linked to another resource: the solution to the problems of the encrypted sector? And if so, which digital currency applications can enable stablecoins?

Cryptocurrency has lost its mark

The main problem affecting the cryptocurrency industry today is price volatility. This volatility is both a driver and the result of a lack of public trust (institutional or individual) in the cryptocurrency as a reliable and balanced currency option. Why is there a lack of trust? Poor and undefined regulation certainly plays a role – the public is disconcerted by the lack of a structured framework that drives its adoption of cryptography and therefore considers it a speculative investment. However, lack of trust is also a by-product of how the industry has shaped and framed itself to date.

In the search for the cryptocurrency industry to market the digital currency as a new frontier – a previously unexplored and fundamentally different space – it ventured too far from traditional currencies. Cryptic companies have long focused on what they are not: traditional, physical, centralized. But in this process, they have not been able to fully appreciate that the resources of the real world such as the fiat currency or precious metals have reached what appears today elusive to cryptocurrencies: a history of trust and durability. This is the real and lasting value of any currency, and must be better integrated into the digital currency model in both trading and storage: a proposal that is undoubtedly demanding. Like the BIS, an organization of world central banks, it noted in its 2018 annual economic report:

Sustainable episodes of stable money are historically an exception far more than the norm. In fact, trust has failed so frequently that history is a currency cemetery. Museums around the world devote entire sections to this cemetery – for example, Room 68 of the British Museum shows stones, shells, tobacco, countless coins and pieces of paper, along with many other items that have lost their acceptability as an exchange and they found their way to this room.

Although cryptocurrencies offer incremental value beyond traditional currencies such as transparency, convenience and speed, without a stronger foundation based on trust and durability, cryptocurrencies will not realize their full potential. The cryptocurrency industry must begin to consider itself more like the next evolution of the currency, taking what came before and developing above, contrary to the new currency imagination, breaking down what came before and building from scratch.

Cryptocurrencies like bitcoin can be built together rather than instead of traditional resources like GETTY gold

Rise Of The Stablecoin

Stablecoin – a new form of cryptocurrency anchored to another resource such as the fiat currency (the US dollar, euro, etc.), precious metal or another cryptocurrency – theoretically represents the cryptographic sector's response to the problem above. Stablecoins can be considered the low-risk and reliable cryptographic option (unproven). Their value lies in their ability to efficiently store and transfer rather than increase wealth and fill the gap between physical and digital currency.

There are two types of stablecoin: collateralized and uncollateralized / algorithmic. Collateralised stablecoins are backed by real assets (fiat or raw materials) or backed by other cryptocurrencies, while non-collateralized stablecoin are algorithmically coupled.

The different types of stablecoinsJonathan Moed

For every currency backed by real resources, an equivalent value in US dollars or gold as an example is set aside in a bank. Trust is built and maintained in collaboration with a centralized financial institution. This means that coins backed by real resources should be fully and easily repayable for the associated resources and that coins should not be created and disseminated, except when this is true. The most popular (and in general) stablecoin supported by the real world, Tether, maintains an overwhelming percentage of total stmoben market capitalization, although this share has declined significantly – about 10 percentage points – in October 2018. Other notable advocates in the real world the stablecoins include TrueUSD, USD Coin and new operators Paxos Standard and Gemini Dollar.

Encrypted coins are supported by other cryptocurrencies. Since cryptocurrencies are less stable than real assets, crypto-collateralised currencies are over-guaranteed. Considering that a stable currency with a US dollar pledge would be 1: 1 (US $ 1 for 1 stablecoin), a stablecoin supported by ethere could be anchored 2: 1 (worth $ 2 for $ 1 of stablecoin) to ensure stability even with great fluctuation. The primary crypto-collateralized stablecoin, Maker Dai, is pegged to the US dollar, but supported by ethereum.

The definitive type of stablecoin, uncollateralized or algorithmic stablecoin, is completely decentralized and stabilized by algorithms that determine its value. These algorithms maintain the value and stability by controlling the supply of non-collateralized stablecoin, narrowing it and growing it as needed. Basecoin is an example of a non-collateralized stablecoin: when the value of the coins falls below US $ 1, the currency contracts (the holders of coins buy the bonds using their coins, after which the used coins are destroyed) to increase the price, and the opposite applies when the value exceeds US $ 1.

How stable are the scalpels?

Stablecoin are at the beginning of their evolution and as such they operate and are seen by most as untested works. The extent to which these coins are or may become truly "stable" – coherently and precisely anchored and supported by their associated asset – will determine whether they are judged to be the last crypto-cryptography, or as a legitimator of cryptocurrency. Reaching stability is not an easy task, regardless of the type of currency. In many less mature economies, even the legal currency is rich in volatility. Look no further than Argentina, Venezuela and Turkey in recent months as recent examples of wildly fluctuating fiat coins. Furthermore, as the annual BIS report attests, sustainable currency stability is an exceptional event throughout history.

The Stablecoin have already had their share of growing controversy and pain in their short life span, and the jury does not care whether these struggles must be attributed to the immaturity of the coins or to fundamental defects in their construction.

Guaranteed coins in the real world, in theory the most proven model of stablecoin, given their centralized reserve of value, have not yet proven to be reliable. The Tether has been specifically attacked due to questions related to its accounting and to the process by which each of its coins is supported by US dollars 1: 1. The company has been consistently reluctant to provide audit of its reserves, and is accused of manipulate the value of other cryptocurrencies due to a suspicious relationship between it and the Bitfinex exchange (the two companies share executive leadership).

On October 15, Tether broke his 1: 1 ratio with the US dollar, with a USDT token below US $ 1, jeopardizing its stability. In addition, last week, the news broke that Tether had destroyed 500 million USDT tokens, a tactic that many believe is the way the company has intentionally contracted the offer. The USDT token has recovered from its downside, but questions remain and its share of the total market capitalization of stableco has been very successful. In addition to Tether, the other stablecoin collateralized in the real world have and continue to fluctuate slightly above or below US $ 1, enough to question whether a real draw is possible 1: 1. Even though real-world guaranteed coins are able to to stabilize, the cryptic purists argue that the fact that the coins guaranteed by the real world require a third central part clashes with the very premise of the cryptocurrency.

The market capitalization and the Tether USD price have been very successful in October 2018CoinMarketCap

As for the other types of stablecoin, one could argue the opposite of the previous point: that the crypto-collateralized stablecoins undermine the very premise of the stablecoin. While they offer more decentralization than the collateralised stablecoins of the real world, because these coins block a historically volatile cryptocurrency to another, what can we say that the currency that serves as a supporter could not fluctuate enough to undermine the stability of the sustained currency? Following this line of thought, algorithm-based coins are even further from a proven and real support model, and are much more complex than the real world's stablecoins. Holders of non-collateralised tokens have no right to any underlying assets in case of a chip break.

No single stablecoin has been able to achieve the balance between centralization and decentralization, while maintaining speed, transparency, simplicity and, consequently, confidence. Despite this, the number of new projects and investments grew only in 2018. Stablecoin projects, of which about 50 under development or development, have raised investment capital of 350 million dollars, attracting the attention of financial institutions inside and outside the cryptic world. Significant exchanges have begun to embrace stablecoins, and Tether is ranked eighth in the total market capitalization of all cryptocurrencies at the time of writing, despite its recent problems. This is a testament to the wide-ranging potential of the stablecoin. If true stability is achieved (or a more real stability than existing alternatives), stablecoins could serve to unlock the potential of cryptocurrency and to extend its application and impact.

Cases of use of Stablecoin

The main use case for stablecoin in its current conception is a tool to circumvent the restrictions arising from the clash between traditional financial institutions and crypto institutions. Many cryptographic exchanges can not deal directly in fiat currency, so the stablecoins behave like a valid substitute: a medium of exchange and a reserve of value. They allow investors to have more control over their funds, moving effectively between cash and encryption and storing their funds in reserve without compromising their value, especially during periods of volatility. Stablecoins also offer access to the much needed liquidity to trade that they can not access through banks using traditional means.

This use case scratches the surface of what a truly stable currency can enable: the next generation of financial products and services built on the blockchain and transacted exploiting the advantages of digital money. This includes insurance products, credit networks and better and fairer loans, smart contractual dividend payments and more. These products may not currently be feasible on a large scale due to the volatility associated with standard cryptocurrencies, however stablecoins could change it, give credibility to existing products and catalyze research and development of new products.

At an even broader macro level, achieving a stable currency could help citizens in developing countries gain reliable access to price-stable cryptocurrency assets. As noted above, in the course of history, currency depreciation has caused chaos in unstable economies. For those citizens who hold a currency in crisis (or even in the presence of high rates of inflation), the idea of ​​transferring wealth into a stable cryptocurrency is an attractive proposition that essentially replaces a volatile currency with a currency substitute more stable.

Un nuovo approccio

Il potenziale impatto degli stablecoin è troppo grande per essere ignorato, tuttavia attualmente non sono all&#39;altezza di questa promessa. Come possono evolvere gli stablecoin? Come possono aumentare la loro stabilità e successiva adozione? Una soluzione perseguita da un ristretto numero di aziende stablecoin sta creando modelli ibridi di stablecoin che combinano più tipi di supporto.

Vault, una società canadese-svizzera sostenuta da un consorzio di fondi di private equity focalizzati su metalli preziosi, sta adottando tale approccio e sta pianificando di lanciare il suo stablecoin USDVault entro la fine del 2018. Ci sono altri stablecoin che utilizzano più meccanismi simultanei che rafforzano la stabilizzazione come più valute legali, ma il token USDVault è unico in quanto è l&#39;unico dollaro ancorato al dollaro USA is stablecoin con retro in oro – una combinazione formidabile. Inoltre, i token sono interamente riscattabili in dollari USA o oro.

La proposta di valore di USDVaultVolta

Come spiega il co-fondatore e CEO di Vault Ranjeet Sodhi: "L&#39;oro d&#39;oro LBMA (oro fisico) viene acquistato solo quando un cliente acquista il token USDVault inviando i propri fondi al nostro partner fiduciaria. I fondi vengono inviati a un trust tramite i nostri partner fiduciari e questa fiducia acquista quindi una quantità equivalente di lingotti d&#39;oro (che è conservata in depositi svizzeri completamente assicurati). Il trust esegue anche una copertura in oro e in parallelo ordina a Vault di emettere il token USDVault sul portafoglio del cliente. "Questo processo garantisce non solo una maggiore stabilità, ma anche una maggiore trasparenza poiché tutte le transazioni sono supervisionate da partner fiduciari di terze parti, evitando i problemi attualmente lancia un&#39;ombra su Tether.

Il gettone USDVault sarà inizialmente rivolto agli investitori istituzionali, con l&#39;obiettivo che i singoli investitori seguiranno presto. I token saranno disponibili sia direttamente tramite Vault, sia tramite le borse dei partner. La società prevede di addebitare commissioni per l&#39;emissione, il rimborso e il volteggio di piccole dimensioni per generare entrate.

Il tempo dirà se il modello con pegging del dollaro, il modello con supporto in oro può ottenere quello che altri modelli di stablecoin non sono stati in grado di fare, ma il lancio di monete con più sostegni come USDVault è un passo nella giusta direzione. Con il lancio di nuovi e migliori progetti di stablecoin, ognuno sarà in grado di imparare dai suoi predecessori e concorrenti e di incorporare le migliori pratiche per ridurre al minimo i rischi e massimizzare la stabilità.

Il futuro di Stablecoins

Gli Stablecoin hanno già raggiunto un obiettivo cruciale per l&#39;industria della cripto: evidenziando la necessità di identificare i modi per migliorare la fiducia in cripto. Poiché i progetti di stablecoin si sforzano di generare fiducia, è richiesta pazienza e supporto sia dall&#39;industria criptografica che dal settore bancario centralizzato. Ciò si presenta sotto forma di sostegno finanziario per garantire liquidità, supporto normativo con la consapevolezza che gli stablecoin sono le cose più vicine alle risorse collaterali reali esistenti nel mondo criptato e il sostegno degli scambi crittografici nella promozione di stablecoin sulle loro piattaforme.

Se queste condizioni sono soddisfatte, è del tutto possibile che lungo la strada, la soluzione valutaria del futuro sarà uguale in contanti e criptazione, centralizzazione e decentramento, velocità e sicurezza. Tutto in nome del raggiungimento dell&#39;apice della valuta: stabilità vera e duratura.

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