The Redeemability Tests for Stablecoins
This Track evolved from the Original K-Test/Krueger Test Ideas from this Facebook Stablecoin Group (both thanks to Fred Krueger).
The ‘Redeemability Test’ says that a Stablecoin must be able to be exchanged 1:1 for the value of $1 USD, in order to pass the test.
The reason this is important is because if a Stablecoin has the Redeemability Property then its worth will always be “the value it is redeemable for”.
If a Stablecoin does not have the Redeemability Property then it’s worth will always be “what the market will buy it for”. Then, the Stablecoin is really just a ‘fake dollar’. And so if it’s trading at $0.95…..too bad!
“Physical” Redemption is allowing users to redeem the Stablecoin for $1 in Physical Fiat at a Retail Location or at an ATM.
You want your Stablecoin to have “Physical” Redemption so that it can have a chance to compete with Bank-Issued Digital Fiat in the Future.
The Abra Wallet Synthetic Stablecoin has “Physical” Redemption in the Philippines with Abra Tellers.
Bank-Issued Digital Fiat will be the King of “Physical” Redemption.
“Electronic” Redemption is allowing users to redeem the Stablecoin for $1 in Electronic Fiat.
Electronic Fiat examples: The USD your computer says is in your Checking Acct; The USD that is sent from Bank 1 to Bank 2 when you do a Wire Txfer.
This is “OK” for any Stablecoin pre-2020. But if you have a Stablecoin with only “Electronic” Redemption, you need to move fast and figure out a “Physical” Redemption Strategy for post-2020.
Gemini Dollar (GUSD) has “Electronic” Redemption.
TrueUSD (TUSD) has Partial “Electronic” Redemption: only select people can redeem their TUSD for Electronic Fiat. It’s better than no redemption, but if you’re competing against GUSD, it’s no bueno.
“Asset” Redemption is allowing users to redeem the Stablecoin for some Fixed Amount of an Asset.
That “Fixed Amount” can be $1 in Assets OR some other Measurement of an Asset.
This type of Redemption is in a league of its own and doesn’t compete with “Physical” Redemptions or “Electronic” Redemptions.
MakerDAO has “Asset” Redemption by allowing DAI holders to redeem their Dai for $1 in Digital Assets when an Emergency Shutdown occurs.
DigixDAO has “Asset” Redemption by allowing DGX holders to redeem their DGX for 1 Gram of Gold (can be mailed to you or picked up in Singapore).
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