The Stablecoin Ecosystem Stack

An Infographic + Overview

“gray satellite disc on field” by Donald Giannatti on Unsplash

This is a general Ecosystem Stack.

We aren’t looking at specific building blocks in creating a functioning Stablecoin; we’re looking at what is generally out in the Stablecoin Ecosystem now & into the future.

(ALL INFO IS IN TEXT BELOW THE INFOGRAPHIC)

Infographic created by Cryptographics.eu (aka Jonathan Willems)

Use Cases

Consumer

Access to reliable Banking Institutions and/or reliable Currency.

Underserved

No access to reliable Banking Institutions and/or reliable Currency.

Money of Last Resort

Money used when conducting Criminal Activities.

(My friend Aviv Milner was the first to bring the Underserved & Money of Last Resort use cases to my attention. I had never thought of them before.)


3rd-Party Stablecoins (aka “Stablecoins”)

Centralized IOU Issuance

Fiat Backed
What: Fiat backs the Stablecoin 1:1 and is held in a Bank Acct that either the Crypto Startup controls, or a Custodian controls.
Use-Cases they will Win: None.
How they will Fail: Out-competed by Bank-Issued Digital Fiat.
When is the Peg Considered ‘Broken’: Stablecoin Market Price has been off the Peg more than 10% for the previous 24 Hours + No Redeemability for $1 USD

Asset Backed
What
: A Physical Asset backs the Stablecoin 1:1 and is held in possession by a Crypto Startup, or held in possession by a Custodian.
Use-Cases they will Win: None.
How they will Fail: Out-competed by Bank-Issued Digital Fiat.
When is the Peg Considered ‘Broken’: Stablecoin Market Price has been off the Peg more than 10% for the previous 24 Hours + No Redeemability for the Fixed Amount of the Asset

On-Chain Collateralized

Overcollateralized with ‘Digital Assets’ Foreign & Independent of their Stablecoin System
What
: A ‘Sufficiently Diversified’ Collateral Pool is held on-chain to back the Stablecoin at a 1:1 Ratio at minimum.
Use-Cases they will Win: Underserved; Money of Last Resort
How they will Fail: ‘Dummies’ getting hold of 51% of the Governance Tokens.
When is the Peg Considered ‘Broken’: Stablecoin Market Price has been off the Peg more than 10% for the previous 24 Hours + No Redeemability for $1 USD of Diversified Collateral

Overcollateralized with ‘DCF Assets’ Native & Dependent on their Stablecoin System
What
: A ‘DCF Asset’ Collateral Pool is held on-chain to back the Stablecoin at a 1:1 Ratio at minimum.
Use-Cases they will Win: None.
How they will Fail: Bank-Issued Digital Fiat leading to a Negative-Growth Stablecoin Economy; $T ‘Peg-Attacks’ by Banks
When is the Peg Considered ‘Broken’: Stablecoin Market Price has been off the Peg more than 10% for the previous 24 Hours + No clear NPV of the DCF Assets at the Moment of Redemption

Seignorage Shares

Algorithmic
What: Starts off Fully Algorithmic: Algorithmic Central Bank manipulates the Supply to hold the $1 Peg.
Use-Cases they will Win: None.
How they will Fail: Bank-Issued Digital Fiat leading to a Negative-Growth Stablecoin Economy; $T ‘Peg-Attacks’ by Banks.
When is the Peg Considered ‘Broken’: Stablecoin Market Price has been off the Peg more than 10% for the previous 24 Hours

Hybrid-Algorithmic
What: Starts off 1:1 Fiat Backed until sufficient Network Effects & Exchange Liquidity are present, then switches to Fully Algorithmic: Algorithmic Central Bank manipulates the Supply to hold the $1 Peg.
Use-Cases they will Win: None.
How they will Fail: Bank-Issued Digital Fiat leading to a Negative-Growth Stablecoin Economy; $T ‘Peg-Attacks’ by Banks
When is the Peg Considered ‘Broken’: Stablecoin Market Price has been off the Peg more than 10% for the previous 24 Hours + No Redeemability for $1 USD


2nd-Party Stablecoins (aka “Digital Fiat”)

Commercial Bank Issued Digital Fiat
What: A Stablecoin created by a Major Bank upon receipt of Physical Fiat from a consumer & credited to the consumer’s Digital eWallet on their phone. 
Use-Cases they will Win: Consumer
How they will Fail: When the World Runs out of Oil.


1st-Party Stablecoins (aka “Digital USD”)

Central Bank Issued Digital Fiat
What:
A Stablecoin created by the Federal Reserve upon receipt of a USD Bank Transfer by a bank. Will be used most by small banks who have no need for their own ‘Branded Stablecoin’. Credited to a consumer’s Digital eWallet on their phone upon the small bank’s receipt of Physical Fiat.
Use-Cases they will Win: Consumer
How they will Fail: When the World Runs out of Oil.

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