What does GUSD from @GeminiDotCom and PAX from @PaxosGlobal mean for Stablecoins?

“used fireworks” by Iker Urteaga on Unsplash

GUSD from Cameron Winklevoss and Tyler Winklevoss:

1. ERC-20 Token
2. Regulated by the NYDFS.
3. Fully-backed by USD Deposits
4. Will start being offered on the Gemini Exchange
5. State Street is the 3rd Party USD Custodian.
6. Will have multiple 3rd-Party Audits before and after launch to confirm 100% Reserves (reports available here).
7. Smart Contract has been fully audited & formally verified by Trail of Bits here.

This makes other Central-IOU issued USD-Stablecoins a much harder product to choose. Why would I use TrueUSD or Stably when I can be much more certain I will get a dollar back from my GUSD that is regulated by the NYDFS? (TrueUSD also holds dollars in a 3rd Party Custodian and reports 3rd Party Audits here.)

The thing that I do like about TrueUSD is their product is already out on 15 exchanges and has been trying to establish liquidity (and narrow those spreads) since March 2018.

If you’re a Centralized-IOU Stablecoin you need to be working on getting on as many Exchanges as fast as possible: and hope GUSD only stays native to Gemini.com

PAX from Paxos Global:

1. ERC-20 Token
2. Regulated by the NYDFS
3. Fully-Backed by USD Deposits
4. Will start being offered on the itBit Exchange
5. Paxos Trust will custody the USD (the same parent company that issues the Token).
6. 3rd Party Audits will be done.
7. Smart Contract has been fully audited by Nomic Labs here.

The only thing that kind of turns me off is Paxos custodying users’ USD. Other than that, everything checks out and GUSD and PAX are essentially the same product. (I ‘feel’ that Gemini has the better brand, though.)

I do like that itBit does more daily Vol than Gemini (that it something I did not know). And Paxos says they will be trying to get it on more Exchanges.

So we’ll see what happens.

Does it matter?

“Electronic” Redemption (redemption for Electronic USD) is cool, but it actually doesn’t Fucking matter.

That’s like 2/100 on the ‘Magic’ scale for Customers.

What actually matters is redemption for Physical Fiat: i.e. walk into a Bank Branch with a Stablecoin and walk out with Physical fiat in 30s or less. That is 100/100 ‘Magic’ for the user.

That allows merchants to ‘trust’ the Stablecoin they are receiving as payment for an item….because they can walk into a bank and redeem it for physical fiat. Eventually this allows them to just keep the Digital Fiat full-time because they ‘trust’ that it is real money (exactly how Users of Federal Reserve Notes [redeemable for Gold] in the 1910s and 1920s were slowly brainwashed to believe that the paper notes were ‘real’ money, and they continued to believe it even when the Gold Standard was suspended in 1933).

The Ultimate Stablecoin Winners (for the Consumer use-case) will be those who can offer the ‘Maximum National Retail Footprint’ for Consumers to walk in and cash-in/cash-out Physical Fiat at a Human Bank Teller.

Here who I am looking at as the Major Players:

Wells Fargo: 5,965 branches Nationwide

Data

JPMorgan Chase: 5,275 branches Nationwide

Data

Bank of America: 4,507 branches Nationwide

Data

These are the players that actually Fucking matter.

Wells Fargo launches WellsFargoCoin that is exchangeable/redeemable for $1 Physical Fiat in all 5,965 bank branches in the US? No other Crypto-Startup Stablecoin matters for Consumers.

JP Morgan Chase launches ChaseCoin that is exchangeable/redeemable for $1 Physical Fiat in all 5,275 bank branches in the US? No other Crypto-Startup Stablecoin matters for Consumers.

Bank of America launches BOAcoin that is exchangeable/redeemable for $1 Physical Fiat in all 4,507 bank branches in the US? No other Crypto-Startup Stablecoin matters for Consumers.

Walking into a bank branch to redeem a Stablecoin for $1 of Physical Fiat is the MAXIMUM ‘trust’ a Stablecoin can have.

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If you’re a Centralized IOU Stablecoin you need to figure out how to compete with the Retail Footprints of the above 3 players: it is the only thing that ACTUALLY matters.

My bet is: The Big Banks will move slowly and won’t offer their own Digital Fiat (Stablecoin) until 2025. This gives time for all the Crypto-Startup Stablecoins to figure out a solution to the ‘Retail Footprint Problem’.

I think the fastest way a Stablecoin could win in the US is to partner with one of these 3 Big Banks sometime in the next 5 years and allow customers of that Crypto Startup to walk into any of the Big Boy Bank Branches, nationwide, and redeem their Crypto-Startup Stablecoin for Physical Fiat.

It could start out with Gemini partnering with 1 JPM Bank Branch in NYC. Then 5 JPM Bank Branches in NYC. Then all JPM Bank branches in NYC, then all branches on the East Coat, then all branches in the US…. Gotta move fast!

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