IBM has recently announced that it will provide blockchain services –particularly, helping issuing stablecoins — to 6 of its banking partners using the Stellar blockchain.
The announcement shouldn’t surprise well-informed crypto investors. From JP Morgan issuing its own currency for the exclusive use of major clients, to Facebook’s coin and asset-backed currencies, we continue to get hints that 2019 will revolve around companies combining cryptocurrencies and fiat money to harness the power of blockchain technology.
Winds of change, or stability?\
IBM is perhaps one of the most reputable names in the tech sector, ever since the invention of the world’s first computers. The fact that such a household name has decided to use the Stellar blockchain to serve the world’s banking giants instead of an already-established alternative –such as Ripple — can only mean one thing: The age of stablecoins is here.
Stablecoins, however, are only the first part of the game: Being able to transact with cryptographic tokens within the blockchain, and with the public’s trust, banks can surpass their intrinsic limitations, such as the SWIFT system. Thanks to this, they’re able to accelerate their basic processes and continue to expand on their competitive reach, while offering the world a transition to cryptocurrency previously unattainable.
So, are banked-issued stablecoins the answer?
While the idea of using banking as a pivot to introduce blockchain adoption into mainstream finance might sound nice, we’ve found an alternative.
For banks, issuing a stablecoin is not unlike issuing all other types of securities, be it ETFs, credits, credits on credits (does the movie ‘The Big Short’ ring a bell here?), or even stock. Problems, however, start to occur when transactions of these securities start to outweigh –or even outspeed — the capacity of their backup.
Asset-backed currencies, on the other hand, are a clean, transparent, and verifiable method of issuing currencies, that might or might not be stable. In the case of our own, DIAM, we’ve stored $150 million worth of diamonds in a vault, and created a process to issue stablecoins that represent the value of these diamonds in US dollars. Furthermore, we’ve introduced a system of redeeming the value of said currencies for investors to be able to exchange their cryptocurrencies for their value worth of diamonds. A clean, transparent system.
The rule of trust.
Investors, however, need to be careful when deciding to trust an asset-backed currency issuer. Although Bitcoin and other cryptocurrencies have achieved great things by being completely trustless systems, this also makes them prone to volatility… the last thing an investor, or an everyday currency user wants.
Introducing a trusted third party on the mix, however, helps relieve the pressure and assure investors that things are A-ok. Third parties that have separate stakes in the game and a reputation of their own to enforce therefore make for excellent auditors of the asset-backing of these currencies, stable or not. In our case, for example, we’ve got one of the leading authorities in the diamantaire world –IDEX — to audit our vaults and verify that our diamonds are fully compliant, clean, authentic, and valuable.
We hope this article has been useful for you, and wish you the best luck on your trades.
To learn more about our project, go to https://www.diamdexx.com/
See you next time!