Back in 2016, I had a friend in college started talking me into Bitcoin. I was skeptical.
“The price is over US$1000 now!! It´s going up fast!” He would say.
I would just look at him and say: “Dude, c´mon. Can´t you see it´s just a speculation tool. You can´t predict whether it´s going up or down, it´s just like gambling.”
Two years, my mind has changed completely about that. I realized that the technology behind it will change everything, every industry out there. This was after a talk that I went to, and haven´t stopped researching ever since.
However, the same issue I had with Bitcoin back then, was still arousing me; when Natoshi Nakamoto wrote that paper in 2009, it was tittled: “Bitcoin: Peer-to-peer Electronic Cash System”. Most people focus on the first part: “peer-to-peer”, which means descentralization, freedom and independence from traditional large financial institutions (aka: banks). And that is in fact an amazing asset to cryptocurrencies and what gets people excited about them. However, very focus on the second part of the equation: “Electronic Cash”.
Electronic cash as in paying at 7–11 with it, instead of coins and bills, or credit cards. The digital equivalents of dollars.
BUT, how can this be posible if the price can fluctuate 20% overnight? The fixed-supply of Bitcoin has its downside, and that is, as we all know, its price is not stable, which means we cannot use it in our every day lives, which means NOT electronic cash.
This under-delivery has lead to the emergence of a new group of cryptocurrencies called Stable coins, which is what I want to talk to you about today. Stable as in money that doesnt change too much in price, so you do use it as a payment method, so IT IS electronic cash.
Within this group of stable coin projects there is different views on how this stability can be reached; most common, well known projects like Tether chose to peg its currency to the US dollar in a 1:1 ratio, others have used gold, like onegram, goldmint, digix, hellogold,…I have a complete list of them here. There´s also another sub-category which is backed by othe cryptocurrencies, like MakerDAO. And finally, we have some more ambitious projects, like Basis, that says they want to create an algorithmic central bank, and have a coin that adjustes supply by itself, without the need of an external asset to hold its peg (uncollaterized, they are commonly named).
Why is this something interesting to keep an eye on?
Simple: world financial domination. Sound too good to be true? Think again. Whichever one of this projects can achieve stability and mass adoption as a means of payment, can truly revolutionize the mega trillion dollar banking industry that I think should be the main objetive of cryptocurrencies.
Finally, we can rely on a descentralized distribution method, where banks are not a part of it. Why am I so negative on banks? Why aren´t you?
I have written a whole another lot on this topic on my blog: cryptovsbanks.com