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Stablecoins and the path towards mainstream adoption

Matías Puletti
Sep 14, 2018 · 4 min read

Today let’s learn what the Winklevoss brothers are doing to push the adoption of cryptocurrencies.

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Just hours ago the cryptocurrency exchange Gemini, founded by Cameron and Tyler Winklevoss, announced the launch of the Gemini dollar, the world’s first regulated stablecoin.

How important is this? Why do we need stablecoins? What are stablecoins in the first place?

Stablecoins 101

The ultimate goal of a stablecoin is to become a digital form of fiat-free cash that is exceptionally stable in value.

Why we need them

In the short-term, stability allows for people to transact in a practical way, and the long-term stability enables other important financial functions such as loans and credit.

For example, decentralized cross-border lending can occur through the introduction of a stable cryptocurrency. This removes the problems seen with popular high volatility cryptocurrencies that creates an uncertain lending environment as borrowers and lenders cannot comfortably plan neither for the short nor the long-term future.

Different type of stablecoins

  • Fiat-collateralized
  • Crypto-collateralized
  • Non-collateralized (i.e. seigniorage shares)

Let’s briefly describe them



Non-collateralized (i.e. seigniorage shares)

Why are the Winklevoss brothers paving the path to mainstream adoption?

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Let’s quickly try to spot the main difference of the just announced Gemini Dollar with, for example, the most popular stablecoin to date, Tether.

In it’s announcement, Gemini states:

“Enter the Gemini dollar — a stable value coin (often called a ‘stablecoin’) that is (i) issued by Gemini, a New York trust company, (ii) strictly pegged 1:1 to the U.S. dollar, and (iii) built on the Ethereum network according to the ERC20 standard for tokens. The Gemini dollar (ticker symbol: GUSD) combines the creditworthiness and price stability of the U.S. dollar with blockchain technology and the oversight of U.S. regulators, namely, the New York State Department of Financial Services (NYDFS).”

Spotted it? Regulation.

This past year Tether has faced a lot of critisism caused by the lack of transparency surrounding their activities. What remains to be proved is if they indeed hold 1 dollar in the bank for every Tether minted.

On the other hand Gemini has much more transparent plans.

The USD backing the tokens will not only be custodied by a U.S. bank but will also be eligible for “pass through” insurance from the Federal Deposit Insurance Corporation (FDIC).

Moreover, Gemini has enlisted an independent registered public accounting firm to publish monthly reports verifying that the tokens are fully-backed by USD and has also subjected the GUSD smart contracts to a rigorous audit by an independent security firm.

Final thoughts

Stablecoins solve this problem by making it easier and safer to use digital coins for everyday purchases, including app payments like we use for Bitz. The exponential progress that has been accomplished over the past years shows that not only stablecoins are here to stay but we are still early. Very early.

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