The Gateway To Harder Money: Stablecoins

Stablecoins are the path towards mainstream adoption of what we call cryptocurrency and, further, without stablecoins there is no such thing as cryptocurrency.

For years people thought Bitcoin was going to take over the world, everyone was going to use it as a medium of exchange and go down to the store to buy the proverbial cup of coffee.

Nobody does that for a number of reasons:
Scalability: Although that’s not really the big reason — it’s not like we are constantly bumping up against it.
Volatility: Ordinary people don’t want to hold it as a store of value
Familiarity: Monies/Currencies are standard, and provide mental shortcuts that allows to trade globally with dollars and euros, but not bitcoin.

If we want to get to mainstream adoption we need familiar currencies, and that is what stablecoins bring to the table, whether they be pegged to dollars and euros, or gold and silver. This familiarity with the pegs will reduce onboarding friction significantly.

Stablecoins are perhaps the most exciting place that a developer could be investing their time right now. Many of us were skeptical of fiat-backed stablecoin Tether in the early days, because it seemed like the worst of both worlds: the worst of crypto and fiat, combined with regulatory opacity. Today, not only have we been proven wrong by the massive success of fiat-backed stablecoins, but we are also being proven wrong by the success of crypto-backed, decentralized stablecoins (without redeemability for fiat) such as DAI — which are competing directly with Central Banks.

There is an exciting opportunity here, a new design space for developers to start tackling monetary policy and the creation of money directly. For all of human history, no matter our profession, everyone’s been working in the same business: making money — and here we have an opportunity to cut out the middleman, cut out all the nonsense.

There is a lot of opportunity in the stablecoin ecosystem, but also a lot of fragmentation, with multiple currency and metal pegs, and multiple mechanics to manage the supply and demand. There are 45 live stablecoins today (not counting governance tokens) with a combined market cap of over $20bn, an average of $36bn in daily volume, and a market dominance of 6%.

There are at least 200 stablecoin projects that have yet to launch, making stablecoins the fastest growing niche in the industry. In fact, it would not be surprising if two years from now the vast majority of “crypto” or “tokenized assets” are stablecoins.

The promise of cryptocurrencies for the past decade has been liberty, freedom, equality and permission-less financial markets. Instead, we got massive online gambling and speculation where people call “hodling” an investment. This is frustrating and tiring, especially if you are a developer who believes in the ethos of the industry, because we are not reaching the adjacent use case possibilities.

Although we are quickly witnessing stablecoins across DeFi being used for degenerate speculation, one of the most exciting things about stablecoins is that they are not exciting from a speculative perspective and we’ll finally be able to use them for non-speculative activities, such as lending, remittances and payments. It’s no secret and no wonder that large corporations such as JPMorgan, Facebook and IBM are developing their own projects to monetize and leverage their network.

The future of stablecoins is far more complicated than it is thought, we are really just at the very beginning of what is possible. There are many different ways of creating stability and there is going to be a huge amount of experimentation and failure. That is a risk that we, as a community, need to figure out how to deal with and prevent stablecoins going the way of the Initial Coin Offerings (ICOs). ICOs were designed and used primarily by gamblers, whereas stablecoins will primarily be used by risk-averse people who want to conserve their wealth.

As the stablecoin space continues to grow through experimentation, and large players continue to enter the market, we are going to need some form of interoperability between stablecoins to keep them useful. One of the key things we are working on at CementDAO is solving for stablecoin idyosincratic risks we have identified in the ecosystem, namely:
Solvency: Tether may not be fully asset-backed
Redeemability: Not all stablecoins can be redeemed all times
Regulatory: Projects shut down for lack of regulatory clarity
Governance: Little participation in decentralized governance
Technical: Critical bugs in smart contracts
Scalability: Network/layer 1 limits to adoption

At Cement we are building a perfect solution which seeks to deal with what we believe are the the main risks and obstacles to mainstream adoption, enabling developers to create new types of stablecoins that are interoperable with the entire ecosystem, while providing the community with risk protection and governance votes.

To learn more about CementDAO and our upcoming product launch, please join the conversation in our Telegram chat: t.me/cementdao