Mar 27
A little thought about stablecoins (1)
Since the 2019 covid-19 epidemic, various deglobalization thoughts and regulations have emerged; after the Ukraine war, deglobalization reflections in the financial sector have begun to appear, can the dollar still be trusted? Can financial institutions in neutral countries still be trusted? Behind these trust crises, it shows that decentralized BTC and ETH will be the right direction for human development in the future.
We are at the crossroads of a great transformation.
About power
Before talking about stablecoins, we need to talk about power.
The current regulations on crypto are all illusions, and the essence is a power struggle. The characteristics of power determine that power is always self-reinforcing and self-expanding. Most of the current power is in the hands of politicians and the rich; therefore, we can see that the power of each government is constantly expanding, and at the same time, wealth is becoming more and more concentrated, and the proportion of wealth of the rich in each country is constantly increasing. rise.
With the penetration of the blockchain into finance and economy, part of the power will inevitably be transferred to the chain and to the code. This is unbearable for the current power owners, and they will do everything possible to prevent them as much as possible. This transfer of power.
Let’s take a look at this example of the Ukrainian war. Since the Ukraine war, various agencies have been asked by the US to sanction Russian entities, individuals. The major crypto exchanges are no exception, the most obvious being binance. Several U.S. politicians named cex and binance, asking them to be more proactive in imposing sanctions on Russian entities and individuals. Binance CEO cz said that compared with hundreds of banks in Europe, the assets of Russian users managed by Binance are less than 0.3% of the bank’s assets, but American politicians have been staring at Binance and asked Binance to sanction Russian users. Does binance have more influence than those hundreds of banks? Obviously not.
There are two reasons.
First, cex is a subversion of the financial field. For a long time, the financial field has been licensed to operate, thus ensuring the monopoly position and income of practitioners, and cex has broken this monopoly to some extent, which has always been a thorn in the eyes of regulators; as the largest cex, binance, Naturally bear the brunt.
Second, the assets of cex can be easily transferred to the chain, making it impossible to be sanctioned; while the assets of banks can only be transferred between banks, no matter which bank they are transferred to, they cannot avoid being sanctioned;
The blockchain challenges the country’s financial system and coinage rights. Therefore, neither China, nor the United States, nor other governments are willing to see the development and growth of the blockchain. After several rounds of crackdowns, China basically wiped out the domestic exchanges and mining industries; during the same period, although Facebook made a lot of explanations, made a lot of preparations, and attracted many traditional financial institutions, the United States did not hesitate to stop it. The idea of facebook issuing a stablecoin; Russia has been restricting the use of BTC before the Ukraine war, only allowing BTC to be mined to earn foreign exchange.
If the governments of various countries are monolithic, it is estimated that the use of BTC and ETH has already been banned by law. However, every country in the world has conflicts of interest, and different countries have different demands, which gives the blockchain industry development opportunities.
The United States, as a global hegemon, can harvest the world through currency issuance; other big countries, the government can harvest their own countries by issuing legal currency; the worst is some small countries, which basically have no monetary autonomy and can only be harvested, so we see, Salgado first used BTC as the national reserve currency, and then South American countries followed suit to study this policy. Now that Russia has been sanctioned and kicked out of the swift system, its attitude towards BTC has changed 180 degrees, and it has even been willing to accept BTC as payment for crude oil and natural gas.
The chaotic world promotes the development of crypto. Ukraine has accepted crypto donations from the very beginning, and has also issued NFTs. Now Russia is discussing accepting BTC for the purchase of crude oil and natural gas. These government actions have greatly enhanced the consensus of crypto. This poses a challenge to the current global dollar-based monetary system. Since crypto does not require trust, it cannot be controlled by anyone, any organization, or any country, and it exceeds national sovereignty. Therefore, it will inevitably win the final victory.
In the process of issuing fiat currency, the government obtains a hidden benefit called seigniorage. Among the various challenges that blockchain poses to governments, the challenge of minting rights is the greatest. BTC and ETH are more of an asset attribute, while the influence of stablecoins will involve payment, circulation, liquidation, and penetrate into all aspects of the economy and finance. It has brought huge benefits to the government, and no government will easily give up this power, which is determined by the nature of power. Therefore, we can see that the United States has especially strengthened the supervision of stablecoins in the past two years.
The chart below is a graph of the U.S. government’s liabilities from 1990 to 2020. Among more than 200 countries in the world, the United States is a relatively restrained government, but despite this, the US government’s debt is still accelerating. It is conceivable how much wealth the people of other countries have been plundered by inflation.
Paypal is a great company. Since 1998, Paypal has defeated countless competitors from a team of several people to become the current giant, and profoundly changed the payment industry; however, Paypal has not fully realized its original vision — — — Save most of the world’s people from inflation. Today, even Americans have begun to suffer from inflation under the circumstance that the currency is constantly over-issued.
100 years ago, the food we ate and the houses we lived in were much cheaper than now, and of course our income was much lower than now. In the process of the government’s continuous issuance of fiat currency, due to the timeliness of currency flow, everyone gets different benefits, and the government obtains additional benefits from seigniorage; Most of the people are victims of inflation and become poorer and poorer in the process of over-issue of money.
This is not that Paypal is not good enough, not great enough; it is essentially that Paypal cannot do this; at the same time, no individual, any organization, or any government can do it. Seigniorage is the source of inflation. The corruption of power and the greed of human nature cannot be changed. In the face of the huge temptation of seigniorage, power cannot restrain itself forever, and the currency will continue to be issued. Therefore, the final outcome of any credit currency in the world is collapse. From ancient times to the present , without exception.
OK, we are about to get to the point of stablecoins. Decentralized algorithmic stablecoins must be used if inflation is to be prevented from exploiting the general public.
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