Disrupting fiat: a list of decentralized cryptos that might pull off the impossible
With Bitcoins appearance in 2009 the world was introduced for the first time to a means of exchanging value that required no regulation (by solving the double spending problem). This trait paves the way for a potential disruption of fiat currency that has been the dominant medium of exchange around the globe since Nixon abolished the gold standard in US in the 70’s.
Today, Bitcoin is by far biggest cryptocurrency in existence with market dominance of roughly 48.5% at time of writing. Yet it has not yet succeeded in truly disrupting the economy in a broad sense. For our normal day to day needs we still use dollars, euros, yen, etc. Additionally, there is as of yet no expression for leverage in crypto: this means that mortgages, micro-loans and investment markets are dominated by fiat (and banks).
Nonetheless, Bitcoin as well as multiple smaller projects (at various stages of development) possess unique qualities which potentially can pave the way for a world without fiat or banks. My goal is to try to evaluate these projects according to their utility as a store of value, medium of exchange and unit of account, the 3 basic characteristics of money (read more at wikipedia). If you want to read more about how each of these parameters might impact a crypto check out this article I wrote.
In order for a project to qualify for this list it must be:
- Independent: must be capable of functioning in a world without fiat. This is why you wont find MakerDao, Basis, InitiativeQ, or any other crypto pegged to the value of USD here.
- Divisible: necessary for a currency to be widespread for a large population.
- Decentralized: you won’t find Tether on this list. To disrupt fiat, we need a currency that is not controlled by any single entity. Otherwise, what’s the point?
- Secure: obvious, but necessary to mention.
- Money: you wont find Ethereum (or its competitors) here because its not designed to be money. Though Ethereum is a monetized system there is a subtle difference: ETH has real utility only within the Ethereum ecosystem. Money has utility across the entire economy.
Bitcoin
The big kahuna and the obvious choice. Bitcoin is highly divisible, decentralized in the absolute sense of the word, secure as they come and obviously enjoys the highest popularity and adaption of any crypto so far.
Nonetheless, Bitcoin has an inherent characteristic which prevent it from being an ideal medium of exchange despite being a terrific store of value and unit of account.
This characteristic is the fact that Bitcoin has a fixed supply. This causes Bitcoin to be deflationary and behave a lot like gold. The result is short term volatility and long term increase in value.
I have written a pretty detailed article explaining why I don’t think lightning network and scaling is the key to Bitcoin becoming transacted with more.
While it’s certainly possible that Bitcoin will gain widespread adaption for day to day use, the cards are stacked against it due to the fact that it costs more to use Bitcoin than fiat in the most absolute sense: your Bitcoin will be worth more that your dollars in 1 year, so why not use dollars? This paradigm is called Gresham’s law.
Ryō
Ryō is designed to be a medium of exchange from the get go. Ryō utilizes a 2 token architecture. the Trust token cannot be transacted with. It increases or decreases as a function of how the account owner behaves in the ecosystem. If the owner returns loans successfully it increases and vice versa. Loans and the ability to create and track them are a key feature in the ecosystem. The more Trust in the account, the more Ryō (transaction coin) can be produced by that account through mining.
The general idea is to simulate the functionality of a central bank but in a decentralized way. When there is less Trust (equivalent to high cost of money) in the system, less money is created. Ryō seems to have all the tools needed to provide a stable, shock resistant medium of exchange which is designed to coexist side by side with BTC (which the project views as the ideal store of value).
Ryō is a clone of Nxt (with its own blockchain) and is going to be airdropped to Nxt owners in the next month or so according to the team. This was never an ICO. The anonymous team have been working on the project for about a year.
Havven
Havven also aspires to a 2 token architecture — one (Havven) which functions as a leverage mechanism and the other (Nomin) as a means of transacting. The idea is to compensate those willing to provide leverage to increase or decrease the Nomin value, with fees. In this way, the Nomin value should remain stable.
In theory, this project has the potential to be a good medium of exchange and store of value. One big downside for this proposal is the big reliance on the Havven foundation throughout it’s infancy. Additionally, the leverage mechanism requires active participation from users looking to be rewarded and is not fully automated which adds complexity.
Havven is now post ICO and have a long and detailed roadmap running over the course of years which eventually leads to an independent blockchain. We have not yet seen any real product, but the potential is there.
In summary, there is a growing sense that addressing crypto from an economic perspective is necessary and will help lead us to the next stage of crypto adaption. I am excited to see how the existing projects continue to develop / impact the real world as well as learn about new novel ideas.
