The Next Phase of Crypto Expansion
We are excited to announce the upcoming launch of the HaloDAO Protocol — a stablecoin marketplace protocol that develops liquidity networks for local asset backed stablecoins and crypto assets to bridge the gap between traditional finance and permissionless finance for everyone.
HaloDAO is building an optimised Automated Market Maker (AMM) to facilitate efficient, on demand currency exchange; and a stablecoin specific lending market that provides high interest yields on local currencies.
DeFi is here to stay
Much has been said on mainstream media about how the crypto markets are fuelled mainly by speculation. What is discussed less is the difference between the markets now and that of the 2017 ICO boom. The key defining difference is that Decentralised Finance projects actually make money and are earning healthy revenues. The fact that revenues are growing steadily represents that there is a long term sustainable future to be delivered and more importantly, users are deriving value from DeFi use cases. It also demonstrates that it is possible to replicate existing financial services in traditional markets onto the blockchain, deliver efficiency gains powered by smart contracts, and shift massive cost savings onto users.
Key to the success of these protocols are stablecoins, which allow various use cases to be battle tested with a stable medium of exchange.
The emergence of Decentralised Finance has led to a renewed exuberance in the crypto markets. Total value locked in the ethereum ecosystem went from ~$1 billion in July 2020 to almost ~$100 billion> in May 2021 to all time highs. As of the current writing in June 2021, the current market has entered bearish sentiments, DeFi usage is still persisting and resilient.
The major takeaway is that DeFi is here to stay.
Correspondingly, as more investors participate in investing and DeFi yield farming, there has been a tremendous increase in Fiat volumes into exchanges reaching almost $1 trillion. What this demonstrates is a strong and growing demand from the global investor base — institutional and retail, into the crypto markets. Whether it is private health reflecting their demand at global banks such as UBS of Switzerland or DBS of Singapore; or retail adoption via robinhood, crypto has penetrated the public consciousness. There is an awareness of what crypto is and this will act as catalysts for DeFi interest moving forward.
The Disconnect: Local Economies Excluded
The rise in DeFi also necessarily increases the rise in stablecoins as global investors require a common denominator for global settlement and fund management. Stablecoins, which represent equivalent value for fiat on the blockchain, provide users the ability to access DeFi infrastructure and tools.
Asset backed stable coins such as USDC and xSGD, represent equivalent value to $1 in fiat, and are created by a regulated financial institution that has custody of the $1 Fiat in a local bank. These stables will be the driving force because total supply of Fiat is so much more than the value of the entire crypto market. As it stands, the amount of broad money, which refers to the amount of money in circulation in the economy is approximately $109 trillion (2019)(World Bank Data estimate). Compare that against the ~$1.5 trillion asset value for the entire crypto market. It is evident that asset backed stables have much more room to grow for supply than synthetics and algorithmic stablecoins, which rely on crypto assets as collateral to manage stablecoin supply.
We are bullish that the future of crypto expansion will be via asset backed stablecoins backed by Fiat.
One of the killer use cases are decentralised exchanges (DEX). Powered by smart contracts, DEXes allow users to swap easily between different assets. Users can list their own liquidity pools and others can access them permissionlessly. Whether this might be for FX use cases or trading crypto assets, DEXes give users the opportunity to leverage permissionless infrastructure to conduct commerce.
This has resulted in global stablecoin supply to go from less than $10 billion to more than $100 billion in a few months. Of which, USD denominated stablecoins have seen much of the growth. This is great news for the ecosystem.
There exists new stablecoins, however their supply in comparison are negligible and not yet meaningful. Thus far, no stablecoin project other than USD has succeeded.
Our view at HaloDAO is that the advent of blockchain technology and the Decentralised Finance movement is meant to democratise access to financial markets. So, we are of the view that the future of crypto necessarily requires the rise of local stablecoins emerging so that people can trade and access this disruptive innovation with non-disruptive adoption.
Non disruptive adoption can only be brought about by local stables because local stables are what is familiar to local peoples. It follows the simple idea — ‘When in Rome, do as the Romans do’. Local people spend local money in local markets. There is consumer familiarity and consumer confidence. It works.
Following this idea, there are two futures that will not be brought into fruition.
Firstly, a future where we spend BTC or ETH to buy our coffees and be the main medium of exchange is incompatible to the current way of life. Many teams have tried over the years and many will fail. The reason is obvious. It is not the currency of choice in local markets, because it is not in the public consciousness. Also, these major crypto assets are also too volatile, which makes for bad treasury management for corporates, hence they will be less likely to accept them en-masse. Finally, adoption is impossible as governments control on/off ramps via regulation. They will not approve these payment modes as it would threaten monetary sovereignty. El Salvador being an outlier.
Secondly, USD will never be spent in local markets. Governments will regulate on and off ramps to prevent this situation where USD stablecoins dominate the local markets for local transactions. There is a need to preserve monetary sovereignty
Hence, the only logical future that can be brought forth following USD stablecoin expansion is the expansion of local stablecoins.
The Future of Crypto
We anticipate the future of crypto will be driven by local asset backed stable liquidity. Currently, given that there are no stablecoin projects successful other than the USD. There is a need for HaloDAO to build our project to address this massive demand.
We deliberately attack a niche space where other protocols and some market makers hesitate to attack because we have learnt from USDC supply growth that when the use case is built, the liquidity will come. When we have an asset-agnostic money market fund product and liquidity networks on which payments and FX infrastructure can be built upon, we can demonstrate to the market sustainable value.
Ultimately, HaloDAO is guided by our guiding principle that disruption can only happen with non-disruptive innovation; and that is the greater adoption of local asset backed stables.
To that end, we are building a stablecoin optimised AMM and lending market to be the DeFi infrastructure to take advantage of this trillion dollar opportunity.
PS: In subsequent posts, we will be discussing how we build and our approach in greater detail.