Crypto Stablecoin Report 08: Interpretation of Digital Dollar Project
Original link: https://bihu.com/article/1441231307
Original publish time: July 7, 2020
Original author: HaiBo Jiang, researcher of MYKEY Lab
We released MYKEY Crypto Stablecoin Report to share our interpretation of the development status of stablecoins and analysis of their development trends to help the participants in the crypto market stay updated on the development status of stablecoin. The MYKEY Crypto Stablecoin Report will be published every week, looking forward to maintaining communication with the industry and exploring the development prospects of stablecoin together.
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- Last week, the total market capitalization of the major stablecoins exceeded $12 billion.
- USDT was additional issued 300 million on Ethereum, and the market capitalization of circulation exceeded $10 billion.
- The circulation of USDC increased by another 57.85 million, and the market capitalization of circulation reached $998 million.
- The number of holding addresses of USDT on Ethereum continues to decline.
- Lithuania started pre-selling 24,000 digital currencies issued by the central bank this week.
- The Bank of Japan will soon begin trials of its digital currency, the digital yen.
1. Overview of Stablecoin Data
First, let’s review the changes in the basic information of the various stablecoins in the past week(June 26, 2020, ~ July 2, 2020, same below).
Market Circulation
Source: MYKEY, Coinmetrics
The circulation of stablecoins continues to grow, and the current market capitalization of major stablecoins has reached $12.061 billion.
Source: MYKEY, Coinmetrics
In the past week, the market capitalization of stablecoins has increased by approximately $363 million. On June 29, USDT was additional issued 300 million on Ethereum, and the market capitalization of circulation exceeded $10 billion for the first time. The circulation of USDC increased by another 57.85 million, and the market capitalization of circulation reached $998 million. The circulation of DAI, BUSD, and GUSD increased by 11.65 million, 1.63 million, and 1.41 million, and the circulation of PAX, TUSD, and HUSD decreased by 5.76 million, 2.46 million, and 1.21 million.
The Number of Holding Addresses
Source: MYKEY, DeBank
In the past week, the number of stablecoin holding addresses on Ethereum continued to decline 91,566, mainly due to the decrease in the number of holding addresses of USDT.
Source: MYKEY, DeBank
The decrease in the number of holding addresses mainly came from USDT. The number of holding addresses of USDT decreased by 91,506, the number of holding addresses of PAX and USDC decreased by 3,667 and 647, and the number of holding addresses of DAI and TUSD increased by 3,911 and 343.
The Number of Active Addresses
Source: MYKEY, Coinmetrics
The number of active daily addresses of stablecoins last week decreased by an average of 11.5% compared to the previous week and the number of daily active addresses of USDT decreased by 8,905 compared to the previous week.
The Number of 24-hour Transactions on the Public Blockchains
Source: MYKEY, Coinmetrics
Compared with the previous week, the number of daily transactions of major stablecoins decreased by an average of 10.5%.
The Number of 24-hour Volume of Transactions on the Public Blockchains
Source: MYKEY, Coinmetrics
Source: MYKEY, Coinmetrics
The volume of transactions of major stablecoins on the public blockchains last week decreased by 1.4% compared to the previous week, with the proportion of the volume of transactions of USDT trending down.
2. Digital Dollar Project
In this report, we can see that the size of the main stablecoins has exceeded $12 billion, and these stablecoins belong to the category of collateralized stablecoins. CBDC, another area of stablecoins, has also made great progress. The People’s Bank of China set up a research group on legal digital currency as early as 2014. In early 2017, the People’s Bank of China established a digital currency research institute. In early 2018, it determined that China’s legal digital currency was DC/EP (Digital Currency Electronic Payment, referred to as DCEP). At the end of 2019, we began a small-scale scenario closed pilot, and in April this year, we announced internal testing in four cities: Shenzhen, Suzhou, Chengdu, and Xiongan. In addition to China, many countries have also stepped up research and development of digital currencies. The Bank of Sweden announced on February 20 this year that it would start a digital currency e-Krona pilot project. Lithuania would start pre-selling 24,000 digital currencies issued by the central bank this week. The Bank of Japan will soon begin trials of its digital currency, the digital yen. Recently, the non-profit organization Digital Dollar Foundation and consulting agency Accenture jointly released the Digital Dollar Project white paper, which describes in detail the demand for tokenized digital dollars and the potential path to building a digital dollar system. The Digital Dollar Project is a representative of the mainstream thoughts of western central bank digital currencies. In this report, we will explain this project to you.
The Digital Dollar Road of the United States
The Digital Dollar Project was jointly initiated by the Digital Dollar Foundation and Accenture to promote the exploration of central bank digital currencies/digital dollars. The purpose of the project is to research and publicly discuss the potential advantages of USD tokenization, convene thought leaders and actors of private sectors, and provide a possible model for public sectors when considering the development, testing, and adoption of CBDC.
The United States is often the leader of next-generation technological innovation. These technological initiatives are usually carried out through partnerships between the private and public sectors. This also reflects the long-standing values of the United States, which is economic stability, technological innovation, personal freedom, privacy, free enterprise, and the rule of law.
Now, new technology is developing. The value of things can be digitized and can be tokenized, programmable, and decentralized. Globally, governments and private entities are experimenting with tokenized commodities, contracts, ownership, and more importantly, central bank digital currencies. The wave of innovation in digital currencies is developing, governments and stakeholders in other countries are exploring CBDC. The question for the United States is what role it will play in this innovation and to what extent it will reflect its core values.
The project believes that the United States should play a leading role in this innovation. USD is the most important reserve currency in the world. The tokenized digital dollar is the key to the future development of the dollar and the expression of democratic values. It will be a difficult task to successfully create a digital dollar. Public sectors should combine the technology, creativity, and dynamism of private sectors in the crucial currency and formulation of public policies.
Source: MYKEY, The Digital Dollar Project
Although CBDC is a relatively new concept, the project believes that there is enough research and evidence to support CBDC’s path of “Champion Challenger” (the digital dollar model is called the Champion Model). The project will discuss the social and economic benefits that the dollar in the form of tokens can provide, and will continue to determine the advantages and challenges of the model. The Champion Model is a token form of USD, which represents:
Work with existing currencies.
Mainly distributed through a two-tier structure of commercial banks and regulated intermediaries.
Recorded on the new transaction infrastructure and may use distributed ledger technology.
Introduction to Digital Dollar
The “Digital Dollar Project” aims to encourage the next major innovation of USD: the tokenized digital dollar has the same legal status as the physical banknote. The U.S. central bank digital currency issued by the Federal Reserve will enjoy the full credibility of the U.S. government, represent the third format of central bank currency, and are fully interchangeable with Federal Reserve bills (bank notes or cash) and reserves.
When the existing electronic payment system runs on an account-based model, the Champion Model can combine the advantages of the two because it is essentially a token. It has both cash-like attributes and the existing account-based payment system. This kind of digital dollar can not only maintain the economic stability of current dollar, but also provide new market opportunities, wider applicability, reduce costs and improve efficiency. The Champion Model describes an alternative to existing currency and payment infrastructure, which can be illustrated by a range of retail, wholesale and international real use cases.
The digital dollar model should have the following characteristics.
1. Tokenization: The digital dollar is the tokenized form of USD.
2. The third form of cash: digital dollars will run alongside existing legal currencies and commercial bank profits, and it will reflect many attributes of physical currency.
3. Maintaining a two-tier banking system: Digital dollars will be distributed through the existing two-tier architecture of commercial banks and regulated intermediaries. Digital dollars use a two-tier architecture like cash (as does DCEP). The upper level is from the federal reserve system to commercial banks, regulated financial intermediaries and other financial institutions, and the lower level is from financial institutions to non-financial institutions and individuals.
4. Privacy: The digital dollar will keep the balance between personal privacy, necessary compliance and supervisory process.
5. Neutral monetary policy: The digital dollar will not affect the Federal’s ability to formulate monetary policy and control inflation. The currency dollar can serve as a new type of policy tool.
6. Function-driven technology decisions and design choices: Digital dollar policy and economic demand will determine its basic technology and design choices.
7. Prospective verification of architecture through flexibility: The selected technical architecture will provide flexibility to adapt to policy and economic decision making.
8. Continuous innovation in private sectors: The digital dollar will be a catalyst for innovation and will not run counter to the plans of private sectors.
Source: MYKEY, The Digital Dollar Project
The Value Case of Tokenized Digital Dollar
The introduction of tokenized digital dollars will provide a driving force for innovation in the broader financial system. As a new financial medium, digital dollars, combined with new transaction infrastructure such as distributed ledger technology, will provide a new payment method based on the central bank sending and receiving currency. To realize the extended feature, it will be as portable as the text sent, so that it can be settled at any time and place. Programmability is another feature, which can help improve the innovation and accuracy of value transfer. Tokenized digital dollars can also enhance the confidence, efficiency, and functionality of dollar payments in retail, wholesale, and international payments.
In retail payments, digital dollars will provide new options for peer-to-peer payments, which can reduce costs, diversify payment channels, and promote financial inclusion. In wholesale payments, the current large wholesale transactionsare based on accounts, which are mainly performed by banks and payment providers that have accounts with the Federal Reserve, and tokenized digital dollars will provide central bank funds outside the account, which can provide a broader and more diversified way for large payment of institutions. In international payments, the digital form of the U.S. central bank currency cannot currently be used, and the use of digital dollars can establish more direct currency relationships, reduce risks, reduce delays, enhance the competitiveness of international payments, and promote financial market integration.
Digital dollars will also provide better ease of use and inclusiveness. According to a 2017 FDIC survey, approximately 14 million adults in the United States do not have bank accounts, and digital dollars with lower system costs may have a greater advantage in expanding the service population. During this COVID-19, the US government is working hard to distribute emergency relief funds to more people in need, and it will be easier to achieve the US government’s rescue targets through digital dollars.
The Benefits of Tokenization
The digital dollar we refer to refers to the token-based digital currency issued by the Central Bank of the United States. It is an anonymous digital tool, similar to digital bank notes that represent the liabilities of the Federal Reserve. Central bank digital currency is divided into two types: token-based and account-based.
In the token-based system, the token contains all the information that the receiver verifies the legality of the transaction and the transfer of objects. The system allows varying degrees of decentralization. Transactions can occur when the token is transferred, without relying on a potentially centralized account ledger. Distributed Ledger Technology (DLT) can ensure the uniqueness of the token and prevent double payment. DLT implements synchronization rules to enable multiple machines that store a copy of the ledger to reach a consensus on the order of transactions.
Account-based systems rely on identity verification to authorize updates to the balance on the ledger. Most account-based systems rely on trusted third-party operators to maintain a single ledger. Part of reasons for the existence of account-based systems is the limitation of physical tokens, which can be difficult to transmit, store and process, and are difficult to use anywhere other than face-to-face transactions. Tokenized digital dollars are portable and allows direct transactions in near real time regardless of physical state. This new feature complements the existing monetary medium, and tokenization provides unparalleled opportunities for innovation in the fields of payment and financial infrastructure.
The Benefits to be had of DCEP for the Existing Dollar Environment
1) The role of the United States in the global economy
USD is the most important currency in the world and it is responsible for the dominance of the dollar in international transactions. The availability of financial instruments denominated in USD, the depth of US financial markets (including derivatives markets and interest rate markets traded in USD), and the stability of USD against other currencies all make people believe that the US dollar can be used as an effective exchange and value storage tool. USD accounts for a high proportion of foreign exchange transactions, bank funds, commodity imports and exports, foreign exchange reserves of the central bank, and international loans, which also means that most of the holdings of dollar-denominated securities and other liabilities of the Federal are foreign entities.
The importance of USD in international transactions makes the Federal the only central bank that can create international liquidity. In March 2020, the liquidity swaps between the Federal and some developed countries showed the importance of USD in maintaining orderly international transactions. The continued strength of USD demonstrates the enormous advantages that only USD enjoys.
2) Digital dollars will improve the utility of the dollar
More and more digital payment methods are changing the traditional currency, and the currency will need to adapt to new payment needs to maintain the effectiveness. The primacy of USD is attributed to many factors, some of which originated from the Bretton Woods Agreement signed in 1944, and the resulting network effects. The United States should ensure that the currency remains competitive, and past performance does not represent future success. The portability of the digital dollar has given it new features and practicality. The digital currency can be stored and recovered through consumers’ wallets, which is a feature that physical cash cannot provide. Using digital dollars, securities can be settled in the central bank’s digital currency anywhere, and the central bank’s currency can be exchanged with foreign currencies. Emergency relief can be sent in real time, and the currency relationship will be more direct.
3) How the digital dollar supports the Federal’s key objectives
The Federal pursues a long-term public policy goal to improve the safety and efficiency of the payment system and to ensure fair payment services to financial markets. Effective allocation of the Federal’s funds is critical to the support of financial markets and the orderly operation of payments, which depends on innovations in distribution, transparency, efficiency, flexibility, and payment methods. The portability of the digital dollar will increase coverage and efficiency, complement the Federal’s existing mode of operation, and facilitate the distribution of central bank currency abroad.
4) USD remains the world’s leading reserve currency
As the chart below shows, the total amount of foreign exchange reserves held by global central banks continues to rise, and USD still accounts for more than 60% of foreign exchange reserves.
Source: MYKEY, The Digital Dollar Project
5) Digital dollars will bring new opportunities
The emergence of digital dollars will stimulate emerging industries and modernize existing ecosystems. Digital dollars can not only create new markets, introduce new participants into mature markets, break existing market barriers, but also provide private sectors with a modern monetary system.
3. Views of Experts
The guest invited in this issue is Harper Li, Chief Analyst from Tokeninsight. Here are the views shared by Harper Li.
The additional issuance of TRC20 USDT will not directly cause the explosion of DeFi applications on Tron. The development of the DeFi field requires the conditions of all parties, the most important being the users.
First of all, the DeFi application on Tron is still in the initial development stage, and as an application supplier, it cannot meet users’ needs. Simple additional issuances of TRC20 USDT will not directly attract users.
Secondly, whether DeFi on Tron is complementary to DeFi on Ethereum or competing products still remains to be tested. If it is a competing product, whether users will transfer from Ethereum to Tron will require a comparison of the differences between the DeFi ecosystems on the two blockchains, which will need to be implemented to compare at each project level. If it is complementary, it is likely that they will share the same batch of users, and the development of DeFi on Tron will be better assisted by the development of the DeFi application on Ethereum.
Finally, it was recently detected that Binance converted a large amount of TRC20 USDT to ERC20 USDT, which seems to reveal that the current market demand for ERC20 USDT and the wait-and-see attitude towards TRC20 USDT.
This is what we’re sharing in this MYKEY Crypto Stablecoin Report, welcome to stay tuned for follow-up crypto stablecoin reports. We will provide more interpretations of the development status of stablecoins and analysis of their development trends to help you stay updated on the development status of stablecoin in the follow-up report.
PS: MYKEY Lab has the final right to interpret the content of the article, please indicate the source for the quotation. Welcome to follow our official account — MYKEY Lab: MYKEY Smart Wallet.
Past review
MYKEY Crypto Stablecoin Report 03: Where are the users of DAI?
Crypto Stablecoin Report 07: Security Analysis of Stablecoins
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