Stablecoins and the History of Commerce

The Provenance Blockchain relies on stablecoin to conduct real-time settlement of transactions. Using stablecoin significantly cuts down on transaction costs and the time required to realize funds. Funds on-chain are managed as stablecoin through ledgered digital wallets on the Provenance Blockchain.

Meet Nora

For as long as Nora can remember, she’s been fascinated by fashion. As a young girl, she’d spend hours in her mother’s closet putting together ensembles from whatever items she could reach. Later, after heading off to college, Nora took a course in print screening and became hooked by the medium. She started creating her own designs and, at the encouragement of her professor, began selling her creations at local craft fairs and art walks. Nora picked up a secondhand lockbox and would only accept cash, regrettably turning away customers that didn’t have cash in hand.

A Background on Stablecoin

Stablecoins are cryptocurrencies designed to remain stable against the value of an external asset, most commonly a real-world fiat currency (US Dollar, Euro, Chinese Yuan, etc). While many cryptocurrencies like Bitcoin are speculative in nature with values constantly rising and falling, the express purpose of stablecoins is to have low volatility.

Stablecoins are beneficial to digital value exchanges in numerous ways, including:

• A traditional fiat exchange between two parties can take several days and involve multiple intermediary institutions to transfer money. Conversely, a cryptocurrency exchange of value can be settled immediately without the need of any intermediary. By cutting out the middlemen, cryptocurrency can change hands instantly with significantly less overhead and fees.
• Fiat transactions involving multiple currencies are complex. It has been estimated that one trillion dollars every year is spent on business-related value exchanges. If a multinational business wishes to conduct fiat transactions in multiple currencies, the organization would traditionally need a banking presence in each country or must deal with third party currency exchanges. With stablecoins, however, the same multinational business only needs a digital wallet holding stablecoins for each foreign currency without all of the extra banking infrastructure overhead.
• Stablecoin transactions are both transparent — the blockchain transaction can be readily monitored — as well private — transactional parties can be pseudonymously identified by a public-private key-pair.
• Stablecoin transactions can be completed at any time of the day on any day of the year. Normal fiat transfers can be beholden to banking hours, but stablecoin has no such limitation.

Nora Goes Retail

After finding some local success, Nora took the leap and leased a small retail space of her own. In addition to her clothing, Nora made her space available to other emerging local artists to sell their items on commission. Nora began to accept credit cards, which deducted over 3% of her transactions in fees. Debit cards had much lower fees, but were less widely used by her customers. In both cases, it took several days for the funds to be finally cleared in her business account. With the help of a friend, Nora created an e-commerce web site for her boutique. She was now open for business to a global market, but credit card processing fees were even higher for her international clientele and she was still waiting several days for payments to complete.

Stablecoin and Blockchain-Ledgered Wallets on Provenance

Value transactions on the Provenance Blockchain are accomplished via stablecoin. To facilitate this, Provenance Blockchain depends on an Omnibus service to conduct coin and fiat movement. Individual members are provided Provenance Blockchain-ledgered wallets provisioned under an omnibus bank account held with a partner bank. A wallet is fundamentally a blockchain address, and the account ledgering occurs against that blockchain address.

Wallets can be linked to an external bank account to transfer funds in and out. Fiat can be sent to the wallet via a number of methods: ACH or wire transfers from an external account, or direct deposit through Figure Pay. The fiat amount is then minted as stablecoin to the wallet/blockchain address and ledgered on-chain. Conversely, when a member wishes to withdraw funds from their ledgered wallet, stablecoin is burned and the fiat amount is sent to the external account via outbound ACH or wire.

While conducting transactions on the Provenance Blockchain network, value exchanges between two members are handled as bilateral stablecoin transfers rather than a traditional fiat exchange. Therefore, the transaction settlement occurs in real-time without any intermediary involvement.

Nora Goes Blockchain

Intrigued by some of the articles she was reading about blockchain technology’s impact on retail, Nora decided to venture into cryptocurrency payments. By offering stablecoin payment options to her customers, Nora could accept a wide range of global currencies and withdraw those funds to her normal bank account. Her transaction fees were substantially reduced, the funds were instantly settled, and Nora was reaching a wider and more diverse audience than ever before.

USDF

USDF is a token that is minted exclusively by federally-insured depository institutions and represents a deposit at a USDF Consortium bank (i.e., “tokenized deposit”). The deposits will qualify for insurance up to applicable limits.

USDF operates on a permissioned basis governed by the USDF smart contract where USDF can only be sent to customers who have an established relationship with a USDF Consortium bank and have been through standard deposit-account opening processes, including such bank’s BSA/AML/OFAC processes.

USDF facilitates low cost, real-time, 24x7x365 bilateral settlement of transactions on the Provenance Blockchain and provides for the programmability of money. To use USDF, the depository institution must be a member of the USDF Consortium. The USDF Consortium is a member-owned, operated and governed network of insured depository institutions to (1) coordinate the efforts of the depository institutions with respect to USDF and (2) promote the adoption and interoperability of USDF.

The Next Evolution for Nora

Nora doesn’t want to stop here. She sees new opportunities that are a natural extension of the major changes she’s already adopted. Nora suggested to her commissioned partners that they could not only sell their physical pieces in her store, but she could support digital artwork sales as well. Recognizing blockchain’s potential not only in the burgeoning NFT space, blockchain is a compelling differentiator for tracking ownership, certificates of authenticity, and digital marketplaces. The future is why Nora is a member of the Provenance Blockchain.

JOHN LOUIE

John is a software engineer in Montana working for Figure Technologies building tools and APIs supported by the Provenance Blockchain. Outside of work, he enjoys woodworking, cooking, and traveling.