How Stable Assets Fit Into the Larger Financial Ecosystem
The internet is affording more remote work opportunities daily. As a result, people are transacting an increasing amount of money online. However, right now, the majority of digital transactions are made with fiat currencies. Think of traditional Fintech platforms like Venmo, Paypal, Cashapp, and Zelle.
Cash is becoming obsolete, and digital transactions are taking over the economy.
The Difficulties of Digital TradFi Platforms
That said, the way that we make digital transactions is, let’s just say, less than optimal. For example, I can send money to friends through Venmo, but if I withdraw those funds into my bank account instantly, I’ll pay up to a 3% fee on those assets. Furthermore, I’ll pay even more fees if I want to transact more than $500-$1,000. Then we have PayPal, which charges fees on pretty much every transaction.
At one point, I attmempted to send money internationally through the platform Transferwise, and it was a hassle. I never sent the money after twiddling with it for a few hours. And I’m no tech illiterate. Additionally, these foreign exchange fintechs take exchange rate conversion fees and additional fees — milking every last dollar from international payments.
And the worst example of all — freelancing online. About six months ago, I was landed a gig on Fiverr(a leading freelance platform). I wrote a whitepaper for an early-stage DAO in the P2E gaming space. Everything went well, and when I charged the client $200 for the first payment, I only received $170. Fiverr took a whopping $30 cut from a $200 transaction. I was astonished. “This is absurd. There has to be a better way to make digital transactions for freelance work.” I said to myself.
All of this to say, transacting with corporate tech giant intermediaries is a painful, complicated, and expensive process. As a result, the globe is ready for a change, and the digital transaction space is ripe for disruptions.
The Age of Stable Assets
Going back to the point at the beginning of the article, the future of economics is digital and permissionless. We’ve already moved almost entirely digital in the developed world. You can cash checks on your phone, see your bank totals, invest, send money to friends, and pay with cards, never seeing a single paper bill.
The problem is that technology has developed so fast that shady tactics are used in just about every fintech service. Meaning that these companies siphon fees at every step of the process, and we users have gotten the short end of the stick.
In a previous article, we discussed why stable assetsare needed in the first place, positing that the volatility of major cryptocurrencies restricts widespread utilization. However, the broader digital economic landscape needs a cryptocurrency with a fixed purchasing power, which is what stablecoins have accomplished.
To build on this point, let’s discuss the implications of stable assets on the broader socio-economic landscape.
A New Foundation for the Digital Economy
I propose that stable assets will profoundly disrupt the core modus operandi of the digital economy. It will make freelance platforms that charge 25% fees between employers and contracts obsolete, allowing businesses to send money to workers with minimal fees. Likewise, digital foreign exchange platforms like Western Union and Transferwise will become obsolete.
We’re seeing a rise in the freelancer economy. An upwork study found that “The 57 million Americans who freelanced this year represent 35% of the U.S. workforce and an increase of 4 million freelancers since 2014.” and “Pre-pandemic, businesses expected that in five years 38% of their remote workforce would be fully remote, while today they expect 58% to be fully remote in five years.” according to this article. So over 50% of workers will be remote-based in just five years, with 35% of the U.S. population currently working digitally! These numbers are enormous.
Work like this has never been possible in the past, and technological innovation will make remote work more common in the future. This increasingly remote workforce will need reliable ways of getting paid internationally without intermediary fees.
Right now, you can send stable assets to anyone in the world with transaction fees less than $1. And with Etheruem merging in the next few months, it will join the blockchain club of <$1 transaction fees for all.
Conclusion
Overall, stable assets will become a basic infrastructure service for the increasingly digital, remote economy. Companies will become increasingly global, and cryptocurrency will only further enable this change.
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Disclaimer: Although we reference “stablecoins,” we don’t claim that these assets will always hold their peg. We call SIKKA a stable asset, reflecting that it’s over-collateralization price stability has a few days lag time.
