New Coins of 2018: speculations aside!

By Olga Grinina

Disclaimer: this is not by any means financial or investment advice.

Cryptocurrencies have been beset by a string of bad news over the last couple of weeks. Blame it on the futures, the big Korean hack or whatnot, the common wisdom holds that keeping all your eggs in one basket is no good. Bad times bring new challenges and the question many are asking now is how to protect the assets and invest wisely? Keeping your portfolio diverse could be the key to profiting even while the market is seeing red. Good old coins are being challenged by new ones, and you probably saw some of them springing up lately in the headlines.

WAIT, ARE COINS REALLY THAT DIFFERENT?

Everyone probably knows by now that multiple token types are distinguished based on the function criterion. But is there any difference coins wise? They are all used as digital currencies, hence their primary function should be the means of payment. In fact, they also can be attributed different distinctive features depending on how they operate. Let’s dive in to figure out what new coins the market has to offer. But why do we need more coin types in the first place? Well, mainly because of volatility and non-stability of BTC, ETH and other mainstream coins. While some might call BTC digital gold and ETH digital oil for powering decentralized smart contract network, the reality is that neither of them is stable — unlike oil or gold. As while gold-backed digital currencies are looming on the horizon, the community is craving for a new type of a digital asset linked to some stable asset that is away from the old world issues like fake audits. And decentralized stable currency solutions, like DAI and BaseCoin, that is already a working project, are emerging at the market.

ARE STABLE COINS REALLY THAT STABLE?

Let’s talk some basics now. A stable coin is a cryptocurrency with a fixed price, and the fixed price cryptocurrency would enable a greater number of use cases than current cryptocurrencies allow. At the moment, cryptocurrencies are primarily held by investors and speculators seeking to profit from price appreciation. Few people hold and use cryptocurrencies like they would US dollars (receiving a salary, paying for groceries, etc.) because prices fluctuate significantly day-to-day. A digital, decentralized currency that is widely accessible and price stable would offer a much needed alternative for people living in countries with unstable monetary systems and restrictive capital controls. So it’s safe to say that bringing stable coins to the mainstream can drastically increase global access to stable unified currency.

Let’s scrutinize some examples of up and coming stable coins:

• Tether

By now everyone has heard a thing or two about Tether that is assuring the investor community that they have enough USD in stock to back their token. Tether acts as a stand-in for the dollar on some of the world’s largest cryptocurrency exchanges. And while that function seems to validate its existence, the company behind the coin, Tether Limited, has seen its fair share of controversy. For instance, last year, Tether Limited was allegedly hacked for $30 million in USDT. Many are now accusing Tether of being fake and not really backed by any collateral at all. It is however the first precedent of up and coming stable coin linked to USD . Not going into broader explanation, we’d say that on a global economic perspective, a lot of experts fairly argue that Tether could only be effective in the short-term, if effective at all.

• Dai

MakerDAO is an interesting, but fairly complex project that uses other cryptocurrencies as collateral for their Dai stablecoin. Aside from the fact that it is difficult for the majority of less tech-savvy to understand the MakerDAO system, it does have some fundamental flaws which are difficult to overcome. Dai is collateralized by other cryptocurrencies, therefore it is vulnerable to exogenous factors, such as a sudden devaluation of the collateral.

• Reserve

Most recent example that just received some sufficient investment round is Reserve that is cites as their main advantage the possibility to keep the currency stable by using crypto assets from outside of their own ecosystem to maintain a peg.

• Circle

Another coin that is building a stable ecosystem with a coin price backed by fiat. They’ve already partnered up with a mining hardware producer to allegedly launch the coin later this summer.

As we see, there is a lot room for critique for stable coins that is not entirely ungrounded. Many analysts fairly note that while stablecoins see trading in the tens of billions of dollars per day, the technology might become the “single point of failure” for the entire crypto industry.

OTHER NEWCOMERS

Another coin type that — if wisely executed — might soon come into the mainstream is multi blockchain coins. These are basically the coins that can run on multiple blockchains. Their main value is being able to execute smart contracts on different platforms. The developers claims that core advantage of such type of coin is leveraging the use of smart contracts with equal currency amounts for settlements on multiple blockchain platforms. So you have many options which one to use, whether it be Ethereum, NEO or Stellar. One of the recent examples here is Metronome that has a lot of hype around right now.

Hidden coins is now more of a theoretical than practical field that some researchers and enthusiasts love to talk about. However, there is no tech solution for create this type of coin yet. Mysterious and vague as the name sounds, so are the implication paradigms and the economic value of hidden coins. However, they can still be used for all sorts of private settlements or as claim for goods or services within closed communities. Plus Ethereum network might soon have the opportunity to use zero knowledge proof protocol and execute hidden contracts, which would make ETH or ERC-token transfers hidden as it is done now in Zcash. What is economic sense of hidden coins? They can be used for private settlements or as a claim for goods or services within closed communities. Also they can be used for creation some anonymus or darknet services, which again brings about a lot of controversy about hidden coins legibility.

All the criticism aside, do not bet big on new coins that are highly experimental in nature — at least for now. There is still a long way to go to build a new type of money, and any collateralized stablecoin will not be able to scale and suffers problems of custody and insolvency. However, a successful implementation would have meaningful impacts for the cryptocurrency world and broader financial ecosystem.