The Standard as DeFi infrastructure

The cryptocurrency world creates many new opportunities, all of which can make a meaningful impact on people’s lives. However, one thing that is still lacking somewhat is the conversion from real-world assets to crypto assets. This is because there is a cost to holding real world assets and if the private keys are lost then the asset custodian has to pay the real world costs forever and the owner of lost private keys can not pay nor prove ownership. Thankfully, there are a few ways to go about this concept.

Leveraging Real-World Assets

It may seem weird to some people to use their real-world assets and wealth for cryptocurrency-related purposes on paper. However, real-world assets represent trillions of dollars in liquidity that will otherwise remain unused. Therefore, it is pertinent to tap into this potential liquidity, even if just 1% of all real-world assets cross over to the cryptocurrency industry. Exploring this option can be done through various means, although one may seem more appealing over the other.

Since the inception of decentralized finance, there has been a growing demand for using real-world assets over the blockchain. However, not everyone has equal access to traditional cryptocurrencies like others, as it often requires specific access to documents and financial services. As there is still plenty of financial inequality globally, it will prove difficult for most people to acquire Bitcoin, let alone more obscure DeFi assets.

Synthetic Assets Are An Option

One of the options to explore regarding real-world assets is the tokenization option. More specifically, users will be given the option to create synthetic assets. Every synthetic is a blockchain-based token linked to a real-world asset’s value. Trading them over the blockchain can be done without permission or approval from intermediaries. Using this digital liquidity allows users to farm yield, explore other DeFi options, and so forth.

Several platforms exist to create synthetic assets these days. However, some platforms have little support for specific assets, whereas others have a much broader range of options. Trading tokenized assets like Tesla stocks for Bitcoin, for example, is an appealing option to many cryptocurrency enthusiasts. However, it may not seem appealing to people who have no ties to the cryptocurrency industry today, as they worry about asset volatility first and foremost.

A similar concept exists with the current stablecoins on the market. The majority of them are digital assets backed by physical cash reserves in bank accounts. A viable approach were it not for banks having the ability to close bank accounts, freeze funds, and so forth. Moreover, the issuer of said stablecoin can always go bankrupt, disappear, or engage in malicious activity. In the end, the issuers of stablecoins are — for the most part — centralized entities that stand in the way of achieving decentralization.

Changing The Entire Narrative

To rectify this entire situation, several things will have to happen in succession. Although the infrastructure to bring real-world assets to the cryptocurrency is already in place, it is all about the execution and bringing new people into the fold. To achieve that goal, the current DeFi and crypto projects will need to rethink their business model and focus on user empowerment instead of speculative values, APYs, and so forth. Establishing an interconnected ecosystem will bring out the full potential of this industry.

The first order of business is creating mainstream demand for this new DeFi asset class. Not everyone wants to buy into an asset that only has theoretical value. Both retail and institutional investors often look for something with more substance, such as real-world use cases. Unfortunately, most of the assets in decentralized finance today lack that feature, even the synthetic assets. For most enthusiasts, a synthetic asset is capable of yielding returns in one way or another, but no one will spend a tokenized version of Tesla’s stock in the real world.

Rather than pursuing this approach further, it is essential to differently leverage the value and liquidity of real-world assets. For example, giving users the power to tokenize their assets to create a stablecoin that can be spent freely and conveniently. The Standard Protocol aims to achieve all of this and more by cutting out any intermediary from the equation, even where the financial backing for its Standard Euro stablecoin is concerned.

Tokenization Doesn’t Need Centralized Concepts

Standard Protocol is a unique breed of the many projects that aim to explore the tokenization of real-world assets. Whereas traditional stablecoin issuers will rely on fiat currency reserves in a bank account to issue their currency, The Standard uses precious metals and crypto-assets. As not everyone has equal access to banking services and products, foregoing this traditional approach can benefit the billions of unbanked and underbanked consumers. Just because they may not have a credit rating or bank account doesn’t mean they shouldn’t access financial services. Decentralized finance exists to even the playing field for everyone.

Several reasons exist to forego the use of traditional banks and similar infrastructure:

1. Banks can freeze money and close accounts willy-nilly.
2. The issuer of the stablecoin can lose funds, face bankruptcy, or maintain an intransparent structure.
3. There are too many other factors to consider that require users to trust the bank and stablecoin issuer.

Interestingly, there has never been a need to maintain such a degree of centralization where stablecoins are concerned. It is a far easier option to pursue than building smart contracts capable of letting users mint their own currency, but that convenience always comes at a cost. The time has come to stop making compromises and prioritize what is really important: the suers who gain unprecedented access to products and services.

Bringing Back The Gold Standard

Cutting out the intermediaries from the equation allows for some innovative ideas and approaches. Thanks to banks and governments, the gold standard was abolished many years ago to favor a system that allows for printing unlimited amounts of money. That situation is no longer sustainable as inflation — and potentially hyperinflation — looms around the corner. Either outcome will negatively affect consumers and corporations, yet there is no way to escape this fate in the current financial system.

Standard Protocol reintroduces the Gold Standard but with a modern twist. Instead of relying on one centralized authority, the goal is to empower rare asset hodlers to generate fiat-pegged stablecoins by borrowing against their holdings. There is no requirement to sell one’s physical assets either, allowing Standard Protocol to tap into a multi-trillion Euro market.

The current financial system is designed to benefit a select few entities rather than create financial equality. Through this method, Standard Protocol users can leverage the inflation wreaking havoc on traditional fiat currencies. Inflation can be beneficial to users, as it makes it cheaper to repay loans. Turning a broken system against itself is the best way to impact and highlight the potential of alternative solutions positively.

Standard Protocol Asset Tokenization

Through Standard Protocol, native custodians — precious metals dealers and assault vaulting providers — can tokenize their assets. Every native custodian will need to go through a first-time and subsequent periodical audits by the Standard DAO. This Decentralized Autonomous Organization, governed by the users, will vet every custodian and adjust the parameters for the audit protocols over time if the need arises.

We have also solved the cost of holding physical assets by inserting a smart in between. The gold gets tokenized but is automatically sent to a smart contract. The user can never send the tokens to their wallet. This means they can never lose their keys to the gold. They can lose the keys to the smart contract but the contract does not care, it will continue to pay the storage fees faithfully every month.

There will be two types of tokens: native and public tokens. The native tokens are backed by assets requiring a centralized organization also called trusted nodes, such as vaulting facilities. Therefore, native custodians are the only ones who can create such tokens. They are cryptocurrencies used as collateral in Smart Vaults for public tokens, assuming the community approves them. It is possible to back public tokens by assets or a centralized organization, including Ethereum, Pax Gold, or even the Standard Euro stablecoin.

With multiple asset types bringing value to the Standard Protocol, it is essential to maintain a soft peg to the Euro. The Protocol does this by constantly adjusting the Stability Fee. If demand for the Standard Euro rises and the price rises accordingly, the stability fee will decrease, allowing more people to generate this stablecoin to lower its value. The other way around works, too, should the peg ball below the threshold, creating an incentive to have more people buy up Standard Euro from secondary markets and repay their Smart Vaults.

Achieving Mass Adoption

While all of the above sounds good on paper, achieving mass adoption remains a critical problem in the industry. DeFi solutions cater to cryptocurrency enthusiasts, whereas cryptocurrencies hold little appeal for the mainstream. Although more people have shown a keen interest in crypto assets over the past few years, there is still a very long way to go. The Standard Protocol aims to alleviate these concerns through several crucial aspects:

• Streamlining the onboarding of Native Custodians
• Use cases for the Standard Euro; merchant adoption, debit card, and more.
• A user-friendly interface and experience even for those who have little technical knowledge.
• Customizing storage fees for native custodians
• Promoting governance by empowering holders of The Standard Token (TST)

Closing Thoughts

It is evident there is a lot more to generating a buzz about DeFi and a new Euro-pegged stablecoin than most people may think. Creating the asset is only the first step, and decentralizing this concept is a crucial second. However, without sufficient native custodians and people looking to leverage their real-world assets in a cryptocurrency environment, there will be no real excitement.

For these reasons, The Standard Protocol prioritizes ease-of-use and use cases for the Standard Euro, something which other projects don’t necessarily achieve. Bringing real-world assets to cryptocurrency requires going in the opposite direction too. Creating a two-way bridge between cryptocurrency and the real world will allow for broader mainstream adoption and lead to more complex and robust products and services.