From Libra concept to USDT or thunderstorm: all stable coins are essentially simulations of French currency

First, the stable currency fire

Since 2019, the stable currency has been very hot, as if the market for the whole year is driven by stable coins.

At first, Libra's concept led to the rebound of Bitcoin from 3,000 US dollars to 13,000 US dollars. Now it is the saying that USDT may explode, which makes the market have great concerns about the digital currency market, so the overall price has been adjusted back some – at least The media said so.

At the same time, there is such a paragraph: every time the bitcoin rises, the reason for the media explanation must be due to the additional issuance of the USDT; every time the bitcoin price falls, the reason for the media explanation must be because the USDT is investigated.

Although it is only the public's ridicule, these ridicules are related to the stable currency, and also explain the important role of the stable currency.

Stabilizing coins is indeed a very important infrastructure in the blockchain industry, so there is still a saying that the meaning of stable coins for blockchain is even more important than bitcoin. If Bitcoin can eventually bring 100 million users to the blockchain, then the stable currency is at least 1 billion, 2 billion, and the difference between the two is an order of magnitude. The founder of the currency has said in the live broadcast that he believes that one of the holy grails of the blockchain industry investment is the stable currency.

Since the stable currency is so important, it is necessary to systematically think about the stable currency from the overall level. Here are my recent thoughts and share with you:

Second, stability is an artificially established state

From a philosophical point of view, change is absolute, and static is relative; from the perspective of money and investment, volatility is absolute and stability is relative.

We often say stable coins. The stability mentioned here is not a natural state, but a state of artificial manufacture. The true natural state must not be stable. Stability must be maintained by external forces. At this time, external forces, such as the center. Enforcement guarantees, such as algorithms, such as mortgages, etc.

Third, all stable coins are essentially simulations of legal coins.

Stability must be relative to a certain standard, and there is no stability without standards . At present, the stable currency of the blockchain world is stable relative to the legal currencies of USD and CNY.

So these stable coins are named: USDT, BITCNY, USDH, etc., that is, they are simulated USD and CNY.

Of course, there are also no names named USD, CNY, such as DAI, Libra, but they are still essentially a simulation of USD. This is a good understanding, no need to say much.

Since these stable coins are essentially simulations of French currency, the problems of legal currency, they actually exist. For example, if the French currency has been over-issued, then the French currency has been depreciating in the long run. Therefore, the stable currency of these simulated French currency has been depreciating in the long run. If the exchange rate of the French currency fluctuates slightly every day, then these simulated currency The purchasing power of the stable currency has also been fluctuating slightly.

4. The legal digital currency is the ultimate stable currency.

Although there are many kinds of stable coins, they are not the ultimate players. The ultimate player is the stable currency of the legal digital currency that will enter the market in the near future. For example, the stable currency of the US dollar digital currency and the stable currency of the RMB digital currency.

The national version of the digital currency will certainly be issued. For example, the central bank of China has started research and research a few years ago, and has already launched a central bank bill system based on digital currency, and the recent approval by the State Council of the central bank’s digital currency has proved this. .

However, as I mentioned in my previous article " Specific Reflections on Statutory Digital Currency ", the central bank's digital currency may not be as good as everyone understands. It is more like a digital version of legal tender than what we understand. The true digital currency.

For example, it may not have a public key private password pair, there will be no UTXO data structure, there will be no POW mining, and even a large probability will not be distributed accounting. The really added function may be programmability.

After the legal digital currency of all countries is admitted, the rivers and lakes of the digital currency stable currency are considered complete. At that time, the competition between digital currencies in various countries will still continue the previous international currency competition. Because the currency has a relationship with the overall national strength, and the national strength will not suddenly change, the possibility of overtaking in a corner is relatively low.

5. The stable currency issued by private individuals will emerge in large numbers and remain fiercely competitive for a long time.

The current stable currencies are divided into the following three types: the currency trust mode, the digital asset mortgage model, and the unsecured algorithm stable currency.

All three are issued by private institutions. The use of Hayek’s "non-stateization of money" is a privately issued currency. The technical difficulty of issuing stable currency itself is not very large, so each powerful institution will not let go of this ecology. Except that all major public chains have their own stable coins, all exchanges and wallets are also trying to push With its own stable currency, private stable coins will continue to emerge in the future.

It will take some time for China to issue legal digital currency. At present, it will take at least three years. The reason why it takes so long, the technical difficulty is not the main one, mainly the policy, the coordination of the financial system and other aspects need to be more cautious research, after all, the currency is related to the bottom of finance, related to the safety of the country, and even Affect the status of the internationalization of the renminbi.

In the past three years, it will be the timing of gold development in private currencies. Hayek said in the "Nationalization of Money" that private money will eventually be a competitive monetary system, and a more advantageous currency will win.

These stable currencies have their own characteristics. Some win with decentralization. Some win with low volatility. Some win with first-mover advantage and network effect. Of course, each coin has its own more or less. The problems also have their own competitive advantages. The competition between the various stable currencies will be very fierce. It may be extremely difficult to maintain a long-term monopoly position in a certain currency. In the end, under the brutal screening of the market, the overall strength of all currencies will increase. The obvious short board will be filled, and the strongest stable currency will eventually win.

Sixth, the stable currency of the legal currency custody class (anchor class), the problem of centralization will exist for a long time

Both USDT and LIbra fall into this category. Take USDT as an example. The most serious problem that USDT has been criticized is its centralization problem, and the problem of non-open, transparent and untrustworthy brought by centralization.

Is the problem of centralization really unacceptable? I don't think so. I don't think people care about centralization or decentralization. People care more about products and services. As long as this model of stable currency slightly improves security and transparency while continuing to maintain this simple and straightforward approach, people will continue to choose it. According to our previous statement, all the stable coins are simulations of the French currency, and the legal currency is inherently centralized. There is nothing wrong with the simulation of the legal currency in a centralized manner.

As for USDT's failure to accept audits and openness and transparency, if it does not change for a long time, and the market is unacceptable, then naturally there will be more excellent stable coins to compete with it and eventually replace it. These new stable currencies, although they may be central, will be subject to public audit, accept third-party custody, and accept 100% deposit reserve. Many new stable coins are available to meet these requirements.

Although there are big problems with the centralized stabilized currency, I personally still think that the stable currency of centralization and legal currency custody will become mainstream for a long time. The specific problems that exist in them can basically be improved by the fierce competition in the market. .

7. The stable currency of digital asset mortgages, the volatility and the risk of bursting cannot be eradicated.

For the stable currency of the mortgage type, such as Bitcny, its advantages are decentralized, open and transparent, and credible, but its shortcoming is that the volatility is very high, and when the price fluctuates greatly, it is easy to have a chain burst. It is related to its mortgage mechanism and on the other hand to the volatility of its underlying mortgage assets.

The mortgage mechanism can be adjusted to reduce the rate of explosions as much as possible, but it cannot be eradicated, and the volatility of its underlying assets will always exist. This is the source of its risks, and this is difficult to eliminate. In the future, it may only be mortgaged. The rate makes some adjustments and improvements.

It is precisely because of this problem that I personally feel that the stable currency of the mortgage can be a good complement to the stable currency, but it is difficult to become the mainstream of the market.

Eight, the effect of the stable currency of the algorithm class remains to be seen

The algorithmic stabilization currency is mainly the pursuit of unsecured issuance of stable currency, which is generally to simulate the open market operation of the central bank. The approximate operation is: increase the supply when the price of the stable currency is higher than 1 US dollar; when the stable currency price is less than 1 US dollar , recycling supply. At present, the stable currency of the algorithm category has a relatively low market share and relatively little influence.

There are some natural problems with the algorithmic stable currency. The scenes in the real world are complex and changeable. It is difficult to perfectly correspond to the real life scenes. It is far from being a simple algorithm that can be matched.

As Mr. Pan Chao said in "The Algorithmic Stabilization Coin" is a false proposition:

Formulating an economy's monetary policy is no less than driving a high-speed car in intricate terrain. Even with the most advanced autonomous driving system, police and protective personnel are required to participate in the machine when they are stupid. It is far from enough to emphasize the magical stable currency algorithm on the blockchain with incomplete infrastructure and lack of identity data. It is tantamount to training the autopilot model in Excel.

Although the influence of the stable currency of the algorithm class is very small, it does not rule out that there are better algorithms in the future that can solve the problem of stable currency. For example, as far as I know, the original chain is on the side chain, and there are plans to be stable based on the bancor protocol. These are all good attempts, and the specific effects remain to be seen.

Nine, the spread of stable currency, not the end of BTC, BCH

After the stable currency fires up, I have seen some articles. The approximate meaning is: BTC and BCH can never solve the problem of fluctuation, and the payment must be stable; the stable currency will take away the payment share of BTC and BCH; Time is when BTC and BCH disappear.

These views can't be said to be unreasonable, because in the field of payment, if the stable currency develops, it will compete with the BTC and BCH that are also positioned to pay, but some people say that BTC and BCH are about to face death. a little.

As I said before, all private stable coins are simulations of French currency, so they also have various problems in French currency, such as KYC, capital control, tax administration, and most fundamentally, they are basic. It is impossible to solve the problem of volatility and it is impossible to achieve complete stability. Since the same is the problem of volatility, if the market value of BTC and BCH is larger, its volatility will be reduced accordingly, as Lightning HSL said: "The so-called stability is developed, not designed. At the same time, there will be third-party digital money service providers that can provide various services. At that time, the payment of BTC and BCH and the payment of stable currency are actually not much different, and the consensus of BTC and BCH is better than that of private digital currency. Stronger.

If you want to pursue as stable as possible, then among all the stable coins, the most stable is the stable currency of the country's legal digital currency. But once it returned to the stable currency of the legal digital currency, it returned to the original original proposition. Nakamoto bought a sentence on the Bitcoin creation block – "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks" (January 3, 2009, the Chancellor of the Exchequer is in the implementation The second round of bank emergency assistance is on the verge.)

This sentence is the title of the front page of the "Times" on January 3, 2009. The news roughly means that the bank decided to open the floodgates in order to save the market. Later generations explained that the purpose of this is to Taunting the infinite super-issuance of the legal currency system has led to various financial problems, as well as three messages about bitcoin:

1. Disrupting banking business and controlling money supply: Bitcoin is a “global book”: a new economic infrastructure that can transfer statutory value and eliminate bank control over money supply;

2, to give individual rights: to enable consumers to control their own money, rather than the bank's permission to transfer and consumption, free of bank spamming and arbitrary policy fluctuations, and make their own money less;

3. Going to bank: Six billion citizens can enter the global economy through their smartphones for the first time, instead of requiring a bloated intermediary. And these are the problems of the legal currency, and it is the problem that Bitcoin has to solve! It is also the meaning of Bitcoin!

Therefore, I believe that the future digital currency payment market may be a three-point world: part of the BTC, BCH-based digital currency payment, part of the country's legal digital currency, and the other part of the privately issued private digital currency, these three Mutual cooperation and competition, together constitute the entire market for future digital currency payments.

Ten, summary

1. Stability is an artificially established state.

2. All stable coins are essentially simulations of French currency.

3. The legal digital currency is the ultimate stable currency.

4. The stable currency issued by private individuals will appear in large numbers and will maintain fierce competition for a long time.

5, the stable currency of the French currency custody class (anchor class), the problem of centralization will exist for a long time.

6. The stable currency of digital asset mortgages cannot be eradicated by the volatility and the risk of opening a position.

7. The effect of the stable currency of the algorithm class remains to be seen.

8. The popularity of stable currency is not the end of BTC and BCH.

Author: Monte Carlo