After completing DeFi to stabilize the currency, Ruibo wants to build another MakerDAO?

Ripple's chief technology officer, David Schwartz, outlined in an article today how to improve the XRP book and the entire ecosystem. He suggested creating a stable currency with XRP as a collateral (an encryption linked to a legal currency such as the US dollar). currency).

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In general, a stable currency means that a party holds a large amount of fiat money, which allows anyone to cash at any time, thereby giving a particular cryptocurrency value and stability. However, the advice given by Schwartz does not bundle the stable currency with the legal currency, but instead uses the equivalent XRP as a support. He said:

"The key difference in this proposal is that this stable currency can always be redeemed through the XRP in the mortgage pool."

This is a model similar to DAI, which is a stable currency built on the Ethereum, used as a mortgage for the Taiyuan native currency ETH.

Schwartz pointed out that this program is not completely decentralized.

“Some organizations or alliances must still continue to provide the price of the assets anchored by the stable currency, otherwise the stable currency will freeze.”

The problem is that even if the stable coin can be created by decentralizing the smart contract on the blockchain, the contract needs to know the current price of the dollar – which means that the centralized participant needs to keep the price updated.

Another concern about stable currencies secured with cryptocurrencies is that the value of the reserve cryptocurrency may be lower than the value of the stable currency in circulation. Given the volatility of the encryption market, this is not impossible. Once the price of XRP continues to fall, this may make a stable asset linked to this cryptocurrency a venture capital.

For the stable currency anchoring XRP, Schwartz's complete idea in the article is as follows:

One of the original applications of the XRP ledger (since 2012) is to use built-in decentralized exchanges to achieve transactions between stable coins and between stable coins and XRP. Currently, XRP books only support stable assets with support or issuers.

We recommend adding the characteristics of the guaranteed stable currency to the XRP ledger. The key difference in this proposal is that this stable currency can always be redeemed through the XRP in the mortgage pool. For example, if you hold a $1 stable currency, you can pay in the books at any time, just like you hold an XRP worth $1.

Our proposal is as follows:

  • Anyone can hold an XRP. If there is enough guarantee, it can issue stable currency.
  • As long as the position holder holds enough collateral, the position of the XRP can be adjusted.
  • As long as the position holder holds sufficient collateral, the holder can issue and redeem the stable currency based on his position.
  • A position with a severely insufficient guarantee can be re-guaranteed – the position holder can retain the remaining guarantee.
  • We will use an order mechanism that allows the XRP to be automatically traded by redempting the stable currency with the least guaranteed position.
  • This encourages increased guarantees and cleans up positions that are under-guaranteed.
  • The path search algorithm will be used to redeem the collateral, so paying with a stable currency is like paying with the corresponding amount of XRP.

The program is not completely decentralized, and some organizations or alliances must continue to provide the price of the assets anchored by the stable currency, otherwise the stable currency will freeze. The relevant institution may set a reserve ratio to levy taxes on the stable currency system or provide a reserve to purchase positions with insufficient guarantees.

The most obvious application is a stable currency linked to legal assets such as the US dollar. However, stable coins can also be linked to precious metals, stocks, indices, and so on.