4 billion knives stable currency rivers and lakes: fallen and climbed

In January 2018, the total value of the cryptocurrency market exceeded $800 billion, surpassing the sum of the currencies of the top 100 countries in the global economy. In May 2019, the total value of the cryptocurrency market reached $276 billion, and the stable currency was in the entire cryptocurrency market. The proportion is less than 2%.

In the recent IME huge financing of Bitfinex's exchange, Tether's market share jumped to 85% of the entire stable currency market. Earlier in April, the Attorney General of New York filed a lawsuit against Bitfinex and Tether in the name of “fraud”. The USDT first mover advantage is obvious, and if it can maintain a stable redemption, it will not be a fatal blow to the USDT. However, the incident also showed that the stable currency is no longer stable, the market is facing shuffling, and supervision has become an invisible time bomb in this industry.

DAI is the only successful cryptocurrency-collateralized stable currency, a stable currency secured by a smart currency-based cryptocurrency. The ecosystem MKR and Ethereum platforms around this stable currency are growing rapidly.

The Basisi type algorithm-driven stable currency has suffered from Waterloo in the past year. The market has questioned that the SEC has tightened its supervision over securities. However, it still cannot keep up with this type of project. Bitfinex will soon launch the Ampleforth stable currency IEO project. In April, Celo, a mobile payment stabilization currency project in Silicon Valley, announced that it had received nearly $25 million in investment from Polychain and A16Z (through the design of the Celo dollar protocol token and the Celo Gold deflation token to complete its entry into the stable currency market).

“Traditional asset-backed stable currency still dominates”

In 2017, USDT (Tether USD) was an undisputed absolute market monopolist. Just one year later, in 2018, the number of stable currency projects that emerged reached dozens. As of 2019, there have been more than two hundred stable currency projects. Some of the earliest projects have been closed, and some new projects are still only initially entering the market, but it is safe to say that at least hundreds of stable currency projects have now been recognized by different interest groups and are in different stages of commercialization.

Whether it's a stable currency that hasn't been online yet, or a stable currency that can be traded on the exchange, too much is hard to track. With the help of CoinMarketCap, we found operational data for 23 stable coins for nearly 2 years. To simplify the study, these stable currencies are grouped by secured mortgage assets and ancillary types. The categories are as follows:

By type of collateral:

1. Traditional assets: asset collateral and certain relative assets with stable value are anchored to value, such as gold, legal currency, or other assets. The most direct way is asset collateral.

2, encrypted assets: secured by crypto assets, represented by DAI

? 3, no asset mortgage, that is, the algorithm controls the monetary value, represented as Basis

"Whether it is a tradition or a substitute for stable currency, the dollar is still the most popular linked currency."

According to CoinMarketCap's latest statistics, among the top 50 cryptocurrencies, the stable currency occupies 5 seats. They are the 8th USDT, the 27th TUSD, the 36th PAX, and the 48th GUSD. Among them, USDT has a large share of the first-mover advantage, accounting for up to 75% of the stable currency. The total market value of May 29 was 3.13 billion US dollars. At the same time, the daily trading volume was 25 billion US dollars, accounting for 73.3 of the daily trading volume of Bitcoin. %. Although the supply of USDT decreased by nearly $1 billion, in January 2019, the total supply of stable coins almost returned to the highest value. If Tether's opacity was only raised by the public earlier, then now, there is no doubt that some USDT may not only be paid in US dollars, but by the credit of Tether Limited or Tether International Limited. The new stable currency successfully exploited the Tether trust crisis and took some of the market from the USDT. Tether's market share has been below 75% for five consecutive months, and Tether's market share has jumped to a maximum of 85% in the recent IME huge financing of Bitfinex's exchange.

"Tespite the success of competitors, Tether continues to dominate."

For supporters of illegal currency experiment projects, the situation is not very optimistic: traditional electronic money, even if it is on the blockchain, is hard to be called the pioneer of monetary thinking.

Although many stable currency projects dream of becoming a truly global currency and even helping the Venezuelan people, so far, the floor trading scene is still the main use of stable currency.

The cryptocurrency secured by the US dollar in the blockchain has the lowest volatility in the stable currency and can be exchanged in the national currency based on the face value. Therefore, it is not surprising that this type of stable currency is far ahead in terms of daily trading volume.

"The entire transaction amount of the stable currency is almost the transaction amount of the cryptocurrency secured by the US dollar."

"Stable gold linked to gold"

When it comes to stable coins guaranteed by gold, the most eye-catching 2018 is the stable currency DGX launched by Digix DAO. This is also the first ICO project in the Ethereum blockchain. After the weakening of the tokenized assets, we can expect the number of stable coins linked to gold to increase. But so far, such tokens on the market are few and their markets are relatively small. So far, only DGX has maintained a relatively stable price and increased its offer. The price history of the remaining “golden coins” is not similar to the market history of stable coins.

"The price of DGX is not as stable as the price of gold, and there are no other "stable" gold stable coins in the market."

Another bad news for gold standard supporters is that there are Austrian stablecoins on the market, but the market does not want to use them as money. They are not quoted currencies in cryptocurrency transactions compared to stable currencies linked to fiat currencies. In e-commerce, the use of gold as an account unit or other currency function is not welcome. The cryptocurrency linked to gold has not increased.

"Cryptographic Currency Mortgage Stabilized Coin"

DAI is the only successful cryptocurrency-collateralized stable currency, a stable currency secured by a smart currency-based cryptocurrency. The ecosystem MKR platform around this stable currency is growing rapidly. DAI trades in the legal currency of the centralized and decentralized exchanges, bitcoin, mainstream cryptocurrency and other stable currencies.

DAI provides loans and deposits and is implemented in e-commerce, which attracts A16Z's investment of up to $15 million. Maker is by far the most successful DAO in Ethereum, with a total capital of $700 million, and about 2% of ETH's offer is based on DAI.

Despite the success of DAI, the growth rate of cryptocurrency-guaranteed stable currencies is not as fast as the traditional cryptocurrency on the blockchain. The cryptocurrency mortgage-stabilized currency project launched a few years earlier than DAI is going through a difficult period. The market history of DAI began when the quotation of the main cryptocurrency-collateralized stable currency (such as bitUSD) on the BitShares blockchain reached its peak. Now, DAI's offer exceeds the quotes of all other similar stable currencies.

"DAI is the only successful cryptocurrency-collateralized stable currency (so far)."

In BitShares, Steem and Golos, the stable currency is just one of the platform tokens, and the reason for this platform does not boil down to this token, which means that compared to Maker's team and community, they can't effectively stimulate development and Promote teams and communities for these projects. However, the main reason for the success of DAI is not just that.

The main reason is the choice of collateral. DAI's native Ethereum is the second largest cryptocurrency after Bitcoin, while the BitShares, Steem and Golos blockchain's native tokens are relatively unattractive new altcoins. As for projects like Synthetix (formerly known as Havven), they do not use the blockchain's native tokens, but instead use the system's internal tokens. Therefore, it is less liquid than ETH, which seriously affects the safety of its stable currency.

"Unsecured stable currency"

Speaking of unsecured stable currency, the algorithmic stable currency, although there have been some compelling news, there is not much progress in this type of stable currency in the market.

Recently, the most important message in this market segment was the closure of the Basis project, the first ambitious algorithmic stabilization coin project and supported by top venture capital institutions with $133 million. The concept of managing money supply and demand is easier to implement by issuing and redeeming stocks and bonds and attracting investment under existing laws.

Basis will inevitably push other projects that use the issue of securities to manage the stable supply of coins to abandon this model. Carbon originally planned to create a system with algorithmic stabilization currency and Carbon Credit security, limited to creating traditional digital currency on the blockchain. Fragment changes the model to a one-sided system that contains an algorithmic stable currency and is called Ampleforth. In order to control the supply of tokens, a part provides a stable currency for cryptocurrencies, and it also plans to use bonds and stocks. Although the team of the project did not report changes in the composition of the token, there was no news about the planned launch of such a stable currency.

Another loss in this section is NuBit, the first algorithm to stabilize the currency. After a sharp increase in supply led to a rapid decline in interest rates, this stable currency could not recover. Currently, the activities of its project team and community are almost zero.

Compared to the cold and clear NuBits community, another algorithmic stable coin, Minexcoin's Telegram chat group, is even hotter than the MakerDAO chat group. However, MNX raised its offer through the Minex blockchain to provide compensation to miners and was unable to maintain market prices at target levels. According to the plan, the price of MNX is expected to increase. In fact, its price changes have been negative growth.

"USNBT and MNX are unable to maintain the target rate."

Still, the algorithmic stabilization currency is still a pioneer in monetary thinking. If Basis and NuBits are just private simulations of trying to create modern legal tenders, then BitBay and Ampleforth are trying to model unprecedented in currency history.

BitBay is experimenting with a method called "hodlers oflast resort". In order to push up BitBair's price or just to prevent it from falling, the holder of the stable currency voted to temporarily freeze a small portion of its assets to temporarily reduce BitBay's market offer. At the same time, unlike traditional stable coins, BitBay does not have any fixed target price.

And Ampleforth, the reduction in the supply of stable coins will be carried out through non-traditional market routes (currency intervention, sale of bonds or stocks). By scaling down the assets of all Ampleforth holders, you can reduce your supply to increase its market price. As a return to the seized stable currency, Ampleforth holders will not receive anything. On the other hand, when it is necessary to increase the Ampleforth offer, the newly created tokens will be allocated in the same "non-market" way: they will be distributed free of charge among all Ampleforth holders in proportion to their balance.

“Seeking global metrics and stabilizing the currency basket”

First, the global currency is a measure of global value. The global market needs a measure. The cryptocurrency claims to have the status of a global currency, so a stable currency is no exception. In order to seek such a global measure, stable coins are associated with special drawing rights and new national currencies and metal baskets. Facebook is considering offering a stable currency linked to a basket of currencies. TiberiusTechnology Ventures offers a token that is linked to a basket of metal used to produce modern electronics.

These baskets may be attractive as a valuable storage, but using them at this stage as a measure of global value seems unlikely. The global value measure is still the US dollar. There is currently no plan to convert the world monetary system into linking the national currency exchange rate to special drawing rights or other baskets. Just like the ECU (formerly a “currency basket” of the nine-country currency of the European Community, and eventually became the euro in 1999), it linked the national currency to a basket, making this basket a popular value. Metrics. Special drawing rights have never been used as the basis of the world monetary system, so unlike ECUs, they are not recognized by the market. As for a basket of changing cryptocurrencies, the global ecosystem of open public blockchains is still too young to use such baskets to measure value and money.

An experiment was conducted on the Coin Exchange to create a HUSD token that can be redeemed against one of four stable currencies (PAX, TUSD, USDC and GUSD). However, this project quickly failed. HUSD 2.0 can only be converted to the above-mentioned stable currency at a weighted average market price. In this cooperation, PAX was nearly $10 million lost by traders through cross-stabilized currency exchange. CementDAO is developing a stable coin aggregator, and Reserve plans to turn to a stable currency that hooks a basket of tokenized assets. Neutral and dForse also announced the development of a basket of stable coins.

"Two business cases: securities and commissions "

At the end of this article, I would like to draw your attention to two issues related to the day-to-day work of the Stabilizing Coin project.

First: Redesign the second generation currency after the first distribution.

Second: impose an additional fee on the use of stable currency.

Let's start with the first one.

If the ownership of the token generates income in the form of commissions for commissions, coins, interest on loans or dividends, the token is a security. Projects that attract money by selling tokens (ie securities) do not always receive all the necessary official approvals. Perhaps this is why Maker and Chronobank changed the design of their second generation coins (MKR and TIME, respectively) after their initial release. These tokens do not currently give the holder the right to share the commission fee of the corresponding stable currency user. Given the tightening of cryptocurrency regulation, the legal issues of these changes will inevitably become the subject of debate.

The conflict between the Stabilization of Coins and the reality of regulatory securities issuance and circulation has led to different outcomes. Some people have closed the project, some have completely changed their token design, and you may even find those who change the design of the second generation, and some are prepared to issue securities in accordance with current regulations.

The problem with the extra charge for the use of stable currency is that the user must not only pay the commission of the miner in the original token of the blockchain, but also the project cost.

Carbon uses meta-transactions to allow its users to pay commissions to Ethereum miners using CUSD instead of ETH. This solution improves the user experience but does not address the issue of additional transaction costs. The user will incur additional charges regardless of whether or not the token is charged for this commission. Offline trading allows to avoid these extra costs, but this solution is unlikely to attract stable currency projects, which is the establishment of its business model through additional commissions.

Commissions affect the interchangeability of stable currencies. The issuance, use and redemption fees for stable currency may vary. The issue of stable currency, circulation and redemption terms may vary. For the technical, economic or legal reasons, the same stable currency introduced on several blockchains may not be fully interchangeable.

Author: Anton Mozgovoy

Translation: Larenia

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