In the wake of Tether's USDT (which has been the stablecoin of choice for many years), there have been serious rumors that the controversial coin is not backed 1:1 by the US dollar, and countless players in the blockchain world are aware A grand and lucrative opportunity to launch a stablecoin.
Over the past 12 months, dozens of new non-functioning cryptocurrencies have emerged from the shadows, including the three original stablecoins — fiat-based, crypto-based, and no-token-based of. Whether it's Gemini Dollar, MakerDAO, or bitUSD, their value should remain close to $1 at all times. But for now, the development of stablecoins has fallen into a bottleneck.
The Dilemma of Stablecoins
While several companies in the cryptocurrency space have begun a race to become the most fiat-backed stablecoin, issuers seem to have completely forgotten that they all have inherent problems. Several financial gurus have predicted the imminent withdrawal of all fiat currencies around the world. According to David Stockman, the former director of the Office of Management and Budget in the Reagan administration, the next financial crisis could be just around the corner. David Stockman recently told CNBC that he expects "a historic monetary and fiscal conflict." So fiat currency seems to be a pretty bad currency for assuming stable collateral since a huge crash could happen at any time.
There are also some cryptocurrency-backed tokens that are said to maintain a stable value! I'm really sorry to disappoint you, but after hours of researching facts, calculating mathematical formulas, I've come to the conclusion that cryptocurrency-backed stablecoins have a huge problem to solve: they have Backed by one of the most volatile assets. While issuing new cryptocurrency-backed tokens requires a large amount of cryptocurrency as collateral, the system is not ready to withstand a price slump of up to 80% or more. Since we expect a financial catastrophe, there is no guarantee that this stablecoin will survive a so-called "black swan event."
What did you say? Are you really thinking about a stablecoin without any backing at all? Yes, you must be one of those bankers. To be fair, stablecoins that are not backed by any token have been around successfully for almost 50 years. Some of them have really interesting names like dollars, euros or yen. To be sure, algorithms based on theories such as seigniorage stocks, similar to central bank-issued “stablecoins,†may stay more or less around a certain price. However, their system is designed to collapse once it stops growing consistently, which bears an eerie resemblance to a Ponzi scheme.
Remember that era? Currency at the time was actually backed by a physical commodity with a limited supply. But over the past few years, I've begun to see a silver lining in dark cloudy skies. I'm not sure if you've heard of it, but there is a technology that can literally tokenize any type of physical and digital asset, where ownership can be tracked, it's very transparent, and it's very easy to transfer. It's called blockchain.
Additionally, our commodities have been shown to be effective stores of wealth for thousands of years. Some of them have perfect properties, such as limited supply and acceptable measurements and weights, etc. that can be used as a form of currency. You know what I'm talking about, they are called precious metals and precious minerals. Also, there are some resources that simply come with demand because they are needed for production steps or transportation. These could be crude oil, plutonium, and in a few years it could be water.
In an ever-changing environment like the blockchain, where some projects are already thriving, it’s no surprise that an asset-backed token is available to the world. The most popular examples are DigixDao’s gold token (100% backed by physical gold) and the petro token backed by Venezuelan oil. Besides the shiny and greasy coin, I would like to introduce another commodity, a currency that I have never considered.
So I recently stumbled across a company that is developing a cryptocurrency called "DiamCoin" that is fully backed by real diamonds. While this may sound crazy, it makes a lot of sense when you think about it. In fact, diamonds are a very reliable asset, the most resilient in any crisis. During the 2008 financial crisis, diamonds fell by 6% and gold by 25%. In addition, the price of diamonds has been on a continuous upward trend for decades, and the demand seems to be inexhaustible. Compared to gold, diamonds are actually very small stones that can easily be shipped around the world in an envelope.
Sir Christopher Pissarides, Nobel laureate in economics and director of Hello Diamonds, said in a recent press release: “Although blockchain technology has the potential to disrupt the current financial system , but it is still mostly used for speculation.†If we can remove volatility and bring stability, we now have the necessary financial tools to replace the current antiquated payment system.
my dream future
I'm not sure if you've noticed, but I really like the idea of ​​asset-backed stablecoins. Listening now, my real dream is: a currency backed by a cryptocurrency whose base currency and tokens are backed by real-world assets. This crypto-asset-backed stablecoin will gain value through a variety of assets that have been deliberately taken into account historically. Part of the idea should be traditional currency alternatives such as gold, silver and diamonds, as well as high demand resources such as oil and plutonium. While I'm thinking about this, we should also join Bitcoin.
The idea is: a currency is basically an index of many different commodities, always maintaining a certain value. Even as the prices of one or two assets plummeted, the currency remained relatively stable. Additionally, a token should always be exchangeable for its backing cryptocurrency asset, and again for a physical commodity. Think of this currency as a global currency, constantly updated by adding new assets and discarding inappropriate ones. In any case, I hope you are ready for the impending financial apocalypse.
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