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April 2018

Back to the Basics | Can Stablecoins Save Crypto’s Soul?

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stablecoins

stablecoins

When the perpetually mysterious Satoshi Nakamoto, founder of Bitcoin, set out to build his own cryptocurrency, it’s fair to assume that he didn’t foresee where his creation would be just 10 years down the line.

This isn’t to say that the enigmatic developer didn’t have big plans for Bitcoin. After all, the aim of the digital currency was to ultimately overthrow the financial sector of the time. Instead, it became a capitalist dream—hurtling towards market values of almost $20,000 at its peak, before caving in on itself over the twelve months that followed.

Astoundingly, considering the unprecedented connectivity that we enjoy today, Satoshi Nakamoto has never been officially identified following the rise of his creation. Considering that he is rumored to own around 1 million Bitcoins that haven’t been touched—even during the cryptocurrency’s highest peaks—this has led to some investors to claim that Nakamoto died after founding his digital currency.

It would be quite something to hear Nakamoto’s thoughts on the ecosystem that he created. In the early days of Bitcoin, some adopters were keen to get the cryptocurrency up and running as a viable payment alternative—with some hip fast food places accepting the coin and a few businesses offering to pay salaries in Bitcoin.

Cryptocurrency startups established themselves in a bid to support transactions through Bitcoin. BitPay could’ve paved the way for the currency to be used to buy groceries or cinema tickets, but adoption wasn’t widespread enough to bring viability and Bitcoin began to mutate.

Last year, The Next Web found that 44% of all Bitcoin transactions are for illegal activities. Users found that Bitcoin was an ideal and untraceable currency for use on the dark web.

Writing for The Outline, Adrianne Jeffries said, “Nakamoto was a libertarian who wanted to create a system for payments that would circumvent governments, bankers, and corporations.”

He continued, “Instead, Bitcoin is now a get-rich-quick scheme that retains none of the exciting, anarchist features it proposed and has created a secondary economy with financial shenanigans that mirror the ones that led to the global financial crisis.”

It would be hard to classify Bitcoin as a failure, but it’s fair to say that the cryptocurrency has lost the soul it had as an emerging financial alternative off the back of 2008’s devastating financial crash.

There is, however, hope for the soul of the crypto-ecosystem as a whole.

2020 promises to be one of the biggest years for the world of cryptocurrencies. Stablecoins aren’t exactly new, but with the anticipated arrival of Facebook’s Libra and Wells Fargo Digital Cash, the volatility-free industry of stablecoins looks set to take centre stage.

Stability in the Face of Volatility

In December 2017, Bitcoin reached a value of almost $20,000; one year on it had dwindled to nearly $3,000.

As a digital currency that was designed to operate as a reliable alternate payment system, the success of the Bitcoin bull run in 2017 rendered the cryptocurrency unfit for its intended purpose.

>> Ripple Transfers XRP to New Trading Address: Bad News for Crypto?

Stablecoins, however, are pegged to real-world assets like the US Dollar or gold. Because of this, there aren’t any meteoric rises in value, but no crippling drops either.

Ethically speaking, stablecoins will be free from the clutches of speculators and profit-turning investors, leaving the digital coins to operate as they should—as a universal currency that can be used seamlessly beyond borders.

Practical Application

Stablecoins like Wells Fargo Digital CashTimvi (TMV), and Tether have been designed with convenience in mind.

When Wells Fargo announced its own digital stablecoin, the banking giants did so with an eye firmly fixed on enabling easy transactions. Lisa Frazier, head of the Innovation Group at Wells Fargo, boldly predicted that Digital Cash will be “faster than SWIFT, cheaper and definitely more efficient.”

Wells Fargo Digital Cash uses R3’s Corda Enterprise software to leverage swift book transfers internally—enabling funds to move seamlessly from a payer’s account to a payee’s account within the bank.

The true pace of Digital Cash remains to be seen, but if it is indeed faster than SWIFT, then it represents a step in the right direction towards utilizing crypto payments for everyday activities—like buying a coffee on the way to work.

Reaching the Unbanked

When Facebook announced Libra, its stablecoin that’s due to be released in 2020, it was done so from a humanitarian perspective.

Libra has been developed with the aim of reaching out to the unbanked citizens of the world. “For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account, and those numbers are worse in developing countries and even worse for women,” wrote Facebook subsidiary Calibra in a recent company statement.

Facebook, along with 28 other founding members of The Libra Association, including Visa, Mastercard, PayPal, Uber, Lyft, and Coinbase, among others, will focus on developing a stable universal currency that’s designed to accommodate low-cost transactions across borders.

“The goal of this new project is to build a financial ecosystem that can plug in and empower billions of people,” explained Dante Disparte, head of policy and communications for the Libra Association.

It’s early days yet, but 2020 may well be a watershed moment for driving the world of cryptocurrencies away from the soulless Wild West period of late-2017 and 2018 and into a new era of inclusivity and innovation. Hope springs eternal.

This article was curated through CryptoCurrencyNews’ Contributor Program. If you would like to write for us, send us your submission!

Featured image: DepositPhotos © monsit

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ECB Questions Stablecoin Stability Amidst Regulatory Uncertainties

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ECB

ECB

Stablecoins are not immune to uncertainties. Those are the sentiments shared by the European Central Bank (ECB). According to the regulator, stablecoin stability could be hampered by the uncertainties stemming from the lack of regulations.

Uncertainties

The fact that regulatory pressures do affect fiat currencies is one of the tailwinds that could take a toll on the stability of stablecoins. For instance, these coins pegged on fiat currencies, such as Tether (USDT), are always subject to volatility in line with regulatory policies instituted by the FED to protect the dollar.

The ECB has since called for improvements pertaining to stablecoin governance as a way of addressing some of the uncertainties. Some of the upgrades touted touch on updating the smart contracts at the core of the projects.

The regulator has also called for the classification of these coins based on key concepts as a way of guaranteeing their stability. In that regard, the ECB maintains that stablecoins should be classified as either tokenized funds, off-chain collateralized coins, on-chain collateralized coins, or algorithmic coins.

The sentiments come hot on the heels of the ECB raising the red flag over the risks associated with the use of stablecoins in the mainstream financial sector. Some of the concerns raised include the proliferation of money laundering activities as well as consumer protection.

>> Telegram to Release TON Blockchain Code on September 1

Proliferation

Amidst the concerns raised, stablecoins continue to gain traction as the cryptocurrency revolution continues to take over. Facebook launching its own cryptocurrency Libra has already affirmed the fact that cryptocurrencies are here to stay for the long haul. China is the latest country to join the cryptocurrency fray with the launch of a state-backed altcoin

According to the ECB, there are about 54 stablecoin projects, with 24 already in full operation. The market value of these coins is on the rise, thanks to their acceptance in the industry. For instance, stablecoin capitalization stood at $1.7 billion as of the start of 2018. It has since more than doubled to $4.8 billion. With the average volume of stablecoin transactions at €13.5 billion, there is no denying that they are here to stay.

Featured image: DepositPhotos © fazon1

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Bitcoin Soars Above $9K Mark with Strong Momentum

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Bitcoin

Bitcoin

The cryptocurrency market might have had a horrid time over the past few weeks, but things have changed this week. Much of the reversal in fortunes is possibly tied to the upcoming Bitcoin halvening event.

Why the Sudden Jump?

The world’s biggest cryptocurrency by market cap has been in the doldrums due to the coronavirus-induced market crash over the past weeks, but now it seems to be on course to reach its previous levels. This morning, Bitcoin gained 1.9% to hit $9,099 a token, and that is a strong start, considering the fact that it gained 15% yesterday.

Any major rally in Bitcoin is generally followed by a rally in other cryptocurrencies as well, which is exactly what happened today. Other major cryptocurrencies like Bitcoin Cash and Litecoin recorded gains for the third consecutive day. Over the past few weeks, the price action in the crypto sphere has been in lockstep with other asset classes that are classified as risky. However, the situation has changed dramatically this week. Crypto experts suggest that the rally in Bitcoin is possibly linked to the halvening event that is going to take place this May.

A halvening indicates the slashing of rewards by 50% for Bitcoin miners, and when that happens, it usually results in a lower supply of BTC tokens in circulation. Many analysts are pondering whether the cryptocurrency is going to experience a crash at this time. As a matter of fact, it is important to point out that in the past, the cryptocurrency has shown significant bearish price action on the day of the halvening.

>> Ethereum Soars Over 125% Since March: What to Expect Now?

That being said, it is also necessary to point out that it is very difficult to predict whether BTC is going to rise or fall on the day of the halvening event. However, it should be kept in mind that months after the previous two halvening events, Bitcoin went on strong rallies.

Featured image: DepositPhotos © peshkova

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