They are asked all the time: You value more than 100 pieces of cryptocurrency. Why don’t you rate stable coins like Basecoin, Carbon, MakerDAO, Tether, TrueUSD, USD Coin and more?
Their answer: True, their value is stable. Yes, they are digital. But they are not real crypts.
Stable coins are simply digital assets that function as a substitute for some common currencies. That’s what keeps them stable. But it also removes any hope of achieving the main purpose of cryptocurrency, which is to give people a new form of money that is controlled only by them.
These unique differences are the main reason why cryptocurrencies, no matter how experimental, have attracted so many investors, mathematicians and speculators. They are the first asset class in history that is …
Because at least for now, the market price of real cryptocurrencies is too volatile. And as long as that is the case, it’s extremely difficult to bring shared applications (dApps) to the masses.
There are many examples: Video streaming. Taxi services. Social media platforms. If their own coins do not keep their price stable to a minimum, the average user will not risk using them. Speculators can sometimes love unpredictable crypts, sometimes hate them. But would anyone who just wants to use a taxi service accept it? No.
They will help dApp creators until cryptographic markets become more stable and secure. And this is not an insignificant feature.
The problem is this: Unlike Bitcoin, Ether, and other true crypts, stable coin is more like a bond — a promise to pay out in another currency — rather than an asset that has its own value. If their issuer fails to ensure that the supervisor has a common currency in the value of stable coins, the whole structure will collapse.
What is worse, if the financial system itself destabilizes, stable tsins could collapse with it. Just like bank accounts, PayPal, Apple Pay and all other centralized financial services. Which raises the question …
Think about it.
Stable coins use basically the same shared general ledger (DLT) technology as real cryptocurrencies. But they only have value if the counterparty has an asset in the reserve and agrees to exchange tokens for that asset. If you use stable coals, you must believe that they will keep their promise.
Do you see this contradiction? The technology used by stable coins was created to eliminate the need to trust someone – not to demand that trust.
So imagine this scenario: The issuer stops converting stable coins to the regular currency. You are protesting, but frankly, there is not much you can do. Your request to receive your regular currency is suddenly void. And the value of the stable coins you have is just a penny compared to what you paid for them.
Does such a thing really happen? In times of financial crisis or localities, of course!
Just look at what happened recently in Venezuela . In a state of war, Maduro government officials sought to retrieve their gold reserves from the Bank of England. But the BOE sent them away for a long time. “For us,” they said, “you are no longer a legitimate government.”
We are not in favor of Maduro. But this case highlights problems with supervisors. If you leave your assets under the supervision of an institution, in an extreme crisis, having direct ownership of those assets may allow them to take control. And if they no longer recognize your right to your property, you will have to fight for it in court or simply say goodbye to your property.
After all, stable quinces are made of the same wood. They are only as “stable” as the system that gives them value. In the long run, only real cryptocurrencies offer the opportunity to build a more secure, sustainable structure.
Translation: Lucreds Plus OÜ