On Stablecoins

by admin on June 30, 2019 No comments

The launch of Libra by Facebook has brought to the fore the role of stablecoins in the development of the cryptoasset industry. Stablecoins are a category of cryptoassets that seeks to maintain stable value to a reference asset. In the case of Libra, it will be pegged to a basket of fiat currencies and government-backed securities.

According to research by Blockchain.com, stablecoins are already an important part of the cryptoasset ecosystem. There is a total of over 57 live and pre-launch stablecoins, with a total market value of $3 billion, or 1.5% of the total market value of all cryptoassets. Tether, as the most actively traded stablecoin, has a daily trading volume equal to approximately 60% that of Bitcoin.

Use Cases

There are many reasons to use stablecoins. Some of the earliest use cases are in trading. Stablecoins are useful on exchanges that don’t offer fiat trading, as they can be used as a quote currency for trading pairs. They may also offer exchanges the opportunity to develop a robust ecosystem of products and aggregate users by issuing their own stablecoins. Finally, stablecoins provide traders a stable asset to park cash and a short-term store of value.

On the other hand, stablecoins have bigger, multi-trillion dollar opportunities. It could open up money and payment networks based on cryptocurrencies for business and commerce, as price stability is the key missing piece they fill for merchants and retailers. They may also fulfil the role of store of value, especially for citizens of unstable monetary regimes such as Argentina and Venezuela, who can find refuge in a stablecoin pegged to a more stable currency or commodity (such as USD or gold).

Perhaps the most exciting opportunity are the programmable and decentralized applications (dApps) that can be built on top of stablecoins to create a digital ecosystem. These dApps will create everyday experiences and operate with stablecoins as tokens. Examples include gaming, prediction markets, financial services, content production, and more. They are channels through which stablecoins can be brought to the masses and companies (like Facebook) can create a robust system of users and applications.

Taxonomy

A wide variety of stablecoin designs have been developed, but in general one can identify three major design types: 1) traditional collateral; 2) crypto collateral; 3) algorithmic.

The most basic form of stablecoin involves an issuer holding an off-chain, traditional asset like fiat currency or commodity, and issuing a token that represents each unit. A token is essentially a 1:1 IOU for the asset held in reserve. Tether (pegged to USD) and potentially Libra (linked to a basket of major fiat currencies) are examples of such IOU systems. In this design, participants are required to trust the centralized issuers, who may position themselves as trustworthy by making their operations more transparent with regular audits or even regulatory oversight.

Then we have the crypto collateral type, which uses on-chain assets like Ethereum as collateral. This solution often involves overcollateralization to build a buffer against downward price swings in order to protect the peg. As both the stablecoin and collateral are on-chain, everything is publicly auditable with no requirements to trust a single counterparty. MakerDAO’s DAI, backed by Ethereum, is the most well-known example of this category.

Finally, algorithmic stablecoins are uncollateralized and rely on mathematical mechanisms to balance coin supply and demand and achieve price stability. However, the success of this category is still unproven, and some believe they may need some collateralization after all to achieve stability.

Trust and Centralization

Paradoxically, stablecoins may not be fully aligned with the trustless philosophy of crypto evangelists, as they rely on centralized issuers. However, the market today appears to have prioritized stability over decentralization. In fact, fiat-backed designs are far more prominent than crypto-backed or algorithm-based stablecoins. Tether alone accounts for approximately 98% of total stablecoin daily trading volume.

It is not difficult to understand why. If price stability is what market participants most value, it can be best achieved by a more centralized design. More automation, decentralization, and transparency generally carries with it the trade-off of greater complexity and less stability (i.e. higher likelihood that the peg will be broken). However, while the market prefers stability over decentralization in the near term, this does not preclude experiments with more decentralized stablecoins in the future.

Outlook

With price stability and regulatory compliance, stablecoins may be one of the first cryptoassets to achieve mass appeal and adoption. It is the ideal bridge and educational tool for the general public to transition into the crypto and tokenized economy. We are likely to see the continued growth and competition of stablecoins in 2019 and beyond.

At the same time, this trend will be driven by big corporations looking to achieve user aggregation, ecosystem development, and ancillary product synergies through stablecoins. We see Facebook’s Libra as an obvious example in social media and e-commerce. In financial services, JPMorgan has launched JPM Coin, looking to apply it to wholesale business payments. And Goldman Sachs is following suit. Its CEO David Solomon summarized the potential prospects of stablecoins well, “assume that all major financial institutions around the world are looking at the potential of tokenization, stablecoins and frictionless payments.” The outlook, in short, is exciting.

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adminOn Stablecoins

On Facebook Libra

by admin on June 27, 2019 No comments

On June 18, 2019, Facebook made a splash in the cryptoasset industry by announcing its intention to launch a digital currency called Libra. The currency will be governed by the Libra Association, a group of 27 companies, non-profits, and academic institutions including prominent outfits like Paypal, Visa, and Uber. Libra is expected to be a stablecoin backed by a basket of low volatility financial assets. Much remains unknown at this stage – however, Libra could provide new pathways and accelerate the inclusion of the estimated 1.7 billion unbanked population around the world into the formal financial system.

By its scheduled release in 2020, Libra is expected to be incorporated into the Facebook ecosystem, including Facebook.com, Messenger, and Whatsapp. With its active user base of over 2.3 billion, this could understably create a huge impact not only in financial services, but also the cryptoasset industry.

Facebook Libra

In a paper published in February 2019, the Financial Stability Board identified BigTech firms as poised to disrupt traditional financial institutions. By way of their established networks and large customer base, proprietary data, and access to forefront technologies, they enjoy competitive advantages over financial services firms. By creating a Libra network on which innovative decentralized financial applications can be built, Facebook can reshape the future of payments and financial services with Libra as a potential medium of exchange.

More importantly, Libra itself could well spark the mass adoption of cryptoassets. Today, onboarding into cryptocurrencies requires access to fiat onramps, OTC desks, or exchanges, which can be cumbersome for the mainstream user. In a possible Libra world, Facebook or other marketplaces participating in the initial consortium could allow millions of users to easily earn the cryptocurrency by offering their products or services, in an environment they are already familiar with. This is like how AOL broadened the reach and impact of the Internet in its early days.

However, Libra’s future development is by no means easy. Regulatory uncertainty is the biggest obstacle. According to Binance Research’s first ever survey of its largest VIP and institutional clients, changes in global and local regulations are considered the largest single potential growth driver within which crypto projects can either work and flourish, or stall and wither.

Within days of its announcement, Libra is already being subject to regulatory scrutiny around the world. Bank of England governor Mark Carney said that he remains “open-minded” on Libra, but it will be subject to the “highest standards” in global regulations. French Finance Minister Bruno Le Maire said that Libra cannot become a sovereign currency, while German member of the European Parliament Markus Ferber warned that Facebook could become a “shadow bank”. Federal Reserve chairman Jerome Powell also commented that Libra will be looked at carefully, with high consumer and regulatory expectations.

With much remaining unknown, scrutiny abundant, and expectations high, it is probably too early to tell whether Libra will become a success. 

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adminOn Facebook Libra

Cryptocurrency Market Price Alerts and Notifications

by admin on June 18, 2019 No comments

In this fast-paced world, it is challenging to keep track of everything that’s happening.

If you are a cryptocurrency investor, it is paramount you are immediately aware of changes on the market that can have a substantial financial impact on you. So, cryptocurrency market alerts are the solution as these are always-on 24/7 monitors of markets and exchanges.

Cryptocurrency Market Price Alerts

Bitcoin & Cryptocurrency Price Notifications

In 20 seconds you can configure any needed alert for changes in your portfolio. Whenever a cryptocurrency’s price changes, you can become instantly notified through your phone, email and several other channels. Alerts use special filters, so you can choose the ones that work best for you.

For example, you can choose cryptocurrency percentage change alerts which will be sent to you once there are changes of that magnitude in a given time interval. Just indicate which channel you’d like to be notified through and you are good to go.

Using Desktop Browser Notifications to Get Crypto Alerts

If you spend most of your time on a laptop or desktop you can avail yourself of our browser alert option to be directly notified about market changes through your desktop browser. Alerts will pop up on the screen, and thus, you will never miss out.

Using Mobile Device Notifications to Get Crypto Alerts

Desktops and laptops are great; however, we cannot take them with us anywhere. No worries, we have mobile cryptocurrency notifications for you! With these, you can travel, relax with friends, go to the movies or workout and still keep track of your money through SMS and Push notifications.

Get Notified on Mobile if the Price of Cryptocurrency has Changed

iOS or Android, your mobile device is now your personal cryptocurrency market manager.

Any alert you create will notify you directly on your mobile device with a message of your choosing. This way, you can manage your money even on the go!

Just make sure you are within an Internet coverage area. Cheers to mobile notifications!

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adminCryptocurrency Market Price Alerts and Notifications