Editor’s note: encryption currency is coming into our life gradually, which is a stable currency. Currently there are four types of currency stability, by endorsement, endorsement by the sovereign currency, commodity endorsed by other encryption currency and asset endorsement. Although there are a variety of limitations, convenience but stable currency also deserves praise. In view of the development prospects of stable currency is still considerable, we have to suppose, the price relatively stable currency in the future will not be encrypted, encryption and subversion of the world’s payments system? Original title What Are Stablecoins?
Block chain may subvert almost all industries.
In the case of a large number of emerging technology, which aims to create a new and improved through the payment system — a secure, transparent, fast, to the center of the payment system in the world, and the use of encryption currency as a means of payment.
But most encryption the value of the currency, especially the bitcoin volatility in every day. Although the virtual currency is to promote more secure transactions, but their value is increasingly focused on speculation.
Encryption currency investors may become millionaires overnight, but in just a few weeks after may have lost most of the wealth. Although change radically a little stimulation, but also shows when bitcoin extremely unreliable nature — especially as a general equivalent of hope.
As a result, stable currency (stablecoins) stage.
Stable currency — a growing concern — than the ordinary encryption encryption currency currency fixed to much, because of their dollars or other assets linked to gold.
At the same time, the stable currency also has many advantages of encryption currency, but unlike most other encryption currency that has great volatility. After all, if the price of bitcoin always change radically live, most enterprises may not produce what it will not interested in.
According to a recent report, there are at least 57 kinds of stable currency on a global scale has been put into use or under development. In addition, Paxos Standard (PAX) and Gemini Dollar (GUSD) is two by the approval of the Ministry of Finance and the stable currency regulation, $endorsement.
What is a stable currency?
Today, the world has recognized 180 currencies by the United Nations, from the dollar to the euro and the yen.
In the network of global economy, the money is often used to buy goods and services. Despite inflation, exchange rate fluctuations, but the value of money in daily life is almost no change.
This allows people to receive the money as a general equivalent to trade. In other words, you can from you today most love the Baker to spend $3.5 to buy a loaf of bread, and you know that tomorrow it is unlikely to fall sharply to 99 cents.
Stable currency exists in the form of digital currency, to imitate the traditional, stable currency.
Usually, the stable currency is an underlying asset for its endorsement of encryption currency. Stable currency different underlying assets will be discussed below.
The most stable currency and some legal currency (such as the dollar or Euro) linked exchange rate of 1:1. These statutory currency can be traded on an exchange. Other stable currency can be linked to other types of assets, such as gold and other precious metals, even can be linked with other encryption currency.
Why was the stable currency?
Effect of stable currency not by other extreme fluctuations in the price of money encryption.
For example, 2010, a programmer with 1 000 bitcoin (then worth about $30) to buy a pizza. Earlier this year, 1 million worth of bitcoin has reached 8200 million dollars — this is the price of bitcoin rapid change results.
Therefore, some enterprises can become an effective means of payment are skeptical of encryption currency. For example, Microsoft for the first time in 2014 years to accept bitcoins as payment, but earlier this year due to market fluctuations and temporarily stopped the payment. While other companies have begun to accept the encryption currency, but commonly used encryption currency economic activity time is still very far away.
On the other hand, has the advantages of stable currency crypto currency — such as transparency, security, digital wallet, fast transaction and privacy protection — as well as the legal tender (such as the dollar or Euro) security.
Stable currency may benefit to make rapid and many industries international payments and personal safety decision – from personal remittances, to find cheaper and more effective way for large enterprise payment to overseas suppliers.
In these two cases, people do not need to worry about such speculative asset depreciation — such as bitcoin, since this year 1 months fell by about 60%.
For example, bank deposits in underserved communities, people can use this form of digital currency transactions, especially in the larger economic uncertainty area. A theory not subject to local laws and conditions in the global currency is technically feasible.
Stable currency in the financial services ecosystem is also showing its advantages.
Through the establishment of a secure and stable dispersion system, from cross-border lending to financial planning are likely to benefit from. For example, stable currency trading environment can provide reliable P2P needs, this is bitcoin such unstable currency to compete with the encryption.
Broadly speaking, this is likely to involve encryption currency field of APP personnel and enterprises, such as traders, investors and block chain enterprises based on the huge impact.
The type of currency stability
Stable currency can be roughly divided into the following 4 categories.
Stable currency currency endorsement The most common is a stable currency dollar, euro or pound as legal tender endorsement.
The stability of the RMB exchange rate legal currency endorsement for 1:1. Therefore, we can say legal currency every penny coins are stable in a bank account in real as support.
When people want a stable currency cash redemption, relevant agencies will be removed from their currency reserves and the person into the bank account, stable currency of the same value is then destroyed or exit the loop.
Stable currency principle legal tender endorsement of the most simple, most advantageous. Just contact for any encryption currency of the people, it is easy to understand the principle, which can be widely used in encryption currency and to promote this new technology.
As long as the economy linked with the stable currency and keep stable, stable currency value will not fluctuate. This means that even if the whole circle of crypto currency collapse, bitcoin fell to $0, stable currency also did not affect the legal tender of endorsement.
Stable currency is the most popular Tether (USDT), which is the current market value of 9 crypto currency is trading in the greatest amount of money all encrypted, behind bitcoin.
However, Tether has recently been controversial, some people doubt the actual release of Tether was more than the actual dollar amount.
For this reason, many new legal tender coins have the endorsement of stable, trying to replace Tether.
The typical one is TrueUSD (TUSD), it is currently the second most popular and stable currency, and U.S. dollar exchange ratio of 1:1. TrueUSD allows users to directly exchange with the escrow account, to provide legal protection for the integrity of the token holder, and ensure the stability of the currency they hold is a dollar endorsement.
Stable currency and many other legal tender endorsement. In the UK, the London Commodity Exchange (London Block Exchange) released LBXPeg, this is the first to sterling encryption currency. In Mongolia even has a stable currency called Candy, and Mongolia Tugrik currency peg.
Earlier this year, the company announced the issuance of Circle encryption financial stable dollar endorsement of USD Coin (USDC). A number of exchange platform — including Coinbase, Poloniex and Bit-Z — USDC.
A stable currency backed by the United States has been the New York Financial Services Department for approval and supervision, further evidence of the stable currency has begun to enter the market circulation. 9 2018, Paxos Standard (PAX) and Gemini Dollar (GUSD) to become the world’s only 2 regulated encryption currency.
Stable currency commodity endorsement A stable currency commodity endorsement and precious metals and other trading assets. The most common is the gold linked goods — but also to oil, real estate and all kinds of precious metals to stabilize the currency basket mortgage.
Commodity endorsement stable coin holder basically holds a tangible practical value, but most do not have this value encryption currency. Over time, these goods even has the potential appreciation, this increases the people hold motivation and use of these stable currency.
Have a stable currency, commodity endorsement to anyone in the world can invest in gold and other precious metals, and even the Swiss real estate, and this kind of assets used only the wealthy investment, but the stable currency has opened up new investment opportunities for ordinary people in the world.
For example, Digix Gold (DGX) by physical gold endorsement, of which 1 DGX represents 1 grams of gold. The gold stored in a vault in Singapore, an audit every three months, to ensure security and transparency. The founder of DGX, said they had “achieved gold democracy”. DGX holders can redeem even physical bullion — as long as they go to Singapore vault on the line.
Tiberius Coin (TCX) is not a commodity endorsement, but by 7 kinds of commonly used precious metals combination technology hardware manufacturing and. The founder of the idea is that as these metals are increasingly used for manufacturing solar panels and electric vehicle technology, TCX Coin value will rise.
SwissRealCoin (SRC) is a stable currency by the Swiss real estate portfolio endorsement. The holder of the SCR can even democratic vote on investment choice.
Stable currency currency encryption endorsement There are some stable currency is endorsed by other encryption currency.
Therefore, a stable currency currency stable currency than encryption endorsement endorsement by the legal tender of the underlying assets more to the center, because all the operations are carried out in block chain.
In order to reduce the risk of price fluctuations, the stable currency often need more assets as a support, in order to ironing collateral price fluctuations.
For example, stable currency value behind the $500 could be worth $1000 dollars for Ethernet (ETH). In this case, the stable currency behind the underlying assets is 2 times the price fell, can withstand 25%.
If used as the endorsement of encryption currency prices fell badly enough, stable currency will automatically liquidate.
Stable currency currency of the underlying asset encryption endorsement of a wide variety, to some extent also to disperse the risk.
This kind of stable currency strong liquidity, which means they can be quickly converted to the underlying assets.
A stable currency currency endorsement encryption is one of the most complex of all stable currency, which means that they do not get enough attraction, because they are a series of problems.
Endorsed by the encryption currency stable currency is currently the most popular and most promising is Dai.
Dai is a stable currency value surface created by MakerDAO to the dollar, but in fact there are ETH endorsement.
No stable currency asset endorsement No stable currency asset endorsement? Well, considering the stability of currency, it seems a bit contradictory.
The past is the dollar backed by gold, but in this case the decades before the end, the dollar is still very stable, because people believe that the dollar’s value. The same idea is also applicable to the stable currency without the endorsement of assets.
Stable currency of this type uses a method to control the stability of control money supply. With the increase of the demand, the new currency stability is created, the stable currency prices decreased to the normal level. If the stable currency price is too low, stable currency circulating in the market will be recovered to reduce supply. In theory, these stable currency prices will remain stable, because they are driven by market supply and demand.
This is a stable currency independent and decentralized, because it does not have any other assets endorsement. This means that even if the dollar and the encryption market collapse, stable currency in this form will survive and maintain stability.
However, no stable monetary assets endorsement of success is the continuous growth. In the case of collapse, stable currency to assets, all the money will make sense.
No stable currency asset endorsement of Basis is typical, it through the algorithm to adjust the supply, in order to keep prices stable. It calls itself “the central bank has a stable currency encryption algorithm”.
Although still in the early stages, but the stable currency has many potential uses in the real world.
Daily trading Stable currency can be used as other mainstream legal tender, but as a legal and safe digital currency, it also has additional benefits.
We may finally be able to come up with mobile phone, for us to drink in the morning with a digital wallet encryption encryption currency like many lovers dream that coffee pay.
Stable currency also quite favorable on cross-border payment, because it does not need to exchange currency different. In India, you can directly use the stable currency payment, instead of the dollar in advance for rupees, do not worry about the losses caused by exchange rate fluctuations.
To simplify the payment and P2P payment Stable currency also supports with intelligent time enforcement of financial contracts.
Intelligent contract is self executing contract exists in block chain network, does not require any third party or authority to implement. These transactions can be automatic tracking, transparent and irreversible, which make them pay wages and loans and pay rent ideal.
For example, the employer can set up a smart contract, each month will pay money to the automatic bottom stable staff. This is particularly advantageous in multinational companies, because it reduces the high cost and long process of exchange. A process in a stable currency system may only take a few minutes.
Between the landlord and the tenant can also establish an intelligent automatic contract, pay the rent at the first day of the month, without worrying about the price volatility as unstable as encryption currency.
The same example is also suitable for automatic payments, monthly membership renewal, even regular donations to nonprofit organizations.
Convenient remittance Stable currency may also change the life of millions of people in developing countries.
In today’s world, migrant workers must be through the enterprise remittance, to put money back home and relatives. This is a slow and expensive process, eventually because of the high cost and the loss of a large amount of money.
Although encryption currency provides a solution to this problem, but there are still some defects such as bitcoin currency depreciation of 20% encryption in a day.
But now, the stable currency can provide a better choice. The world of the workers and their families can use a digital wallet, you can instantly from anywhere in the world to receive a stable currency, low cost, stable value.
In 2017 alone, the global total remittances reached 613 billion US dollars, to stabilize the currency, a huge market.
From the currency collapse worries In the case of devaluation of the currency, residents can save more quickly before the loss, its depreciation of the currency into dollars, euros or goods are stable gold endorsement, thus affecting their currencies from further depreciation.
In order to present the hyperinflation of Venezuela as an example, on average, commodity prices will be doubled every few weeks. The International Monetary Fund (IMF) predicts that by the end of 2018, Venezuela’s inflation rate will reach 1000000%. Most Venezuelans can’t afford food, because they have nothing at all.
Stable currency provides a solution to help people through the crisis, so that they can rapidly depreciating currency into a stable currency, so as to protect them from the effects of further depreciation.
Improved encryption currency exchange Due to strict supervision, at present only a handful of encryption currency can be exchanged for legal tender. But the use of stable currency can circumvent this problem. This will greatly contribute to the promotion of encryption currency, bitcoin will also reduce the huge influence on the market, because most of the requirements of the exchange traders hold bitcoin, then can be converted into other types of encryption currency.
Although the stable currency has many advantages, but also has its limitations.
The Tether shows that the stable currency may be what problem. Stable currency legal tender endorsement is centralized, which means they run by a single entity. This requires people to believe that this entity does use legal currency real stable currency endorsement.
Because Tether had never been on its dollar reserves of transparent audit, many people suspect that Tether holds only a small part of its holdings of claims. The results, only in October 2018, Tether’s market value fell more than $1 billion.
In order to solve the problem of trust is similar, stable currency should provide regular audit from third parties, to ensure transparency. This will help to ensure a stable currency is trustworthy, and helps to maintain a stable currency reputation.
Stable currency legal tender endorsement is also subject to legal tender with restrictions, which reduces the efficiency of the conversion process, namely, their liquidity is lower than ordinary encryption currency.
The stable currency commodity endorsement is especially true. For example, if you want to get real gold, may need to complete all the work spent months.
In addition, the risk value of the underlying asset crash always exists.
Think of the sovereign currency plummeting picture. If such an event occurs in a stable currency endorsed by the legal tender, to stabilize the currency would be disastrous.
A stable currency cryptocurrencies endorsement has problems of its own.
Compared with the stable monetary currency or commodity endorsement, stable currency linked with other encryption currency more vulnerable to the impact of price instability.
They are associated with specific encryption currency (or encryption currency portfolio) associated with fluctuations in the value, which means that if certain encryption currency volatility, stable currency will eventually affect. In the case of price collapse, they will be automatically liquidation as the fundamental instability of the underlying encryption currency.
By another drawback of stable currency currency is their endorsement of encryption is difficult to understand, and is the most complex types of risk and currency stability, error in complex process is much higher.
The encryption currency is still in the initial stage, and stable currency even more so. This new digital currency is still in the exploratory stage, there is still a long way to go before the real mature.
Although we can not predict the blockchain world changing in the future what will happen, but stable money can lead all the money in the encryption of mainstream payment make a space for one person.
Stable currency each form has its unique advantages and disadvantages, no one is perfect. However, they can provide for enterprises and individuals of the global value and stability may have a revolutionary effect.
However, to assert that its success is premature, many emerging stable currency will have to try these new concepts and see what works and what doesn’t work.
Compile group produced, editor: Hao Pengcheng