Industry analysis of currency stability

1, what is a stable currency

Definition 1.1

Stable currency as a crypto currency, aims to minimize the price volatility. The underlying logic is stable currency in the establishment of the whole block chain world payment system.

The background of 1.2

Intermediate L and encryption currency conversion lack of legal tender intermediary

Most of the current exchange currency does not support direct trading encryption currency, investors can only use currency exchange and currency stability, stable currency and other encryption currency transactions, price stability to ensure stable currency investors bear a huge price risk in this exchange process does not need.

L business scene demand settlement currency price stability

The use of encryption currency for settlement scenes in the real world, such as cross-border payments, futures trading, forecast quizzes, users want to use the currency price stability so as to ensure the interests of the parties or the parties to the transaction.

Under this background, the stable currency came into being, it is a medium of exchange, store of value and unit of account and other functions, and universal, regardless of frontiers, with great convenience in the settlement of the settlement. We can see that the stable currency value not only become the entrance encryption currency of the world, it will eventually become the payment system block chain in the world, the user will be engaged in various types of financial activities in the world in the block chain using stable currency, governments have not yet launched its currency corresponding encrypted currency window period, stable currency market produce will be extensive and profound in the whole block chain world.

2, stable currency status

2.1 classification

The stability of the currency market mainstream is mainly divided into three categories: legal tender coins, mortgage type stable chain asset-backed currency stable, stable currency algorithm.

Currency mortgage stable currency

This is a kind of stable currency is a center of cash issued by mortgage bonds, from the “gold standard”, the issue is a center will hold the dollar, Hong Kong dollar currency assets for collateral, can be issued to stabilize the currency fixed rate repurchase, for currency assets generally tend to choose dollars, mainly because it has higher stability and wide use of.

The release process of the USDT are as follows:

1, users need to 100W usdt

2, the user will pay 100W $Tether (USDT issuer)

3, Tether 100W and 100W in the bank, issued to the user

(in fact, USDT issuance process is more complex, here we do not discuss whether Tether licence, whether you need to audit process, and whether the Tether super problem.)

The chain of asset-backed currency stability

This is a kind of stable currency mortgage assets as chain assets (now basically are encryption currency), issue is to block the user through the chain chain holding mortgage assets, such as ETH, to obtain a stable currency corresponding to the user mortgage encryption currency system will be locked, and users need to add down mortgage mortgage assets and asset prices remain stable currency price stability, usually the mode of operation is in the user first mortgage, the mortgage will be N (more than 1 times the value of the currency stable). The total value of this kind of stable prices and currency linked mortgage assets.

The algorithm is stable currency

This kind of stable currency from the central bank issued currency, the quantity of money based on the theory of contract through intelligent increase or decrease the amount of money in circulation to keep the currency stable price. This model is based on the assumption of the quantity theory of money, money and $1:1 stable anchor, when the market demand for the strong currency algorithm is stable, stable currency flow increased, the actual market price will be higher than $1, the issuance of new currency contracts intelligence will automatically put on the market; when the decline in market demand, smart contracts began to recover stable currency, usually by way of issuing bonds repurchase system stable currency, withdraw the liquidity by reducing the supply of the stable currency price regression.

Three types of currency stability

 Industry analysis of currency stability

2.2 stable currency risk

1) long term, stable currency the biggest risk source encryption currency from the government, when appeared by the state endorsed encryption currency currency stable living space for private projects will be greatly compressed, the government clearly has a better credit endorsement. Stable currency development is now the best time window, in the existing regulatory policies to explore the construction of the blockchain payment system, the future for the government to build a crypto currency payment system to provide practical experience.

2) the difference of different types of stable currency risk, the risk theory we discussed based on:

We believe that the risk of currency stability at present there are three main aspects:

L market risk, because the risk arising from the change of market demand, the performance of the market to stabilize the currency demand bullish or bearish. The algorithm mainly exist stable currency market risk, because the quantity of money based on the theory of the market demand for long-term stable assumption of currency, when the stable value of the currency is shrinking, the issuance of bonds to reduce the supply system, adjust the price, but if the price fell because of currency, allows users to lose confidence in the stable currency, then the algorithm will be stable currency in a death spiral, and eventually the entire monetary system collapse.

L floating risk refers to the risk due to stable coin price fluctuations. The encryption type stable currency mortgage currency mainly exists the risk, because of mortgage assets and encryption currency, encryption currency price fluctuations, but when the market is generally upward or downward, which leads to stable currency risks appear to float.

L trust risk refers to the risk for the currency market is in accordance with the agreement and perform their duties faithfully.

The currency stable currency are mainly mortgage credit risk, because the anchor currency, so the price is relatively stable, the floating risk is small, but because it is the center of the center of the mortgage agencies responsible for legal tender, if not to disclose the mechanism for mortgage and financial situation, not to accept the audit, easy to produce super, spam and other covert operations leading to trust risk.

Three stable currency in contrast, currency type stable currency issuer is simple and direct, in normal operation condition, pattern is quite stable, but this kind of stable currency is not open around for the issue of trust, which will be the center of the problem, for example, the current market value of the highest USDT has a history of information disclosure, non disclosure of key information Co. super, SEO, three party auditing to market trust for such a gradual decline in the stable currency, and this kind of stable currency is also affected by the regional politics; and the chain of asset-backed currency stable and highly decentralized and transparent, but because of mortgage assets is extremely unstable floating risk; algorithm stable money do to the center, without geographical political influence, the risk depends on whether the market have long-term expectations for this kind of stable currency.

3, the stability of currency

 Industry analysis of currency stability

4, on behalf of the project

4.1 yuan mortgage – Tether

Currency: USDT

Introduction: USDT Tether company issued currency stability, stability in the currency market capitalization accounted for about 77%.

Circulation: 1706421736

Total supply: 2580109502

Evaluation: USDT is still the market value accounted for the highest stable currency, high liquidity, but the excess has not been solved, but also because of its binding with the bank, will be more regional control.

4.2 the chain of mortgage assets – MakerDAO

Currency: DAI (stable currency) +MKR (functional tokens)

Introduction: MakerDAO is to the center of the autonomous organization and intelligent contract system Ethernet square on DAI, is the first stable currency issued by its square on Ethernet

Circulation: 72034579

Evaluation: DAI uses excess mortgage model, based on chain assets issued, with a high degree of transparency, and can solve the liquidity and solvency problems, the main problem is that the anchor assets is not stability and anchoring assets lack of diversity.

4.3 – Terra algorithm

Currency: Terra (stable currency) + Luna (functional tokens)

Introduction: Terra is a stable currency project launched by South Korea’s second largest business platform TMON, in addition to back business platform TMON, Terra and Brothers will also include Woowa, Qoo10, Carousell, Yanolja, Pomelo, TIKI.VN, business partners established Terra business alliance, covering about 40000000 users. At the beginning of Terra stable currency will gradually pay the electricity supplier in the union duties, the latter will block chain in the world to pay for.

The characteristics of Terra:

1, dual currency: currency stability mechanism algorithm (Terra) + functional token (Luna)

L Terra: algorithm with stable currency, and to ensure the supply of additional tightening algorithm Terra stable currency price stability;

The function of L Luna: token Terra platform, can be likened to the rights and interests of Token, its value from payments from Terra on the network fee, so as to use Terra stable currency trading volume is bigger, the value of Luna will be higher;

2, Luna pool: the user will Luna into the pool of funds to obtain the right to return, the pool of funds to ensure real-time minimum deposit reserve rate of 120%, which is an important factor to keep the Terra stable, not only provides a decentralized guarantee for the solvency of Terra, but also to avoid the risk of investment and supervision of various machine.

The design of Terra stability mechanism:

The stability condition of L Terra is a pool of funds sufficient to ensure adequate funding pool is mainly in two aspects: hold Luna enjoy Terra in the network transaction fees, to attract investors to buy Luna Luna caused prices to rise; the ecological Terra network more prosperous, application of the payment system more widely, more fees received. Also promote the rising prices of Luna.

When l Terra over supply, the anchor value is lower than the asset price, the algorithm will borrow from the pool of funds to repurchase Luna for Terra in the market therefore destroyed, the pool of funds is higher than the value of the Terra market capitalization, this is the pool of funds to ensure the reserve rate 120%.

L Terra when the supply is too small, the anchor is higher than the value of asset prices, the algorithm will release a certain amount of Terra, the Terra on the one hand from the pool of funds for debt, other will determine the use of Terra by voting.


1, the height to the center, from the market the most stable currency to anchor a single asset, the value of which anchors the Terra network in the value of the goods and services, and does not depend on the regional monetary and economic policy, with a height attribute to the center of the.

2, completely reserve system forced to set 120% is not less than the reserve ratio for the stability of the currency are fully guaranteed.

3, the initial anchor payment in real life, trading scene, backed by TMON and its business alliances, business scenarios are solid enough and the huge number of users, combined with the use of Terra function type token Luna, to a certain extent, can solve the anticipated risks we mentioned earlier in the market.

4, with strong investment, investment, including currency coins, fire Okex, Upbit and Polychain Capital, FBG Capital investment institutions etc..

The risk of:

1, market risk still exists, when the market continued downward to Terra stable mechanism of collapse, prices plummeted, at this time would be to the pool of funds used to repurchase borrowing Luna coins, the destruction of Terra. In order to maintain the pool of reserves will increase the transaction fees, if the market is not optimistic about the Terra, will not accept the fee increase, reserve pool will be consumed rapidly, and caused panic selling of the holder of the Luna Luna, the formation of a death spiral. The project also takes into account the risk in the occurrence of this phenomenon, will introduce external currency reserves, used to save the collapse of the economic system.

2, weak center of risk, Terra in the design of governance mechanism in two place is through the chain in the form of a voting decision, as at the beginning of the project, because the network is too weak, the foundation will add money directed into a currency fund pool, to prevent the black swan and so on; the other one is in the supply of small Terra the new currency, decided by voting the whereabouts and use, there will be 51% risk control.

Evaluation: Terra payment system aims to establish a block chain in the world, and gradually upgrade to block chain financial services platform in the world, its innovation lies in its center, fully reserve, anchoring the real deal scene effectively fusion. Unlike most stable currency project, the development path of Terra is more solid, Terra didn’t make this a system confined to the block chain in the world, it is the first to find the real business scene as the value support, and then to cultivate habits of users, block chain has a solid user base in the world, carrying the will is a huge traffic, which will provide great convenience for the development of Terra after the payment of a scene. Of course, Terra also has market expectations, such as lack of weak center risk, its current planning is only a good vision, the development of specific projects also need to expect the actual landing.


5, the development trend of currency stability

L supervision will be more stringent, the project should be done to compliance, as legal tender to bridge the transition from the track of encryption currency, capital flows, anti money laundering and anti fraud perspective, stable currency is bound by governments focus on, tighter regulation of compliance, with particular attention to the side of the project.

L stable currency to attract more financial institutions, the popularity of commercial society will enter the traditional capital encryption currency market, the money market will be more abundant encryption ecological diversity.

L in the long term, governments will be issued in their own monetary system based on encryption currency, before will be the project stable currency window.

L market size will continue to expand, more stable currency projects will emerge. The market has begun to find stable currency value, with the expansion of the blockchain industry scale, stable currency market will grow, and the design of stable currency mechanism is still in the exploratory stage, will attract a large number of projects, who will be the talent shows itself is still unknown.

Leave a Reply

Your email address will not be published. Required fields are marked *