Stablecoins 3.0 – Von Hayek's Dream: Expert Blog

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If you have the impression that the quest for a currency Decentralized began in October 2008, when Satoshi Nakamoto published a white paper on a cryptography mailing list on metzdowd.com – you'd be gone for about 40 years.

In the mid-70s, the economist Nobel Laureate Friedrich August von Hayek a book now almost forgotten called the denationalization of money in which he made an argument for it. private money issued by the competition. Being the liberal he was, he hoped the market would pick the best money for every occasion.

Von Hayek died in 1992 (spewed by academics, if you know it, for the sin of having married a full cousin) so he missed the technological revolution Blockchain and Cryptocurrency that made his vision possible. If he was still alive, old Friedrich would feel justified. His prediction that the biggest hurdle to these private funds would be volatility was on the point.

Crypto-currencies are volatile. A layperson – or an average redditer commenting cryptocurrencies – would say: "My Bitcoins have turned! I do not see any problem. But in economic theory, upward revaluation is just as bad as devaluation, as it hurts debtors and makes daily practical implementation impossible.

World domination requires stablecoins. ]

There have been numerous attempts to create stablecoins. The first generation – CoinoUSD, NuBits, BitUSD and Tether – attempted to attach a cryptocurrency to the US dollar in the hope that the stability of Uncle Sam would detract from the coin

. They all failed in the same way, but for different reasons.

The stability of CoinoUSD and NuBits was based on the word of their developers. There was no stabilization mechanism in their program code: corrections were made by central management. BitUSD was the first to try to achieve stability through a reserve fund – in their case thanks to BitShares cryptocurrency – but this was not enough to stabilize the $ 1 exchange rate.

Coin Price Chart CoinoUSD (Now Supposed)

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Nubits Price Table

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BitUSD Price Table

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Cable Price Graph (November 30, 2017)

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Tether, the most successful of the bunch, was the first to try to stabilize their cryptocoin by keeping real reserves in the currency to which it was attached. The big problem with Tether, however, was transparency. The reserve fund is not audited and the issuing company is shaded. All of this became painfully clear when Tether was hacked and 30,950,010 of these stable USDTs were transferred to an unauthorized Bitcoin address.

The last two years have seen several new attempts to create stablecoins, with new innovative strategies. . Bancor and Dai are both trying to achieve stability through Ethereum reserves and respective chips – which is inherently volatile – so not an option. Digix is ​​pegged to gold but immediately found it in the same corner as Tether: the underlying reserves are not transparent and need to be manually controlled

Table of Bancor price (November 30, 2017)

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DigixDAO Price Table ((November 30, 2017)

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The Columbus Egg, in In my opinion, it is about linking a coin to a fund that holds a range of core assets such as national currencies and other commodities The anchoring mechanism must be revolutionized in two ways:

be audited to avoid a Tether 2 disaster. 0 Auditors must be transparent, reliable and reliable, so it makes sense to operate a government agency. for work. Second, the project should be supported at the legislative level. This provides a legal framework for payments, registration on the balance sheet, transparent legal disposition, inheritance and handling of complaints through legal procedures.

This knife cuts in several ways: for users, the money becomes more private. far from the banks at Blockchain technology – not to mention all the other well-received benefits that this technology brings to finance. The state, on the other hand, has the guarantee that the money supply of its currency does not increase and that the funds available are used as reserves.

This approach has the potential to realize Von Hayek's vision: Hundreds of stable and transparent currencies will emerge, all related to assets such as gold, oil, wheat, currencies national laws and raw materials. They will all compete for the hand of users who will be able to make a choice based on the benefits that each piece brings to their specific use case.

And if you think 100 different stable currencies are too many – our man Von Hayek has you covered. Three years after spreading the publication of many private funds, he realized that all these different currencies would create a disordered ecosystem. In the updated version of his book (with the subtitle "The Argument Refined") he speculated that the markets would converge on one or only a limited number of monetary standards.

He may have been right.