Lattice Meets Stable Assets

Asset-Backed Stablecoins

Cryptocurrencies backed by an equivalent amount of dollars, currency, or tangible assets. Users and holders of these coins retain confidence with the knowledge that an equivalent amount of value is stored in a vault or on a balance sheet. Tether is the most widely known asset-backed stablecoin, although an audit in 2019 revealed that only 74% of the total value was held in reserve. However, this did nothing to affect the long-term use of Tether for crypto users. Instead, its market cap has only grown. It is available on several blockchains, including Ethereum, EOS, Tron, and Solana.

Crypto backed stablecoins

Stepping towards the more speculative side, there are crypto-backed stablecoins. This may seem like an oxymoron as cryptos are volatile. MakerDAO has managed to walk this tightrope by creating DAI, a dollar-pegged stablecoin that retains its value through a series of smart contracts that dynamically use lending and borrowing to maintain DAI’s value.

Algorithmic backed stablecoins

Stablecoins that hold value based on complex mathematics, or seigniorage stablecoins, are one of the final hurdles in the space. Instead of relying on assets of any kind, these algorithmic stablecoins instead rely on increasing/decreasing the token supply in conjunction with demand. Several attempts have been made to develop a token for this (Basis and Anchor) but they have not yet caught on. Projects currently using the idea of dynamic token supply are AMPL and Tower of Babel (TOB).

Overwhelming Popularity

The resistance to volatility has made stablecoins the most widely traded asset in the world of cryptocurrency. LiveCoinWatch.com shows that Tether has the highest volume in the world. Crypto speculators regularly take profit in Tether to measure gains and losses. Its analogous nature to the dollar also makes it a preferred way to send payments both locally and abroad. Looking at the amount of volume USDT does on a daily basis, it becomes clear just how popular the idea of a stablecoin is.

Future of Stablecoins

It was only a matter of time before nations became aware of the potential of blockchain-based payment systems. Perhaps buoyed by the success of projects like Tether, world governments are now actively pushing forward with native alternatives.

Speculation

The wheels of Government regulation turn slowly, and always behind the wheels of technology. But some local governments, like Wyoming, are looking to the future to encourage and accelerate the speed of adoption of stablecoins and crypto as a whole. The Cowboy State already has 13 blockchain laws on the books, including digital property rights for cryptographic assets, creating a 3-year grace period from current regulations, and a state-chartered depository institution to provide basic business services for blockchain companies. The state government also exempts crypto-to-crypto transactions from money transmittance laws.

Join Lattice In Changing The Face Of DeFi

Authored by Carlos Park

Carlos has been actively involved in cryptocurrencies since 2014 and since then has authored multiple articles and reviews, edited podcasts, and acted as an advisor for several projects related to blockchain technologies.

References

Counterfeit Digital Yuan ALREADY — https://qz.com/1922648/there-are-already-counterfeit-wallets-of-chinas-digital-yuan/

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Lattice Exchange

Lattice Exchange

Lattice is a DeFi application built with Ethereum and Constellation’s Hypergraph Transfer Protocol (HGTP). Empowering users with advanced AMM algorithms.