It depends on the question. For those most in need of value preservation and freedom of transaction, the risks likely far outweigh the benefits. This is a brief aside from our “Reaching Everyone” article series on , by ( ) and ( ) on the use of Bitcoin and the technology stack built atop it to assist those living under oppressive regimes or in conflict zones, and those seeking to flee them. Read and . In The Mesh Matt ฿ @MattoshiN Wassim Alsindi @parallelind part 1 part 2 There is no doubt that volatility in BTC-fiat crossrates make external measures of cryptocurrency value vary wildly, and obviously downside risk is not helpful especially with those in straightened circumstances, or even with their lives on the line. On the other hand things like this might happen: Could so-called “stablecoins” be the answer to the volatility dilemma? Well, stable with respect to what, and how to maintain price consistency? Broadly, there are three current models: . Confidence in value is faith-based with censorship risk — such as JPM’s upcoming offering. Additional risks with undercollaterisation. Central issuing authority . Price maintenance depends on faith in the underlying assets and transparency of auditing. Examples include Tether or gold-backed products. Asset-backed with trusted custodian mechanisms seem like worthy but very much unproven experiments. Until tested at scale and over significant periods of time, these are no place for people on the margins to place their wealth. DAI and Basis (RIP) are examples of this approach. Additional risks arise from regulatory burden, if the stability process is deemed to be and centralised oracles reporting external prices. Front-running may be an additional issue with DAI as MKR (MakerDAO’s parent token) holders would be diluted in the event of a peg failure, with more sophisticated holders jumping ship at first signs of trouble. This may resemble the playing out backwards? Algorithmic security-like Cantillon Effect There is considerable for platform-issued tokens such as stablecoins, especially as the current predominant stablecoin token “hosting” platform Ethereum prepares to undergo transition to ETH1.X and ETH2.0 with some combination of ProgPoW, hybrid PoW/PoS, PoS, the bewilderingly diverse Plasma family of state channels, new virtual machines, sharding and/or state rent. Contrast this with Bitcoin’s conservative development philosophy and aversion to rapid changes in network function largely pushing innovation into “second layers” such as Lightning Network and sidechains. base protocol and smart contract risk Using a Stablecoin today largely redistributes risk from price volatility to , and/or uncertainty, not necessarily a wise trade for someone with few other options compared to physical cash. Privacy is also an issued with almost all these systems, which either require some element of AML/KYC or use networks with inherently poor privacy. technological regulatory custodial Historically, no stablecoin has ever defended its peg over a period of years. Stablecoins are still an experiment, no place to deal with matters of life or death. As the crowded retinue of competing fiat-pegged products grows ever larger, more concepts from traditional finance such as , , or are being proposed or experimented with. demurrage censorability discounts on par interest Even major currencies such as the British Pound , what chance a smart contract or non-native blockchain token with limited resources has to remains to be seen. have failed to maintain agreed trading ranges against well resourced adversaries balance price, supply and demand through the various phases of cryptocurrency’s wild market cycles The BitShares USD stablecoin BitUSD has among the longest history of any attempt. Source https://coinmarketcap.com/currencies/bitusd/ For people outside the most developed nations, or those whose human rights are under risk stablecoins do not deliver the goods, at least in the present day. Wassim Alsindi directs research at independent laboratory Parallel Industries, analysing cryptocurrency networks from data-driven and human perspectives. Find him at and on Twitter. www.pllel.com @parallelind Matt B is a writer and content strategist in the cryptocurrency space with a particular interest in Bitcoin and privacy technology. He can be reached at and on Twitter. itsmattbit.ch @MattoshiN Thanks for reading. Before you go! If you found this article interesting please do 👏 and share it where you can. Remember, you can clap up to 50 times — it really makes a big difference for visibility and warm fuzzy feelings. Y’all welcome to come hang out at and on . www.pllel.com Twitter
