The Stable Coin — A Cryptocurrencies Philosopher’s Stone

Too Long; Didn't Read

Stable coins are a very sought after goal of the current cryptocurrencies ecosystem. <a href="https://a16z.com/2018/01/21/mental-models-tokens-crypto-trends/" target="_blank">A16z podcast</a> has claimed it to be one of the two main challenges of cryptocurrencies’ core tech, together with identity providers. Existing solutions today include Basecoin, MakerDAO and Tether. The reason they are so important is the high volatility in current cryptocurrencies, which is probably due to speculators in the market and the uncertainty of their future value. This creates huge fluctuations in the value of the currencies that prevents them from becoming what they were originally meant to be — a <a href="https://cointelegraph.com/news/bitcoin-not-currency-never-will-be-expert-blog" target="_blank">medium of exchange</a>, and also what they were later predicted to be — a <a href="https://www.cnbc.com/2017/12/07/kevin-oleary-bitcoin-is-an-asset-not-a-currency.html" target="_blank">store of value</a>. A merchant can’t work with a currency that can change 30–40% on the day. If he receives a payment from a customer and by the time he needs to pay his suppliers the payment’s worth is reduced 30–40%, assuming his profit margins are not that high, he’s in a world of trouble. Thus, if you could come up with a coin that is pegged to a more stable asset such as the USD or gold, it could be a great solution for these problems.