What is a USD Stablecoin and Do We Really Have Hundreds of Them?

By making dollar values zip around the world at the speed of a Bitcoin on the Lightning Network, final settlement in USD stablecoins becomes possible without any dollars leaving bank vaults.

Or even being printed ...

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What is a USD stablecoin?

A USD stablecoin is a cryptocurrency with a 1:1 peg to the US Dollar.

Therefore 1 coin of any such stablecoin is always worth $1.

How Does it Retain the Dollar Peg?

There are three ways:

1. It could back the USD stablecoin with real dollars in a big investor’s bank account or real assets like gold, silver, real estate, corporate stocks, etc. (requires some extra collateralization to weather bank and crypto exchange fees).

2. It could back the stablecoin with other cryptocurrencies (requires way more collateralization because cryptocurrencies are volatile and could lose most of their value overnight. So you need a lot to back just a few coins).

3. It could back the stablecoin with an algorithm that manipulates the supply of the coins to maintain its peg. If its demand, hence price drops, the circulating supply is decreased so that demand and price gets back to the $1 peg.

And vice versa when the stablecoin gets too valuable (yes, that too is a problem).

4. A mix of the above 3 strategies

Why do we need so many of them?

Table of Contents:

1. Stablecoins are not CDOs
2. A case for Smaller Stablecoins

Stablecoins are not CDOs

If you watched the movie The Big Short, you learned a thing or two about why and how the 2008 financial crisis happened.

In short, the housing market grew too fast; it was a bubble, and this bubble was caused by selling ultra-risky derivatives assets of mortgages, which were called CDOs.

What's worse, some of these CDOs were made from other CDOs.

Basically, it is a scheme of lending not money but the same house to the same person, 3 or 4 times.

Yeah. Doesn't. Make. Sense. But the paperwork looked like truckloads of free money.

Too bad, when the housing (think mortgage) prices kept jumping, people bought these houses (on mortgage) thinking they were making bank with $100,000 houses poised to be worth $150,000+ the next year and $200,000 the year after.

Except, that initial $100,000 valuation was a lie. The original mortgage was maybe on a house worth $10,000. Then all the scammy subprime stuff was thrown on top but oh well, it looked good.

When the bubble burst, people were left holding their furniture in their hands (if they were lucky).

With houses gone back to the banks who had already robbed them.

What's worse, most of these banks got bailed out of their messes.

Thankfully, Satoshi Nakamoto was somewhere in his basement, building a solution that absorbs real and fake money faster than housing, hence pointing out the scams way faster than a housing bubble.

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To wrap up, allow me to explain why if a real dollar is lent multiple times to different people, that is a good thing (say by building stablecoins of other stablecoins).

You're lending it to different people and creating what I can call "real debt pressure" that makes all these people have to move their feet and go build a better world for a buck so that they pay that dollar.

Note: This is not like creating debt by creating new dollar bills. That isn't pretty, and that is why inflation and pervasive poverty are all the rage.

Because too many dollars are floating around, instead of too many “dollar demands for payment” floating around in the world economy.

Wonder if you got it.

Big debt from $1 is not bad. It could be a show of human capability to remember and juggle long chains of economic activity.

Replace $1 with 1 ounce of gold, and voila.

With a chain of stablecoins, $1 dollar is actually helped to do more than would have been possible.

Meanwhile,

Debt + Too many paper dollars printed = Eventual Hyperinflation = Economic collapse.

Note 2: This is also not like creating massive chains of mortgage derivatives in the 2008 CDO scandal.

As I explained, this (mortgage CDO) is just piling more and more debt on 1 person.

No matter who they are, they won't be able to pay it back.

Asset price bubbles always pop and people get rekt.

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Now you know why USD Stablecoins are not at all like CDOs.

A Case for Smaller Stablecoins

The fewer the people, the easier it is to experiment, tweak, fail fast and learn faster.

This is why neither USDT nor USDC have anything on new USD stablecoin projects like Doxa Dollar (Ancient Greek would read 'common dollar').

Circle’s USDC has billions of dollars for it to back its tokens as faithfully as possible on big crypto exchanges like Binance, Bybit, and Coinbase while leaving very little wiggle room for failure.

Doxa has, however, been built on the internet computer to be backed by ckUSDC, an ICP wrapping around USDC.

1 Doxa Dollar can be acquired for 1 ckUSDC, which itself represents a holding of 1 USDC which represents $1.

4 chains of a-ok value pegging.

If Doxa makes profit, it will be good for 3 companies.

(Like I said, making a USD stablecoin backed by a bigger USD stablecoin is a good idea).

But how could the little-known Doxa make profits?

For example, by leveraging a small but dedicated crypto community native to niche use cases.

Real market needs that serve well a small USD stablecoin include:

1. Localised credit access organizations for mutual development that need real-time feedback and help to manage their funds (in Uganda, they are called SACCOs).
2. Smart contracts affect a circular economy on each $1 dollar within a DAO structure.
3. Linking to new chains of value that big exchanges might fear or not know to connect too.
4. Niche projects by Doxa Dollar’s devoted community members can be built on Doxa that these members would not put on USDC.

Exerting pressure on the Dollar Printer

The more people build and use USD stablecoins, the more the demand for Federal Reserve QE and QT cycles to stop.

Because more people get hurt by artificial USG debt, which hurts real debt systems.

Printing money on a whim destroys that money and the debt.

Be it fiat currency or cryptocurrency.

So maybe 200 USD stablecoins are not enough.

Maybe we need 1000 such projects.

Then when the Fed prints money, it really will wreak the world economy big time.

US dollars are still global reserve currency and US bonds a global reserve investment.

(And Japanese Banks suffered on Monday, in part, courtesy of this entire money printer fiasco).

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