There’s a real disconnect between much of the crypto world and the real world. Crypto enthusiasts, and ironically, many businesses in the space are building empires that are largely built on the most outlandish and unbacked ideas. Much of which, would be deemed illegal. One particular ‘classification’ of blockchain assets which have come to light in recent years are what have come to be known as stable coins. The most popular of these is perhaps Tether’s USDT which largely operates on OMNI layer and as an Ethereum ERC20 token (both of which suffer from scalability issues).
The problem with most modern day stable coins however is that, they heavily rely on ‘trust’. Not your ordinary trust model, but an excessive amount of trust. It was recently told in court proceedings for example, that USDT is only approximately 74% backed by cash. What should only cost approximately 74 cents continues to be worth a dollar across the crypto-sphere.
The concept of the stablecoin is in many ways flawed, but there’s a lot that can be salvaged. First is first, in order for such a token to operate without an impending risk of implosion, the asset must be 100% backed. Secondly, since no blockchain can ever solve the trust model of real world assets, it is fundamentally important that transparency is attained by transparency and through legitimate audits by legitimate organisations – regularly.
The blockchain world needs to stop thinking of such tokens in the cryptocurrency sense, and start thinking of them in the digital certificate sense. Take for example redeemable gold or silver certificates… These certificates exist in the real world and serve to provide a function for investors to buy and sell the underlying asset. This presumes that the underlying asset is redeemable,