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FFCON19: Stablecoins, will Central Banks Manage the Disruption of Decentralized Finance (Alan Wunsche, CEO, TokenFunder)


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April 4-Day 2 of the 2019 Fintech & Financing Conference in Toronto at the Bram and Bluma Appel Salon in downtown Toronto. Alan Wunsche, CEO, Tokenfunder talks about the potential for Stablecoins like the DAI, a hot trend in digital assets and crypto markets, to disrupt the central banks. As technology advances and companies jockey for position, there's one thing for sure, there's never a dull moment in the world of decentralized finance.


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FFCON19: Stablecoins, will Central Banks Manage the Disruption of Decentralized Finance (Alan Wunsche, CEO, TokenFunder)

  1. 1. STABLECOINS: “Will Central Banks Manage the Disruption of Decentralized Finance?” April 4, 2019 Alan Wunsche CEO, @alanwunsche @TokenFunder
  2. 2. “The ‘something’ that connects the two transactions is called money, and it has taken innumerable physical forms — from stones to feathers to tobacco to shells to copper, silver, and gold to pieces of paper and entries in ledger books. Who knows what will be the future incarnations of money? Computer bytes?” Milton Friedman, Money Mischief: Episodes in Monetary History 1994 “The one thing that’s missing, but that will soon be developed, it’s a reliable e-cash. A method where buying on the Internet you can transfer funds from A to B, without A knowing B or B knowing A.” Milton Friedman, Interview with the National Taxpayers Union March 1999
  3. 3. Decentralized Finance (DeFi) Blockchain technology, cryptocurrencies and fractional tokens are enablers of Decentralized Finance and Decentralized Applications ü Capital raise (Regulatory-compliant Security Token Offerings) -- startups, scaleups, mature private companies ü Asset-backed micro-shares (e.g. Real Estate) ü Micro-share Exchange (future)
  4. 4. Central Banks Manage Currency Global Forex Trading Volume $5.1 T / day Today, Central Banks maintain national monetary policy through money supply and interest rates
  5. 5. DeFi Cryptocurrency Pairs Cryptocurrency pairs are forming a parallel, decentralized finance system.
  6. 6. A New World of Cryptocurrencies •Volatility à is the new normal •Manipulation à whale watching is in season •Payment Rails à need price stability Mass adoption may arrive when these and other issues are solved.
  7. 7. Bitcoin Volatility is the new normal
  8. 8. Ethereum Volatility Volatility is a challenge for adoption as payment currency
  9. 9. 1. The changing nature of money and the fintech revolution • Money itself is changing. Micropayments. Cashless • Cryptocurrencies such as Bitcoin, Ethereum, and Ripple are vying for a spot in the cashless world
  10. 10. 2. A case for Central Bank Digital Currencies • A digital currency would be a liability of the state, like cash today, not of a private firm. • Security and consumer protection. Without cash, too much power could fall into the hands of a small number of outsized private payment providers. • Privacy… fully anonymous digital currency? Certainly not. Doing so would be a bonanza for criminals.
  11. 11. 3. Downsides of Bank Digital Currencies • Risks to financial integrity. Tradeoff between privacy and financial integrity • Risks to financial stability. CBDC could exacerbate the pressure on bank deposits. • Risks to innovation. the central bank focuses on its comparative advantage— back-end settlement—and financial institutions and start-ups are free to focus on what they do best—client interface and innovation
  12. 12. Growth of Stablecoins 3 Types of Collateralized Stablecoins: 1.Fiat-backed, 2. Commodity-backed, 3. Crypto-backed
  13. 13. Tether : Fiat-backed Stablecoin The dominant stablecoin created with Bitfinex. Experienced controversy over how much centralized fiat collateral exists in custody.
  14. 14. USD Coin: US dollar-backed Stablecoin
  15. 15. MakerDAO : Dai/USD Stablecoin Dai is a Crypto-backed stablecoin with a decentralized mechanism to maintain stability.
  16. 16. Maker CDP* Overview Dai smart contract holders function together like a Decentralized Central Bank * Collateralized Debt Position
  17. 17. Dai Stability Regardless of ETH/USD, Dai/USD has maintained ~$1/Dai
  18. 18. Example: Pay with DAI at Burner Wallet applications are making onboarding Demo: Point Phone camera at this Private Key QR Code to load this Burner Wallet. Wallet Address
  19. 19. DAI Used for Real World Payment
  20. 20. Maker Collateralized Debt Position •A CDP is an Ethereum smart contract that enables the generation of Dai stablecoins against the collateral that you lock up in the CDP until you pay back the Dai you generated. •Dai can be spent like USD (wallet to wallet) •CDP has a stability fee to the network of 7.5%
  21. 21. Conclusions and Crystal Ball 1. Stablecoins will grow in adoption as crypto payment option. 2. Central Banks will release nation-state stablecoins, and IMF will have digital SDR (e.g. SAGA) 3. More private crypto-stablecoins will be launched (e.g. JPM Coin) 4. Regulators…. may yet deem non CB crypto-backed stablecoins (e.g. Basis) as securities, paving way for more (2).
  22. 22. Thank you! @alanwunsche Find this presentation: