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Stablecoins 2019 / Research
- 1. S T AB L E C O I N S 2 0 1 9 D E C . 2 0 1 9 B L A C K C H A I N . G U R U
- 2. Across global economies,there are 180 currencies around the world. These currencies are recognized by the United Nations. As we all know the usecase of these currencies - buy goods and services. And despite volatility in the forex market due to many factors, the value of these currencies is subject to very little change on a day-to-day basis. A stablecoin is a cryptocurrency that is collateralized to the value of an underlying asset. In simple terms, stablecoin - in the form of digital money - aim to mimic traditional, stable currencies. Stablecoins were introduced to solve the volatility issue of the crypto market, that potentially holds the adoption of cryptocurrencies for everyday payment purpose. In this report, we will outline some important facts and interpret important data about stablecoins that emerged this year. This data quoted in this report is taken from Blockdata and other sources as noted below. O V E R V I E W B L A C K C H A I N . G U R U
- 3. A total of134 stablecoin projects are in development (number may not be accurate) and as of Jul-Aug, a total of 26 stablecoins have been closed. Only 30% of the total number of announced stablecoins are live. USD-backed stablecoins are the most active and have the lowest attrition, while 67% of closed stablecoins were backed by gold. $2 Billion was raised by the top 15 stablecoins. Tether made up half of this total with it's recent IEO. Leader investors name are undisclosed (Private token Sale) Off-chain is the most popular form of collateral for stablecoin projects. B L A C K C H A I N . G U R U H I G H L I G H T S of the total announc ed stablecoins are live of all active stablecoins are developed on the Ethereum network 30% of closed stablecoin projects were backed by gold 67% 50%
- 4. Stablecoins — inthe form of digital money — aim to mimic traditional, stable currencies. Many stablecoins are pegged at a 1:1 ratio with certain fiat currencies, such as the US dollar or the Euro, which can be traded on exchanges, this is because the calculations in the financial markets are always based on major fiat currencies. With stablecoins, it helps to simplify the crypto space Other stablecoins can be pegged to other kinds of assets, such as precious metals like gold, or even to other cryptocurrencies. B L A C K C H A I N . G U R U D E F I N I T I O N M a j o r e x a m p l e Bitcoin Pizza Day On May 18th 2010 Laszlo Hanyecz made known he was willing to buy 2 pizzas for a price of 10,000 Bitcoins. At the time this was worth $41. Four days later, May 22nd, the transaction took place. This date has become known as Bitcoin Pizza Day. The index is the value of 10,000 Bitcoins at today's market price. The Bitcoin Pizza Index is now at $73,091,294! The volatility in the crypto markets still makes some businesses skeptical of crypto as a valid means of payment. In 2018, Bitcoin lost more than 80% of its value. In 2019, since July, Bitcoin's value is down about 50%. Stablecoins addresses this issue and provides a less volatile holding ground for investors and traders during the upswings and crashes of the cryptocurrency market. Not only that, stablecoins leverage the benefits of cryptocurrencies - such as transparency, security, immutability, digital wallets, fast transactions, low fees and privacy.
- 5. T Y PE S O F S T A B L E C O I N S Fiat/Commodity backed stable coin These are known as asset-backed off- chain stablecoins. These stablecoins are backed by a regular fiat currency such as Euro or USD, or any other asset that holds value such as precious metals like Gold. Crypto-Collateralized These stablecoins are backed by cryptocurrencies such as Ethereum Non-Collateralized These are backed by anything. This technology uses an algorithmically governed approach to control the stablecoin supply. This model is known as Seigniorage shares.
- 6. B L AC K C H A I N . G U R U V O L A T I L I T Y The Bitcoin Volatility Index 2.65% Latest 30- Day Estimate Latest 60- Day Estimate 3.34% buybitcoinworldwide.com/volatility-index/ Important note: Daily price volatility of all cryptocurrencies can range from 5% to 160%. Price volatility is the main reason why stablecoins were created. F i r s t S t a b l e c o i n Tether is a stablecoin backed by a combination of cash, cash equivalents, cryptocurrency assets, and loans. Tether tokens (USDT) are pegged 1:1 with the US dollar and account for 80% of all bitcoin trading by volume. It was launched in 2014. by Ifinex inc. - both the operator and owner of Bitfinex and tether limited. Currently, Tether is issued on the Omni Layer, Ethereum and Tron blockchain.
- 7. 0 50 100150 Off-Chain On-Chain Unclassified Algorithmic Hybrid Seigniorage Out of 66 live stablecoins: 95% are asset-backed and the rest are either algorithm backed or fall into 'others' category Out of 134 stablecoins that are still being developed: 77% are asset-backed and 13% are algorithm backed and 10% fall into 'others' category Out of 26 stablecoins that are closed : 76% were asset-backed and 20% were algorithm backed and 4% fall into 'others' category Out of 226 stablecoins, only 66 stablecoins are live. The rest are either in development or have already closed. Classification of type : B L A C K C H A I N . G U R U F A C T S 76% 20% 4% 77% 13% 10% 95% 3% 2% 25 134 66 65% of the total number of stablecoins hold off-chain collateral (Fiat or Commodity backed).
- 8. It is veryprominent to see that Ethereum is the most common choice of blockchain protocols the companies have used to launch a stablecoin. Top 53 active stablecoins on the following protocols (current numbers may differ) : Ethereum : 33; Bitshares: 8; Stellar: 6; EOS: 3; NEO: 2 As you can see Ethereum holds the highest place when it comes to launching stablecoins on its platform. This is because the technology allows the exchanges to integrate stablecoins without spending many resources on coming with another infrastructure or protocol to support stablecoins. B L A C K C H A I N . G U R U I S S U I N G A N D F U N D I N G Not Funded 62.1% VC Funded 16.7% ICO Funded 12.1% ICO & VC 9.1% Only 25 out of 66 active stablecoins are externally funded. Top VC investors are Digital Currency Group, Blockchain Capital, and Andreessen Horowitz.
- 9. USD-backed stablecoins arethe most active and have the lowest attrition, while 67% of closed stablecoins were backed by gold. B L A C K C H A I N . G U R U C U R R E N T S C E N A R I O NumberofProjects EUR: Active 4, In Development 3. USD: Active 18, In Development 13. Unclassified: In Development 30, Closed 4. Crypto: Active 15, In Development 24, Gold: Active 11, In Development 24, Closed 16. Other: Active 12, In Development 38, Closed 3. Data on the current state of stabelcoins:
- 10. Regulators are concernedabout this new asset and they think that this new asset class may fall into the security category. In fact, the Securities and Exchange Commission argue that stablecoins may potentially be violating current securities law. This is due to the inherent nature of stablecoins that is leading the regulators to keep an eye on this new asset. Regulators are still studying and many institutions are still researching into this new asset class. Fiat-backed stablecoins require trust in a centralized entity and majority of the stablecoins are of centralized nature that opposes the principle of decentralization itself. Stablecoins may pose a threat of destabilisation via external geopolitical factors. Think about Black Wednesday in the UK, or the 1998 Ruble crisis that occurred in Russia. If such an event occurs to the fiat a stablecoin is pegged to, it would be disastrous for that stablecoin as well. B L A C K C H A I N . G U R U L I M I T A T I O N S It’s still too early to determine success, and the many emerging stablecoins out there will have to experiment with these new concepts to see what works and what doesn’t.