Stablecoins are the Future, but Not Without a Major Upgrade
Dec 18, 2023
By
Marketing Department
By 2030, the most widely used element of our Web3 world will be stablecoins.
Current Projections suggest 1 billion crypto users by 2030; however, the number might not be high enough given the desperation that already exists for stable digital assets.
Over 1.2 billion people live in countries experiencing double-digit inflation.
Take Abril’s current use of stablecoins for example. She is an Argentinian citizen and sees that the Argentine peso is inflating at 5% per month. So she divides her budget into three categories:
Category 1: expenses occurring within 1–2 weeks will be held in her local currency
Category 2: short-term savings and expenses (1–3 months) are held in stablecoins
Category 3: funds that are not needed for a year or more are held in Bitcoin
Facing 60% annual inflation, this kind of strategic thinking is not only savvy but imperative for financial livelihood. But Abril’s story still lacks efficiency. Let’s dive into why…
Stablecoins are the foundation for the future of finance, but not as they exist today.
The current top market capped stablecoins (USDT, USDC, BUSD) are not a viable long-term solution for daily transactability for multiple reasons:
These stablecoins still lose purchasing power as a result of USD devalution — albeit much slower than the hyperinflation of countries like Argentina and Turkey.
USD pegged stablecoins are anchored to the risk of US monetary policy and fluctuations in the US economy and the banking sector
These stablecoins face an uncertain regulatory future due to their centralized components and the derivative nature of their peg.
Outside of the issues surrounding regulation and monetary policy risk surrounding the peg of stablecoins, the largest stablecoins including those listed above include further problems such as:
These stablecoins transact in rigid transparency. They are less private than any other financial mechanism in human history.
These stablecoins are highly centralized and, as a result, fly against crypto’s core value of decentralization.
We have to learn from the pain of current stablecoins and embrace the development of the next generation of alternative decentralized stablecoins.
What does a futuristic stablecoin look like?
Let’s look at a futuristic Web3 currency - SILK. SILK is an overcollateralized and privacy-preserving stablecoin. Its value is pegged to a basket of assets and commodities. The composition of the SILK Currency Basket - combined with its reflexive and adaptable nature - create the potential for Silk to become the most stable asset on our planet.
Now imagine Abril’s story with SILK in the picture. If she understands the weaknesses of single-fiat pegged stablecoins and is introduced to Silk, she would likely change her budgeting procedure.
Simply by holding Silk, Abril will now preserve value and preserve her own privacy in ways that are not possible through other stablecoins.
Silk retains its privacy-preserving purchasing power in hyperinflationary environments in ways that aren’t possible with current stablecoin solutions. Similarly, Silk can help the 50% of the world that lives on just a few dollars a day (but has mobile access) to preserve their limited earnings with the ultimate private stability.
This global perspective leads to a simple but informed thesis… It won’t be the next bull market that takes crypto to a billion users. Rather, those billion users will enter crypto to access the combination of privacy and stability and to serve their financial day-to-day needs. Most people aren’t looking to speculate on volatility. Most people need stability - ideally private stability, like Silk.
It’s not a stretch to suggest that it will be assets like Silk which open the doors to mass adoption. It solves for privacy, economic resiliency, auditability, decentralization, and purchasing power preservation.
It seems obvious that stablecoins are the future, but not the stablecoins on top of the charts right now. The next generation stablecoin is here.
Information provided in this post is for general informational purposes only and does not constitute formal investment advice. Please read the full disclaimer at shadeprotocol.io/disclaimer before relying on any information herein.
