Published today, 20 February 2019, a new report into the state of stablecoins shows the most popular blockchains they have been built upon, their most popular use cases and how the companies behind them view regulations.
The findings of the State of Stablecoins 2019 Report have been compiled from responses to a survey that was issued to all companies that are actively working on stablecoin projects. Over 40 of these companies responded to this request, with the report notably boasting contributions from emerging thought leaders in the industry such as Nevin Freeman, CEO of Reserve, Jonas Karlberg, CEO of AmaZix, and Michel Rauchs of the University of Cambridge.
Bitcoin News also caught up with the lead author of the report, blockchain analyst George Samman , who shared just how important he believes stablecoins will be for the future of money.
Key findings
Note: These responses pertain to 38 tabulated surveys. Some participants declined to answer certain questions; these responses are not included.
- 68.4% (26) of the stable coins were built on the Ethereum blockchain, Stellar was the second most popular choice with 7.9 % (3) choosing its native blockchain.
- 52.6% (20) aimed to be a currency, store of value, or medium of exchange.
- Transparency was the top factor influencing market confidence, claimed 34.2% (13) of respondents.
- 36.8% (14) viewed the related industry regulations favorably.
While acting like a currency, store of value, or medium of exchange was the most popular target use for the surveyed stablecoin companies, other projects said they were looking to offer a variety of alternative financial services, including the provision of a credit or loan facility, trading facility wage options and facilitating gold trading.
One in three of the surveyed participants regarded regulations favorably, with some saying they believe stablecoins will likely be viewed more favorable than conventional cryptocurrencies in this regard. A number of the companies had already successfully achieved a fully compliant status, although 13.2% (5) had an unfavorable view of regulations altogether, saying self-governance and complete decentralization where crucial for the nascent industry. A common view between these groups, however, was the need for clarity in regulatory oversight
The report takes several examples of failing fiat currency, focusing on the cases of Venezuela and Angola, to highlight why stablecoins can take their place as a successful alternative to the failings of monetary policy. 5 main factors are given to illustrate the weaknesses of fiat not only in these cases but with government-issued currencies on a macro scale: 1) it is backed by nothing, 2) there is a centralized authority controlling interest rates and the money supply, 3)unsustainable global debt levels, 4) unfunded liabilities and 5) military spending.
The paper also acknowledges several of the weaknesses attributed to the different categories of stablecoins. IOU insurance, or real asset-backed stablecoins, require a third-party custodian to secure the physical reserves, also requiring strong regulatory oversight to ensure transparency. Crypto-collateralized stablecoins can have high volatility, with their longevity dependent on the performance of said cryptocurrency. They are also vulnerable to hacks as the collateral rests on the blockchain. Seigniorage shares, or non-collateralised stablecoins, remain highly controversial, with the highest vulnerability to cryptocurrency market crashes, with liquidation not possible during these periods.
Stablecoins: taking over money as it stands today
First setting up the context of the report with a brief history of money and why it has become an unstable concept for many regions, the report continues on to discuss the retaliatory rise of cryptocurrency and stablecoins, noting the different types of stablecoins and how the space is developing. Many of the projects that are building different categories of stablecoins are surmised, with much of the content collected from the surveys cited within the report.
Sammon relayed to Bitcoin News largely optimistic feedback regarding stablecoins from the contributing sources, saying many were “intrigued with the concept”.
When asked why it is so important to better understand stablecoins, the author responded:
“Money systems are broken in many parts of the world. Many governments have lost control of their monetary policy and it has destabilized countries and reduced their wealth… Inflation and hyperinflation are more common than people think and having a stable and transparent money option can solve a lot of problems for those afflicted by bad monetary policy.”
Sammon believes this failure of the state has given non-government issued currency and stablecoins the ideal opportunity to offer an alternative solution.
Although there has been a great interest in stablecoins in the past year with several dedicated reports already having been published, Sammon says the addition of a questionnaire involving 40 companies in the industry is something unique this report can claim.
“It becomes a giant educational resource for anyone interested in money and why stable coins are an evolution of money,” he told Bitcoin News.
Samman thinks that stablecoins will evolve past the asset-backed subcategory dominant today, primarily because many of these are backed by fiat which are themselves inherently unstable, with most fiat currencies failing to last beyond thirty years. Instead, crypto-collateralized and algorithmic stable coins may well prove to be the bigger innovations in the field, competing to become the decentralized banks for the internet.
“Personally, I feel these projects and the ones that aren’t tied to traditional financial institutions hold the most promise”, said Samman.
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