2017 is the first year of the blockchain, and 2018 is the first year of the stable currency.

In September, GUSD and Paxos anchored to the U.S. dollar were approved by the New York Bureau of Finance, which is considered a milestone in the stablecoin field. Prior to mid-October, the sharp drop in USDT caused panic in the market.

The irrational prosperity of ICO has passed away, and the trust crisis of USDT has been exposed, coupled with regulatory approval, which has set off a boom in stablecoins.

Stablecoin projects that have been unknown before have surfaced one after another, including Maker DAO, a stablecoin project that uses ETH as a collateral asset; Basis project, which uses an algorithmic banking model, received over 100 million US dollars in investment from Google Ventures and Bain Capital in April; Financial services organization Circle launched USD Coin, a stablecoin project anchored to the US dollar, in May.

In December, Basis was forced to cease operations due to regulatory issues. More people have also begun to think about the reasonable model of stable currency and the correct way to get along with supervision.

Looking back at the 2018 of stablecoins, we all feel that this application that has been on the fringes has finally entered the mainstream view of the blockchain.

"Stablecoins have completely turned around this year. There were many misunderstandings about stablecoins before, or no one cared about them at all. I told people that stablecoins are very valuable in the first half of the year, but someone asked me that this thing cannot be speculated. What is he doing? As a result, after Gemini and Pax come out, everyone wants to do it.” Wang Zhuo, executive general manager of Xinpai Capital, who has been paying attention to stablecoins for a long time, believes that the stablecoin market will be a market worth hundreds of billions of dollars.

Guests of this issue:

Q1. Where is the fundamental value of stablecoins?

Wang Zhuo: Legal currency deposit channel

The essence of stable currency is to connect the virtual world and the real world of Crypto, which is actually what the Crypto world or decentralized fundamentalists have been resisting. But if you consider the utility, there is no more valuable and meaningful financial application than stablecoins at this stage. The greater value of stablecoins is a legal, or basically legal, legal currency deposit channel.

Crypto fell like this in 2018. A basic problem is that there is very little institutional money in this market. At the beginning of the year, I believed that there were many hedges, and large organizations were also eager to try. But the SEC wanted to investigate, and all the money went away. Institutional money comes in through legal channels, not OTC and gray exchanges. Therefore, for institutional money to come in, stablecoins are the first step and the most basic infrastructure.

The consideration of the institution is very realistic, but in fact it is fair. Everyone can deposit funds through legal stablecoins, which is necessary when the market develops to a certain stage. If deposits can only be made through OTC or illegal exchanges, the market will always be small and there will always be manipulation by giant crocodiles.

In my opinion, the size of the stablecoin market determines the size of the Crypto market.

Stephen Kade: at the core of the economic foundation of the blockchain

Stablecoins are a core part of the economic foundation of the blockchain. Many blockchain applications would not be possible without price-stable cryptocurrencies.

For example, in order for a business to use the blockchain to pay salaries, take out loans, or pay dividends to shareholders, they need a price-stable token that works with the blockchain application. Imagine if your monthly salary is 1 BTC per month. This could be $19,000 or $3,000, depending on which month it is. Many of the applications already promised on blockchains — from remittances to democratizing access to capital and loans to faster international corporate payments — would not be possible without blockchain-based and price-stable currencies.

Stablecoins are also important to cryptocurrency traders. Whether it's a retail investor or a large cryptocurrency hedge fund, if the cryptocurrency market is going downhill, they need to be able to withdraw funds quickly and convert them into stablecoins faster and easier on exchanges, rather than into fiat currencies.

Q2. Which model of stable currency will become mainstream in the future? Which one do you like best?

Stephen Kade: Sufficient liquidity, transparency and convertibility promises

There are currently three models of stablecoins on the market: fiat currency collateral, digital asset collateral, and algorithmic stablecoins.

Every stablecoin model has tradeoffs. For example, algorithmic stablecoins aim to provide crypto-native solutions, but have yet to find price stability, face many regulatory hurdles, and have yet to prove their long-term viability.

Crypto-asset collateralized models exhibit greater stability over time, but since they are still backed by digital assets that have proven themselves in the market, there is no long-term guarantee or security of value.

On the other hand, fiat-backed stablecoins like TrueUSD offer the legal right to exchange each TrueUSD token for $1. Additionally, since each token is fully collateralized with funds held in escrow accounts and verified by top auditing firms, our clients are protected from unforeseen volatility in the crypto market.

Different projects have different levels of transparency and security around the underlying funds, and traders should always choose options that can demonstrate redeemability, security, and underlying funding.

Among the many projects in the market, those that promise transparency and convertibility, provide sufficient liquidity to the market, and build trust with users will be successful in the coming year.

Wang Zhuo: follow the legal supervision

As for the several models that currently exist, I am optimistic about the one recognized by the law. Because of this incident in 2018, the entire market finally returned. At least most people are no longer enemies of the government and regulation. Whether it is because of education, or because more people have entered the market, in short, everyone realizes that it is impossible to escape from supervision.

From another perspective, if you want the blockchain to be valuable to this society, you must cooperate with this society and reconcile with this society. I am optimistic about anyone with regulatory approval and endorsement, and the rest is commercial competition.

You see, there are still many people who say that staking Crypto is good, and algorithmic banks are good, but before there is a legal stable currency, they can’t do tether. It’s only a few days since Gemini and Pax have Gemini and Pax. . In addition, you must convince the regulators that you have the ability/motivation to do this well, and at the same time, there are good financial institutions willing to give you fiat currency custody. Simply talking about the requirements is actually okay. It is enough to do a good job of KYC and AML and design the process well. The smart contracts of Gemini and pax are said to be generally written, and the key is to get it done on the regulatory side.

Q3. How big is the stablecoin market?

Stephen Kade: Huge need

In 2018, TrueUSD showed that there is a huge demand for regulated stablecoins on cryptocurrency exchanges and OTC platforms.

In fact, the speed and security of stablecoins can be used in most areas of traditional finance to provide a "medium of exchange". This application is much larger than any single market; stablecoins are the first use case of transactions of value with the real world on the blockchain.

Q4. What is the current bottleneck of stablecoins?

Pan Chao: Liquidity, Cash Dilemma, etc.

According to different modes. The fiat currency custody model is faced with a dilemma. It first needs to have a sufficient amount of U.S. dollars for guarantee. If it is really done, there will be problems in liquidity, and once it is overissued, there will be problems with redemption.

USDT has the dilemma of liquidity and redemption. At the same time, there is also a regulatory level. It is not actually a product on the blockchain, it is just a certificate. Liquidity and redemption are inherent contradictions that cannot be resolved, and its direction may be how to become a sub-product under the existing regulatory model.

Another is that the bottleneck of the digital asset mortgage model is the bottleneck of the blockchain, such as cross-chain assets. At present, the asset mortgage on the chain stays on a single chain itself, and many assets cannot be interoperable between different chains, so there are no more assets. Issue them as collateral. At the same time, asset mortgage on the chain is a secured stablecoin, which requires excess assets for mortgage. He has no way to mortgage unsecured credit currency.

The stable currency of this model must eventually comply with regulations, but it does not rely on institutional credit. The directions of the two models are different. The first one is the application of it by financial institutions with heavy supervision, and the second one is to rely on the development and expansion of the blockchain itself.

Q5. Do you think stablecoins should be issued by the state or enterprises?

Stephen Kade: Both are fine

A stablecoin anchored to fiat currency is a "new technology medium", and a stablecoin based on the blockchain can be anchored to the US dollar, gold, or a package of commodities. Ultimately, one could create a stablecoin pegged to a basket of 20 different fiat currencies.

So, will "stablecoins" replace key currencies like the U.S. dollar? I don't think so. Instead, currencies like the U.S. dollar will combine with blockchain-based tokens to become a new medium of value: "fiat-pegged stablecoins." This is a new form of technological advancement that, like the switch from paper money to credit cards, makes the underlying currency faster and easier for people to use.

We are a technology layer that connects real-world assets through blockchain technology. Blockchain technology will be ubiquitous across all asset classes in the future, and both companies and governments can choose how to upgrade existing systems to pass on these benefits to consumers and citizens.

Q6. Do you think regulated stablecoins are a trend in the industry?

Stephen Kade: We Advocate for Regulation

We recently published a "Stablecoin Code of Ethics" to answer this question in order to be a trustworthy stablecoin. The criteria we propose are: 1) One-to-one support; 2) No price manipulation; 3) Reassurance; 4) Regulatory compliance. We were the first advocates, and the initiative gained attention around the world.

The state of New York has published its opinion on stablecoin regulation, but its position does not apply to the other 49 states, and I suspect it will take some time to achieve a national regulatory consensus on stablecoins.

At the same time, stablecoin projects are free to seek to regulate in their home countries and be as transparent as possible. That's what we do. We are regulated at the state level (through our Nevada Trust Corporation) and national level (through our FinCEN MSB).

Q7. What predictions do you have for the stablecoin market in 2019?

Wang Zhuo: Legal stablecoins will become entry-level layouts

I think Gemini and pax will take a large part of tether's market share. At the same time, there may be some results of the investigation on tether, and tether may be hit hard.

Basis is about to close down. If the market is still like this, and it is likely to be like this, it is estimated that some stable currency projects will also be closed down.

As an infrastructure, stable currency will be more important in the future than it is now. Those who have made legal stablecoins are visionaries, and this will become an entry-level layout.

In the next few years, the blockchain will have the opportunity to start to truly bring value to society, and there will be a slow rising period.

But due to the characteristics of the blockchain itself, the curve will be steeper than other types of technologies.

Stephen Kade: Be an opportunity to improve finance

Stablecoins will be more integrated into blockchain applications and businesses. The bigger picture is that ordinary people and businesses can use stablecoins to improve their financial opportunities. Stablecoins and blockchains are tools, a means to help create better financial opportunities and services for people around the world.

Xiang Dan: The investment enthusiasm will become higher and higher

Attached is "2018 Inventory of the Blockchain Field"

Attached is "2018 Inventory of the Blockchain Field"