Stablecoins (technically speaking, price stable US dollar-pegged cryptocurrencies) were undeniably the biggest theme of 2018. A multitude of projects launched last year with the goal of knocking the much-maligned but still dominant USDT (USD Tether) off its perch after its rather surprisingly long five-year monopoly as the only popular USS-pegged stablecoin.
Within a year of their launch, USDT alternatives such as DAI, USDC, Paxos and GUSD have managed to grab significant market share (and mind share) from USDT, aided in no small measure by allegations about Tether’s insolvency. USDT has ceded ground to its new-generation rivals as its share of the total stablecoin market cap has dropped significantly from 91% in Apr’18 to 70% at last count (the green-colored area in the below figure indicates USDT’s market cap).
Beyond their preliminary use case of hedging against a downmarket, stablecoins are slowly becoming a critical infrastructural component of the emerging DeFi (Decentralized Finance)/Open Finance ecosystem. MakerDAO’s crypto-(over)collateralized stablecoin ‘DAI’ has grown very fast, with over 2% of outstanding ETH locked up as collateral (Check out this quick primer on how DAI works). While over-collateralization somewhat reduces the attractiveness of DAI (With DAI, you have to stake $150 worth of ETH to ‘borrow’ $100 worth of DAI), the launch of multi-asset collateral will soften up the stringency imposed by the 1.5x collateral required. More importantly, DAI’s operational model looks well-tested as it has so far managed to survive the steep fall of ETH prices that commenced in 2018. Other stablecoin projects such as Paxos, USDC and GUSD leapt past DAI despite having launched months after DAI, mostly because of their backing from popular exchanges. With the exception of DAI, the other stablecoin projects are all ‘plain-vanilla’ collateralized, meaning that just like Tether, these projects hold a stash of US dollars somewhere against which the stablecoins are issued. Such models are intuitively simpler and easier to understand, notwithstanding fundamental structural weaknesses, such as the risk of sovereign regulatory action. Stablecoins with 100% collateralization are also much easier and faster to arbitrage off than DAI, which has 150% collateralization. For more insight into how arbitrage activity drives up scaling in stablecoins, please check out this post.
However, DAI can potentially be the preferred stablecoin for other use cases such as stablecoin-denominated ICOs, which would be an ideal capital raising mechanism for ICOs with a longer term view, as DAI is arguably more decentralized than its peers through its automated token creation mechanism through smart contracts. Assuming that the next generation of ICOs will learn from the failures of their predecessors’ treasury management, DAI has the potential to become the de-facto capital raising platform for future ICOs, resulting in even greater adoption for DAI and MKR tokens.
“Grin Goes Live on Mainnet” Grin, a cryptocurrency that leverages mimblewimble, a privacy protocol that fuses transactions together such that they are indecipherable, is now live on mainnet. While it has been in the works since late 2016, Grin saw its first block of transactions (after the network’s genesis block) appear Tuesday at 17:38 UTC. A second block was mined less than a minute later, according to one block explorer. A market for the cryptocurrency is already beginning to form, and though the first block only awards 60 grin, one investor has already bid 0.1 BTC for 1,000 grin (roughly $0.37 per token) on Bisq.
“Binance Launches UK and EU Fiat-Crypto Exchange” Binance, the world’s largest cryptocurrency exchange by adjusted trading volume, has launched a new fiat-to-crypto exchange on the island of Jersey, a British self-governing dependency. Through the new exchange, users are able to trade in pairs for Bitcoin and Ethereum against the British pound and the Euro in Europe and the UK. According to Wei Zhou, the exchange’s chief financial officer, “Binance selected Jersey for its highly developed digital infrastructure, robust regulatory framework, and world-class financial services sector”.
“SBI Invests in BRD” SBI Crypto Investment, a subsidiary of the Japanese financial giant SBI Holdings, has invested an undisclosed amount in Switzerland-based crypto firm Breadwinner AG, the developer of mobile crypto wallet BRD. According to the announcement, BRD operates in 170 countries and has been downloaded by 1.8 million Android and iOS users. SBI Group as a whole has also invested in the crypto space previously. The company announced in August that it had invested in cryptocurrency exchange LastRoots for the second time.
“Petro Price Revised (Again)”The price of Venezuela’s native cryptocurrency, the Petro, has once again been revised by the government. After seeing its price go from VES 3600 to VES 9000 just last December, the Petro is now valued at VES 36000 – a 300% increase. The new price is predicted to have a domino effect to many aspects, such as the country’s minimum wage, which will increase by exactly the same percentage as it is pegged to Petro’s price. Its USD value, however, will remain at $60, which is based on the oil price per barrel during the ICO.