“A Solution in search of a problem”

I was listening to an interview with a well respected economist today who used this phrase. “If you want to have Euros why not just use Euros?”

This begs the question, in the era of Digitisation and abundant technology

What innovation do Stablecoins really provide?

Photo by DrawKit Illustrations on Unsplash

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This is an interesting question to answer and there are clearly several obvious ones:

Reducing Counterparty Risk

One of the issues Stablecoins address is that of counterparty risk with agents outside the traditional financial system.
Using unregulated exchanges for storing assets (for example) could be mitigated with stablecoins. A Brokerage account is no longer required, but it's important to note this is not actually how most exchanges currently operate.

The worries about Tether are well documented so I will not cover it but this is a good example.

Hybrid Digital Money

Restrictions, delays, costs with transferring Euros from one person to another can be reduced or eliminated with stablecoins that are using a global decentralised money transfer network.

For traditional financiers Bitcoin as a store of value is always a very big leap. Maybe a Peer to Peer Digital Cash is what it really should evolve to. Stablecoins are ideally suited to this task.

New Forms of Decentralised Finance

Some Cryptocurrencies have issued a form of debt collateralised by tokens on their networks in various forms.

HBD for example in part uses the mechanism of maintaining a market peg to regulate the debt levels in a decentralised manner.
There are other projects such as Terra with variations of approaches but none of these projects have achieved sufficient scale yet to provide enough liquidity to the market here but the idea is promising.

A good post by @dalz today covers HBD.

What do you think, Are Stablecoins a solution in search or a problem?

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This post is my daily contribution to a challenge by @dragosroua to "publish a meaningful post every day of January"* Who's Up For A January Writing Streak?

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During January I am visiting different communities virtually on Hive to see where I get the most engagement, and which inspire me most to write. Where I get the biggest welcome I might stick around :)

I hope you enjoyed this post to the Leofinance Community about Stablecoins. If you would like to follow me to hear more I write mainly about Blockchain and Crypto but this month I am really going to explore different communities on Hive so my posts will be quite varied.

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