Crisis and Opportunity of Stablecoins

As mentioned in the previous article: There are many articles about the Crypto industry and project research, but most of them analyze the project from the perspective of technology and data. In reality, this kind of article doesn’t help investors see what’s going to happen next. Therefore, Akong will make a column “I see XXX” series for the investment targets in the Crpyto industry in the future, and put forward the business model of the project and personal investment views from the perspective of the industry development trend. I secretly think that this is meaningful and valuable to readers.

This article is divided into four parts, the first part discusses the future development of BTC, the second part discusses the development of the real-world currency system and the philosophical level of reference to the metaverse, the third part discusses the metaverse currency system and the impact of ust, the third Part four discusses investment opportunities.

Recently, major public chains are doing or preparing to do their own stablecoins, which has attracted a lot of attention in the industry. Taking this opportunity, I also want to talk about my thoughts on BTC’s future investment and my views on stablecoins.

Two points of view:

1. The currency attribute of BTC will be eliminated

2. Decentralized stable coins will replace the currency attributes of BTC.

Note that the elimination here refers to the elimination of BTC as a “currency” attribute, not the “value return” of its “value store” function.

Until now, many people may not understand the value of BTC. This is a very scary thing for investment–because once you can’t find value, then the result must be that you can’t withstand more than a 50% plunge in a bear market, and there won’t be a few more rises in a bull market. ten times the faith.

Many people say that BTC has various values, such as cross-border transactions, such as anonymity, or becoming legal tender, or a store of value. The imagination of the first two concepts cannot even support the current market value, how can it support the future imagination space?

What ultimately supports the narrative value of BTC is that after P2P trust is resolved, everyone hopes that it can replace legal currency, become a store of value, and become a narrative of “Crypto gold”.

However, in the real world, any sovereign country with ambition and status will not let BTC become its national currency, unless the following two situations are encountered:

1. Either aliens invade, the earth becomes a federation, and BTC becomes a federal legal currency;

2,. Or is the world “everyone is like a dragon”.

The meaning of the two expressions is actually the same, that is, after the world no longer has the concept of a country, BTC can become the legal currency of the real world, it is as simple as that.

Therefore, the real value of BTC is actually to become a currency system of “another world”, or to measure the total social wealth of “another world”.

This world is the “metaverse”.

The future crypto world will form a global virtual economy, or a world that is different from reality. Then, as one of the three elements supporting the world (the other two are politics and culture), the investment imagination possessed by the economy is infinite.

However, if you refer to the history of currency development, BTC will not always become the mainstream currency of the metaverse in the future, but will be “eliminated”. The final function is likely to become a ruler to measure the wealth of the metaverse world, just like gold. Same.

Gold has been the dominant form of currency for nearly 5,000 years.

Only in 680 BC did gold become real money. During the Lydian period, gold and silver were minted in equal parts. Can start interchangeable and become a unit of account that can be used to measure value. But the emergence of the state has changed the development of currency.

In order to ensure the security of the account, take Athens as an example. Athens represents Greece, the cradle of Western civilization. We can learn from the development of the “Greek Empire” and the development of other currency systems to discuss the currency system in the future metaverse.

Beginning in 499 BC, Greece and Persia fought until 449 BC. After winning a few years, they began to fight the alliance war again. Greece fought Sparta, and the Delian League fought the Peloponnesian League. This was the fuse that led to the collapse of the Greek monetary system.

In the first stage of the war, Sparta sacked Attica and took away the gold and silver mines in Greece, but Greece had to increase military expenditures, the bulk of which was the army’s salaries. After the soldiers left Athens, they had to exchange gold coins for them. goods and services.

Under the circumstance of shrinking the source and opening the flow, the gold coins become more and more valuable, and the inflation begins to shrink. what to do? The war is still going to be fought, but the currency is getting less and less, and the currency can only be devalued.

For example, the government’s tax is 10,000 gold coins, they will melt them all, and then add 50% copper, which makes 20,000 new gold coins, 10,000 out of 20,000, which is deficit spending.

This is only part of it. Athens is a Western brand. During the truce, they felt that the infrastructure could not be pulled down. During the truce, they also built the Greek Goddess of Victory Temple. Another point to mention is that after 6 years of armistice in 27 years, Athens never thought of restoring the market economy, which is very far-sighted.

Therefore, as the gold content of gold coins continues to decrease, everyone is willing to use new things, which is called “Gresham’s Law”. What does it mean, people like to collect some rare and valuable things. In this way, all the old gold coins are not circulated in the market, and all that can be circulated are copper coins with lower and lower gold content.

Bad money drives out good money.

In the end, when the coins were all turned into copper coins, the currency lost its value, and the world’s first largest hyperinflation occurred, which directly destroyed the Athenian monetary system. In the end, Greece became a vassal state of the Roman Empire.

Human nature has never changed, and the past of Greek history, likewise, will rhyme again at some point in the future. But we need to understand two things.

The first problem is that when a country develops politically, culturally, and economically, it will inevitably lead to an increase in public works and fiscal expenditures, and more and more “currency” will be needed. Therefore, currency itself is inevitable. needs to enter into a state of inflation.

The second problem is that when the currency is controlled by centralized power, the greed of human nature will make the currency inevitably enter into hyperinflation. The final result is that “bad money drives out good money”, which leads to inflation and soaring prices, causing the public to lose confidence in the monetary system and eventually collapse.

The development of the world is nothing more than that.

In the early days of the metaverse world, BTC will play the role of “gold and silver” and will be the main form of currency for a long time. But with the explosive growth of the metaverse economy, the limited amount of BTC that cannot adjust for inflation will be powerless and will eventually be replaced by another currency.

such as stablecoins.

There are three types of stablecoins, one is a centralized stablecoin endorsed by fiat currency, the other is a decentralized stablecoin endorsed by crypto assets, and the last is an algorithmic stablecoin.

From a philosophical point of view, if hyperinflation is to be avoided, then controlling the right to print money is the top priority. This means that fiat-backed stablecoins will be phased out one day in the future, and will be replaced by decentralized stablecoins.

Of course, the stability of fiat currency endorsement is still in full swing, and there is still a huge wealth effect, but the competition in this market is too fierce. After Bitfinex promoted the development of usdt, Goldman Sachs, Baidu, and Bitmain joined forces with giants inside and outside the circle to jump in the queue with USDC. The intensity of competition has reached the ceiling level of the entire industry; while in the world of decentralized stablecoins endorsed by crypto assets , MakerDAO’s top brand effect and the help of A16Z , DAI ‘s power is deeply rooted.

Only the algorithmic stablecoins that came into being in the “DeFi summer”, there is no market leader yet. Therefore, LUNA can have the opportunity to “overtake” and cut into the main track of stablecoins. Moreover, the algorithmic stable coin UST launched by LUNA seems to be successful – at least UST is already the top three large-scale stable coins by market value.

Major public chains are just around the corner. Immediately after NEAR completed the 350 million financing, it announced that it will deploy the stablecoin USN and launch Anchor. Today, Brother Sun also announced that TRON will issue the stablecoin USDD. But is UST’s road to success so easy to replicate? Or has UST really been successful?

not necessarily.

To put it bluntly, UST is now on the verge of collapse. The total market value of UST 17 billion US dollars is locked in Anchor to give users 20% APY per year —— Only relying on pledges and UST loans to fill this income pit is really hell.

It all depends on the banknote ability of the consortium behind it to continue its life, that is, if it stops, it will die. At the beginning of this year, LFG invested 500 million US dollars in Anchor, and it burned 140 million US dollars in 2 months. The reason why everyone is still participating in the UST game is simply to look at the money. Once LFG stops making money, the final result will be that everyone will be scattered, leaving a piece of chicken feathers on the ground.

The only turning point is that Luna is finding a new “credit support” for ust, providing credit for ust by anchoring crypto assets, such as BTC.

The first is to buy it yourself. LDG bought 1 billion BTC at the beginning of this year. But if you want to support the entire ust system, 1 billion dollars is not enough, so we started to mobilize the masses, so that users will not burn all of them when they mint ust with Luna, but leave a part to buy BTC.

But can such a UST still be called an algorithmic stablecoin? Isn’t it just a decentralized stablecoin backed by crypto assets like DAI? Yes, that’s right, ust is aware of this problem too. So UST has treated DAI as its own direct competitor:

On the one hand, terra is constantly cooperating with other public chains to allow its own ust to anchor more crypto assets. The first cooperation is AVAX, and it is bound to contact more public chains in the future.

On the other hand, it aimed at CRV and started to attack. CRV (stablecoin lending platform) provides liquidity for a large number of stablecoin projects, but this liquidity is built on the 3CRV pool, that is, relying on usdt, usdc, dai to take risks, and enjoy providing liquidity for other projects benefits. But now ust has a 4CRV pool on CRV, which no longer contains DAI, but consists of UST, FXS, USDT and USDC.

The war for decentralized stablecoins has already started at this moment.

No one will sit still.

In the real world, no country can resist the opportunity to issue its own currency to become the world currency, so the public chain in the crypto world cannot refuse the temptation from stablecoin either.

“Bridge all public chain ecosystems, drive countless protocols and applications, the underlying assets of the crypto world, and the key support for the entire currency system”

So this war is bound to be fought, it must be fought. But the current practice of public chains is actually putting the cart before the horse. Everyone hopes to use Ponzi, which is an algorithmic stablecoin, to promote the development of the ecosystem, just like in the early days of UST. But the contradiction is precisely that only the public chain is strong enough to become a strong support for stablecoins.

The dollar was able to become the world currency not only because of the largest gold reserves in the United States at the time, but because of its military might. If not, your wealth belongs to someone else’s family ——- just think about our humiliating history.

In the crypto world, as a “country” public chain, if your strength is not enough, then your stablecoin system will not be able to do the same.

In the final analysis, the key factor that determines the battle of stablecoins is the public chain itself. Then, from the perspective of the development process and current situation of UST, each public chain must spend more money in order to fight this battle. The result is accelerated industry consolidation, the damned will die faster, and the victorious will win faster.

In the chaos, the biggest beneficiary is also our biggest opportunity, of which there are three opportunities.

1.90% BTC and 10% ETH. This is the most direct beneficiary, because BTC is the best crypto asset to endorse decentralized stablecoins, followed by ETH. If each public chain has to embark on the road of issuing their own stablecoins, then the buying orders of BTC and ETH will be infinitely enlarged.

2. CRV. CRV is now the largest stablecoin lending platform and a place for stablecoins to obtain liquidity. If each public chain wants to have sufficient liquidity for its stablecoins, it must continue to buy CRV to obtain governance rights to allow its own stablecoins to have sufficient liquidity. Stablecoin pools are more attractive.

3. MakerDAO. DAI is the direct opponent of UST and other USXs. To be honest, I am most optimistic about DAI. Because he is backed by the “country” that is currently winning and can still maintain its advantage in the future, Ethereum. Congenitally, it is possible to obtain high-quality crypto assets that introduce ERC20, and MakerDAO has already begun to exert its strength when it accepts the challenge of challengers such as UST. On 4.20th, MakerDAO announced that it will begin to integrate the Ethereum expansion scheme StarkNet on April 28th to reduce DAI transaction costs. This is the first time that MakerDAO has integrated a network other than the Ethereum mainnet.

above.

After all, the most valuable assets of Crypto are BTC and ETH.

The more the world develops, the more valuable they are.

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