Tag: stablecoins

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Crypto Videos

Largest Russian Bank Sberbank Launching its Stablecoin in Spring 2021!

https://youtu.be/tOEN2T0igVs

https://youtu.be/tOEN2T0igVs


Largest Russian Bank Sberbank Launching its Stablecoin in Spring 2021

Sberbank, the largest Russian state-owned bank, has reportedly filed an application with the Bank of Russia regarding the launch of a blockchain platform for its “Sbercoin” stablecoin.

The director of the transaction business at Sberbank, Sergey Popov, announced the news on Jan 21 at a local financial event.

At the “Digital transformation and prospects for regulating the digital economy” event, Popov stated that Sberbank applied with the Russian central bank in early January, explaining that this kind of registration procedure usually takes no longer than 45 days. If everything goes by plan, the bank may launch its platform by spring 2021, the official said. However, Sberbank is still working on specifics about how to tax Sbercoin:

“There is a high probability of this project being launched in the spring. However, there is still one more issue that has not been fully resolved, and it is connected to the taxation of digital assets. We hope that this question will soon be resolved.”

Popov also added that Sberbank had completed internal testing to see if the solution they propose works, which it apparently did.

Sberbank broke the news on developing its own Sbercoin token at the end of November 2020, following long-running speculation about these plans. Its latest announcement comes shortly after Russia’s official adoption of the crypto law “On Digital Financial Assets” on Jan 1, 2021.


In late 2020, a member of the Russian State Duma, Anatoly Aksakov, said that the Duma’s Committee on Financial Markets expects that Russian crypto issuance will surge after adopting the country’s new crypto law.

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Crypto Daily Topic Cryptocurrencies

Top 5 Trends Driving the Crypto Market Right Now

2020 was an interesting year for crypto. From the market crash in March to Bitcoin rebounding past $15k for the first time in two years, to DeFi exploding than ever before, this was not your average year for the industry. But beneath these events were unseen undercurrents that were driving everything. 

2020 was an interesting year for crypto. From the market crash in March to Bitcoin rebounding past $15k for the first time in two years, to DeFi exploding than ever before, this was not your average year for the industry. But beneath these events were unseen undercurrents that were driving everything. 

2020 was an interesting year for crypto. From the market crash in March to Bitcoin rebounding past $15k for the first time in two years, to DeFi exploding than ever before, this was not your average year for the industry. But beneath these events were unseen undercurrents that were driving everything. 

As you already know, the crypto market moves to its own beat. It all comes down to supply and demand – the causes notwithstanding. This is starkly different from traditional currency, whose value is set and controlled by central banks. Other factors are artificial actions such as the stimulus protocols being conducted across the globe right now to ameliorate the economic shock of the Covid pandemic. 

What’s the point? That the crypto market is interesting, and the events driving it one side or another are worth a closer look. A lot is happening behind the scenes: from a change in attitudes to stablecoins to new and bold crypto products. 

This article looks at the trends that are currently driving the crypto market and how. 

#1. Stablecoins

Stablecoins are a special kind of cryptocurrencies pegged to real-life assets, so they’re not subject to the wild volatility experienced by ‘normal’ cryptocurrencies. Stablecoins can be pegged to fiat, other cryptocurrencies, or exchange-traded commodities like aluminum or gold. The fact that they are attached to a fixed unit doesn’t mean that their prices never vary. Their market prices tend to fluctuate around their underlying assets. 

Stablecoins have the ability to bridge the gap between fiat and digital currencies. They provide the stability of fiat while maintaining the security of crypto. This year, stablecoins kicked off exceptionally well, recording a $90 billion transactional volume in a single financial quarter. 

As an investor, you can make money off stablecoins.  For instance, you can acquire a stablecoin for $1 and sell it on the market at a higher value of, let’s say, $1.0003. The extra amount might seem meager, but the amount of profit accrued becomes very substantial when you multiply this figure by thousands or millions. 

#2.DeFi

DeFi (decentralized finance) is, without question, one of the megatrends pushing the crypto space right now. DeFi is the idea that people can have complete financial autonomy. You know, without an interfering government or controlling bank. It’s a revolutionary idea that’s not just timely but liberating. Countless projects are now rushing to introduce new and interesting DeFi products. Things like yield farming, the latest DeFi craze, entered the crypto lexicon less than two years ago. 

The vast majority of DeFi projects are based on Ethereum. Ethereum pioneered smart contracts and decentralized applications (DApps) – which explains everything. The network’s market cap increased by 60% in Q3 2020. This growth percentage was seen by increasing market value from $25 billion to $40.5 billion by the end of September. The top 10 DeFi coins’ market capitalization by total value experienced a greater increase within the quarter. This was seen through the 345% increase (rise from $1.2 billion to $5.3 billion). The market capitalization of DeFi now accounts for roughly 12% of the blockchain’s total market value. As of now, DeFi is the driving narrative for the Ethereum ecosystem.

DeFi protocols such as Compound, Balancer, Curve, and other varied platforms are introducing new and exciting DeFi products. From staking to yield farming to borrowing, investors are rushing to DeFi to carve out financial value. 

#3. The Possibility Of A Cashless Society

One of the biggest upheavals to the world’s normal order in recent times was the Covid pandemic. In the blink of an eye, the pandemic had interrupted everything we hold dear – social life, economies, and yes – deeply held attitudes. Naturally, people began to rethink a lot of things. 

What previously seemed odd was now the norm. Working remotely? Check. Crypto payments? Check. Now, being forced to do things differently can sometimes be a good thing, which is the case with these scenarios. And it seems like these practices will remain even after Covid is long gone. It wouldn’t be an exaggeration to say that a cashless society is a possibility in the future. 

Meanwhile, the blockchain space is expanding quickly, as applications for interacting with crypto also advance. These days, you can easily buy crypto with just a credit card. This is a huge leap from the early days when you had to meet with a stranger to purchase crypto (and we all know that’s a risky proposition). Also, it’s not just the young and savvy population that’s embracing crypto. It’s institutional investors too. 

#4. Derivatives

Derivatives are another trend driving the crypto market. Bitcoin derivatives dominate the market at the moment, but Ethereum is catching up. This is a strong showing of Ethereum, and it hints at a derivatives economy buoyed by Ether and possibly other crypto’s derivatives. It also means both individuals and institutional investors are beginning to see Ethereum as a worthwhile investment and trading asset. Another thing – it shows that the crypto market is maturing. When other cryptocurrencies join Bitcoin in the derivatives club, it will be a diverse and more resilient market. 

#5. Cryptocurrency is becoming big

Crypto is probably enjoying its highest review ratings in years. Bitcoin, the pioneer of them all and the most successful one, is not viewed as a bubble anymore. And its market cap has exploded to eclipse that of superstar companies such as Coca-Cola and Intel. Also, crypto’s underlying tech – blockchain, is now being embraced by a multitude of industries. Like we’d mentioned earlier, institutional companies are getting involved in crypto more than ever before. 

Closing Thoughts

When we study the undercurrents of the crypto market more closely, it’s easier to tell which direction it’s veering to. And the current trends indicate nothing but good things for the future of crypto. Stablecoins are roaring, as is DeFi, and indications point to Bitcoin sharing the derivatives spotlight with other cryptos in the near future. In short: these are the trends driving the crypto market right now. 

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Cryptocurrencies

How Coti (COTI) can change Payments and Money Transfers

The traditional payment system is defined by long waiting periods, expensive fees, and error-prone transactions due to the single point of failure inherent in centralized systems. Blockchain was supposed to help with most of these problems, e.g., by facilitating peer-to-peer, fraud-free transactions. However, the first and second-generation blockchains, i.e., Ethereum and Bitcoin, face challenges like low scalability that prevent them from competing with the fastest traditional models such as Visa. 

The traditional payment system is defined by long waiting periods, expensive fees, and error-prone transactions due to the single point of failure inherent in centralized systems. Blockchain was supposed to help with most of these problems, e.g., by facilitating peer-to-peer, fraud-free transactions. However, the first and second-generation blockchains, i.e., Ethereum and Bitcoin, face challenges like low scalability that prevent them from competing with the fastest traditional models such as Visa. 

The traditional payment system is defined by long waiting periods, expensive fees, and error-prone transactions due to the single point of failure inherent in centralized systems. Blockchain was supposed to help with most of these problems, e.g., by facilitating peer-to-peer, fraud-free transactions. However, the first and second-generation blockchains, i.e., Ethereum and Bitcoin, face challenges like low scalability that prevent them from competing with the fastest traditional models such as Visa. 

However, it’s doubtless that blockchain tech offers the best possible alternative to the traditional payment models. For this reason, a litany of blockchain projects seeking to provide better scalability, security, etc. than Ethereum and Bitcoin’s blockchain has sprung up over the years. 

Coti is one of these. Formed in 2018, Coti wants to fix traditional finance issues such as high fees, low latency, and lack of inclusiveness. 

This article is a deep dive into the Coti ecosystem. 

Coti: Core Elements

COTI supports the following elements to realize a safe and cost-efficient payment structure:

  • Scalability: The COTI network can support up to 100,000 transactions per second (TPS), which is incomparable with the 25,000 TPS managed by traditional payment systems and 20 TPS by most blockchain protocols
  • Simplicity: COTI has designed its user and merchant-facing tools to be friendly and very easy to use
  • Buyer-seller protections: COTI provides a dispute resolution system to act as a safeguard against fraud, errors, and so on
  • Cost-effectiveness: On the COTI platform, there’s no need for intermediaries or power-intensive mining, which drastically cuts costs.
  • Price stability: The COTI team is creating price stability technology, an indispensable factor for blockchain to realize wide adoption
  • Instantaneity: COTI’s architecture makes for fast transactions, payments, and remittances, as opposed to the hours or days common with the traditional system
  • Security

Thanks to its use of a distributed ledger, COTI eliminates the possibility of a single point of failure

COTI: Infrastructure

Below, we’ll be taking a look at some of the core technologies on the Coti platform.

#1. Trustchain

This is a consensus algorithm based on machine learning. Trustchain decreases transaction costs while increasing transaction processing speed. Trustchain utilizes a directed acyclic graph (DAG) data structure to maximize scalability, supporting up to 100,000 TPS. The Coti team wants to revolutionize crypto by having decentralized payment solutions built on Trustchain. The Trustchain will offer the following innovations: 

  • Single-click payment requests

Coti will use the Trustchain to realize one-click payments. Merchants will be able to embed the functionality on the websites for easy checkouts.

  • Buyer-seller protection

The Coti team has developed an arbitration service in readiness for potential disputes. The arbitration service is made of a decentralized collective of trusted network members.

  • Node manager

Through the node manager, anyone can join the network as a node operator and start running various types of nodes.

  • Privacy

Coti has enabled privacy specifications that prevent transactions from being tracked down to their originator. These specifications include implementing a multi-address for transactions through a one-way hash function.

  • Proof of Trust (PoT) consensus

Coti implements a DAG-based decentralized ledger that achieves scalability through the use of Trust Scores. The higher a user’s Trust Score, the faster the confirmation time.

  • Fees

Coti implements a transparent and equitable fee structure where all fees are distributed in a balanced manner amongst network participants.

  • Trust Score Update Algorithm (TSUA)

This tool is designed to collect data on user behavior and transfer the info to Trust Score Nodes. Trust Scores are used by Trustchain Algorithm to verify and confirm transactions quickly.

  • Smart contracts

Coti will introduce smart contracts for a DAG distributed pledger, the first-of-its-kind. Smart contracts are recorded in the MultiDaG Cluster and are verified severally before being confirmed. 

  • Stablecoin framework

COTI’s MultiDAG, coupled with Coti smart contracts and the infrastructure for genesis transactions, creates the possibility for high-performance stablecoins

#2. Loyalty Networks

Coti has developed an end-to-end solution on which businesses can build blockchain-enabled loyalty networks. Such networks allow businesses to retain customers and earn more revenue. 

Marketplaces are currently proliferated with loyalty programs, which lead to customers accumulating loads of loyalty cards, all with different terms and conditions. 

On their part, businesses have to manage their own loyalty programs, a task that’s often demanding in terms of money and time. And even those loyalty programs often never maximize their potential due to low account activity, low redemption rates, account maintenance costs, and time limitations.

Coti’s solution

Coti provides cheaper, time-saving, and more interactive solutions for loyalty programs. These solutions are as follows: 

  • Branded wallet and token

Coti will allow businesses to build a branded wallet complete with customized tokens. Users will be able to hold multiple loyalty tokens from different businesses.

  • Simple integration

Businesses will have the ability to create a loyalty program fast and easily. 

  • Tradability

Users will have the ability to trade their loyalty tokens. 

  • Earn tokens

Uses will be able to earn tokens as a reward for purchases, referrals, and engaging with businesses.

  • Global alliance

Businesses will be able to collaborate with other companies to exchange tokens and share ways to enhance customer loyalty and retention.

#3. Stablecoins

Coti also provides the first-ever blockchain-powered environment for creating stablecoins. Users can issue their own stablecoin that they can have total control over. Stablecoins are a kind of cryptocurrency that is not volatile. They cushion users against the potential losses that could happen overnight with a regular cryptocurrency. Coti enables companies to create their own stablecoins and apply a stability mechanism to any asset of their choice. The stablecoin feature will benefit users in the following ways: 

  • Higher profits

Businesses can dramatically increase revenues by not having to depend on external stablecoins

  • New markets

Businesses can reach entirely new markets by offering stablecoins as a means of payment.

#4. Community and Advanced Nodes 

These are a mainnet full nodes that utilize a delegated staking mechanism to verify and confirm real-world merchants’ transactions. These nodes are technically operated by a node operator who has the requisite skills for the task. To become a community node, you must first stake in 5,000,000 COTI. 

There are also advanced nodes, which are also mainnet nodes in how they function. However, advanced nodes will need to stake between 500,000 – 5, 000,000. 

#5. COTI Pay 

COTI Pay is a digital payment tool that can process online and offline payments, including crypto, stablecoins, businesses’ native coins, and credit cards. On the tool, users can also earn passive income through interest on deposits. 

Coti Pay seeks to solve the following problems with traditional finance payment models: 

  • Long settlement periods, sometimes taking even weeks
  • Costly processes
  • Cross-border transaction constraints
  • Involvement of costly third-parties
  • Error-prone transactions
  • Millions of people excluded from the global finance system

Community Growth Strategies of Coti

The Coti team plans to undertake several growth strategies to expand the growth of the community: 

  • Partner with similar projects such as Cardano, Chainlink, Celsius, and Fantom
  • Launch a Community Ambassador Program
  • Work with platforms like Xangle and Binance Info V-Label for data transparency partnerships
  • Carry out regular community updates via a bi-weekly newsletter, GitHub updates, etc
  • Conduct AMAs on platforms like Reddit, Twitter, and Facebook
  • Create and disseminate visual content such as tutorials, 3D videos, and more
  • Have Telegram groups hosted by community members in a variety of languages, including Korean, Vietnamese, and Brazilian

Future strategies include: 

  • Push the project to the global stage through global ambassador activity
  • Conduct joint AMAs with leading blockchain projects 
  • Conduct and participate in hackathons
  • Launch Coti Pay Business mobile app

COTI’s supply distribution was done this way: 

  • Seed sale tokens: 2.90%
  • Private sale tokens: 10.04%
  • IEO tokens: 2.31%
  • Team tokens: 15.00%
  • Advisors tokens: 10.00%
  • Ecosystem reserve tokens: 59.75%

Key Metrics

On October 20, 2020, COTI traded at $0.029472, placing it at #380 with a market cap of $16,740,885. The token had a 24-hour volume of $2,492, 122, with a circulating supply of 568, 032, 883, and a total and maximum supply of 2 billion. COTI has an all-time high of $0.127076 (July 02, 2019) and an all-time low of $0.006226 (Nov 09, 2019). 

Where to Buy and Store COTI

You’ll find COTI listed as a market pair of USDT, BTC, BNB on exchanges such as Binance, CoinDCX, KuCoin, BitMax, BitHumb Global, Bidesk, Coinbit, Gate.io, and Binance.DEX. 

Coti provides its official wallet known as the COTI Pay VIPER. See here. 

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Crypto Guides

How DeFi Is Solving The Problem That Bitcoin Always Wanted To?

Introduction 

Introduction 

Introduction 

When you hear the word ‘cryptocurrency,’ Bitcoin is the first thing that pops into your mind. For the longest time, bitcoin has been synonymous with cryptocurrency and regarded as the future currency. In the recent past, bitcoin’s monopoly has been diluted by the entrance of thousands of other cryptocurrencies.

The cryptocurrencies’ primary objective was to serve as an alternative, and down the line, a replacement to the global fiat financial system. This objective has failed to take off. This failure can be attributed to the skepticism cryptocurrencies have faced, which has slowed their role as a legitimate alternative to fiat currencies. DeFi has helped address some of these challenges and help make cryptocurrencies mainstream.

What is DeFi?

DeFi is the short form for Decentralised Finance.  At its core, decentralized finance is the provision of conventional financial services on platforms built on the public blockchain. Specifically, DeFi is based on the Ethereum blockchain platform.

DeFi is heralded as the most suitable alternative to the global financial system. This new enthusiasm about the decentralization of finance is owed to the fact that DeFi is seen as being able to solve the problems that bitcoin failed to solve.

Advancements Made by DeFi

Here are some of the advancements made DeFi, which bitcoin failed to achieve.

Creation of issuance and investing platform

These platforms operate like an ordinary stock exchange. DeFi has made it possible so that cryptocurrencies can be issued and traded like conventional financial securities. The platform brings together broker-dealers, legal advisors, and custodians, who will advise issuers through the process. Furthermore, the platform also makes it possible for asset and investment managers’ proliferation for crypto-based financial assets.

Establishment of a decentralized prediction market

A prediction market is one where individuals can bet on any future occurrences. With decentralized prediction markets, there is no form of censorship whatsoever. Therefore, it offers an incredible opportunity to hedge against future risks financially and speculate on all forms of social events globally.

Growth of open lending protocols

Decentralized open lending championed by DeFi involves the following: collateralization of cryptocurrencies; elimination of credit checks among borrowers; lending and borrowing of cryptocurrencies for trading purposes; and real-time settlement of transactions. The financial inclusion resulting from open lending is unparalleled.

Facilitated the issuance of stablecoins

DeFi made it possible for the issuance of stablecoins by facilitating the auditing of crypto reserves and ensuring manageable volatility of such cryptocurrencies. With DeFi, stablecoins can be pegged on another asset. Categories of stable coins that have been spurred by DeFi include crypto-collateralized stablecoins, fiat-collateralized stable coins, and non-collateralized stablecoins whose stability depends on an algorithm controlling the expansion and contraction of its supply.

Bottom Line

DeFi undoubtedly offers a higher potential for financial inclusion, censorship-free transactions, and improved privacy. Although DeFi is offered as an alternative to the centralized financial system, it is almost impossible to envision an economy where the centralized financial system ceases to exist. Thus, it is prudent to co-mingle the two systems to ensure complementarity, which will tone down the inherent risks associated with either system.

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Cryptocurrencies

What’s Curve Finance (Curve.fi)?

Curve Finance is one of the projects making waves in the DeFi space right now. The project is not a day older than one year, yet it’s already giving older projects like Uniswap a run for their money. 

Curve Finance is one of the projects making waves in the DeFi space right now. The project is not a day older than one year, yet it’s already giving older projects like Uniswap a run for their money. 

Curve Finance is one of the projects making waves in the DeFi space right now. The project is not a day older than one year, yet it’s already giving older projects like Uniswap a run for their money. 

DeFi is the idea that the masses can have control over their own finances, as opposed to this being done by centralized entities such as governments and banks. Curve is giving opportunities to stablecoins holders to provide liquidity and earn from it, as well as traders to swap coins in a secure and safe environ. 

What’s Curve.fi?

Launched in Jan 2020, Curve is a blockchain-based platform for exchanging Ether-based stablecoins safely and securely. Michael Egorov, the founder of the protocol, recently told DeFi Prime that Curve is “an exchange expressly designed for stablecoins and Bitcoin tokens on Ethereum.”

The idea of such an exchange is not new. For instance, Uniswap has been doing this for years. So what sets Curve apart? Well, the answer to that is a bit complicated, but we’ll break it all down. 

What Curve Does Differently

For one, Curve utilizes a market-making algorithm known as an automated market maker (AMM). A market maker is a software that buys and sells securities on behalf of a particular market, providing liquidity. At the same time, a market maker usually profits from the difference between bid-ask prices. 

By employing a market-maker, Curve facilitates a faster order-matching process in its platform. This allows traders of all types (including large-volume traders) to easily swap their crypto at a very little fee and with minimal slippage.

Curve and Stablecoins

Curve specializes in stablecoin swapping. It currently supports DAI, USDC, USDT, TUSD, BUSD, and sUSD. Also, it supports the BTC pairs of these coins. Exchanging between these coins is easy, efficient, and fast. 

Impermanent Loss 

Using AMM protocols presents its own challenges. One of these is what’s known as impermanent loss (IL). IL is the loss you can incur when you hold crypto in an AMM instead of a wallet. An IL will occur if the price of such assets diverges in any direction. The bigger the divergence, the bigger the IL.

While these losses can be impermanent, they can become permanent when the liquidity pool is rebalanced to more accurately reflect the prices in other exchanges.

On the Curve platform, though, the likelihood of either impermanent or permanent loss is effectively reduced. This is because Curve specializes in stablecoin trading. Stablecoins are less prone to the price divergence that would trigger such losses. 

Why Has Curve Grown so Fast? 

The growth and rise in popularity of stablecoins is responsible for Curve.fi’s rapid growth in just a few months. Users are flocking to stablecoins because of their stability when compared to regular cryptocurrencies. Stablecoins provide the security and anonymity of cryptocurrency while providing the stability of Fiat. 

Then, centralized exchanges such as Coinbase are characterized by high fees and a great likelihood of slippage. Curve.fi solves these problems by providing a decentralized, peer-to-peer, and safe exchange platform with minimal fees and slippage. 

What’s Curve’s CRV Token?

CRV token is the planned native token for the Curve protocol. In the beginning, the protocol was centralized, thanks to founder Michael Egorov being at the helm and controlling nearly all aspects of the platform. With the launch of CRV, the network aspires to become a completely decentralized platform. This launch is expected to happen sometime in early September. 

How Can You Get CRV?

There’s no planned public or private sale for CRV, or an ICO for that matter. Rather, CRV will be awarded to liquidity providers based on how long and how much liquidity they’ve provided for the last months. 

CRV Supply

The total supply of CRV is 3.03 billion. The distribution of the supply will be as follows: 

61% (1.85 billion) for liquidity providers

31% (939 million) for shareholders (2 to 4 year vesting period)

3% (90 million) for employees (2 year vesting period)

5% (150 million) for a burnable reserve to be used in the case of emergencies

What’s the Role of CRV?

CRV will play the following roles in the Curve.fi ecosystem: 

  • For users to participate in the governance of the protocol via a time-weighted voting mechanism.
  • To promote various liquidity pools through a value capture mechanism.
  • As a locking mechanism for liquidity providers to earn value over time.
  • For transaction fee burning to reduce inflation. 

Getting Started on Curve

To get started with Curve, visit its website here. You need to connect the Ledger hardware wallet in order to continue. To start trading, proceed to the ‘Buy and Sell’ tab and indicate how many tokens you’re trading for the particular token pair. Click Sell. 

To deposit funds, go to the ‘Deposit’ page and indicate the amount of that particular stablecoin you wish to deposit. Click Submit. 

Get Involved with Curve

Curve is one of the most interesting DeFi products to enter the space. With its groundbreaking approaches like the AMM algorithm to provide liquidity, and it’s successful avoidance of the impermanent loss problem, Curve is a project set for greater heights. To keep abreast of new developments, follow the project on Twitter or join their Telegram group. If you’re one for investigating under the hood, consider checking them out on GitHub. 

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Crypto Daily Topic

Why the United States Senate is Mulling over Digitizing the Dollar

About two years ago, the concept of central bank digital currencies (CBDCs), particularly in the United States, seemed far away in the future. Sure, there have been several studies exploring the implementation and use cases of CBDCs, but to the average person, the concept was still unclear. Fast forward two years, the Senate Banking Committee tabled a bill known as “Banking For all Act” that seeks to digitize the U.S.U.S. dollar. 

About two years ago, the concept of central bank digital currencies (CBDCs), particularly in the United States, seemed far away in the future. Sure, there have been several studies exploring the implementation and use cases of CBDCs, but to the average person, the concept was still unclear. Fast forward two years, the Senate Banking Committee tabled a bill known as “Banking For all Act” that seeks to digitize the U.S.U.S. dollar. 

About two years ago, the concept of central bank digital currencies (CBDCs), particularly in the United States, seemed far away in the future. Sure, there have been several studies exploring the implementation and use cases of CBDCs, but to the average person, the concept was still unclear. Fast forward two years, the Senate Banking Committee tabled a bill known as “Banking For all Act” that seeks to digitize the U.S.U.S. dollar. 

Led by Senator Sherrod Brown, the bill came at the height of a global pandemic – the Coronavirus outbreak – which has prompted the U.S.U.S. government to offer taxpayers a stimulus check to help them weather the economic recession caused by the epidemic. In a press release, Senator Brown laid out the details of this bill by saying that if implemented, the legislation would allow Americans to access their stimulus funds without relying on expensive check cashers. Unfortunately, the proposed legislation didn’t make the final draft of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. As a result, the distribution of the first $1200 stimulus check was riddled with issuance glitches since the existing infrastructure doesn’t support the nationwide disbursement of funds. In fact, it is reported that more than 35 million Americans are yet to receive their first stimulus check. 

The digital dollar debate Gets a second chance.

Under the current system, Americans have to wait for direct cash deposits or physical checks from the U.S. Treasury Department. As such, those without a bank account filed with the Internet Revenue Service (IRS) cannot receive the stimulus check. At the same time, with respect to the spread of Coronavirus, physical cash/checks can increase the spread of the disease, countering the government’s efforts of flattening the curve. This created a new momentum for the reintroduction of the digital dollar proposal as an efficient way of distributing funds. 

Building on this momentum, congresswomen Rashida Tlaib (D-Mich.) and Pramila Jayapal (D-Wash.) introduced a proposal to have the federal government issue a $2,000 stimulus check through the Automatic BOOST to Communities Act (ABC Act). Under this act, Congress will authorize the Federal Reserve to create ‘FedsAccounts,’ which are, basically, digital dollar account wallets. This way, U.S. residents and businesses will be able to access funds through an app on their phone. 

Following up on ABC Act, the Senate Banking Committee recently held a virtual meeting to discuss the digitization of the dollar, chaired by Senator Mike Crapo. In attendance were four ‘witnesses,’ among them being the former chairman of the U.S. Commodity Futures Trading Commission (CFTC), Christopher Giancarlo. He is also the brainchild of a non-profit think tank known as the Digital Dollar Foundation (DDF), which seeks to advance the cause of government-issued digital currency. Recently, the foundation partnered with Accenture – a global leader in CBDC advancement – to form the Digital Dollar Project. Under this merger, a whitepaper was released explaining a “Champion Model” for what should be the essential technical designs of a digital dollar. 

The Champion Model 

As outlined in the whitepaper, the digital dollar doesn’t seek to replace its fiat counterpart, but rather act as a third form of the national currency. As such, the Federal Reserve will maintain its control over the monetary policy and distribution of the digital dollar. 

The only difference between the proposed digital dollar and the fiat currency is that the former will be distributed in the form of tokens instead of an account-based model used by the latter. Through tokenization, all transactions will be managed by a digital ledger that records and authenticates digital dollar tokens to ensure that they are genuine and not double spent. 

To kick-start, the distribution of the digital dollar, commercial banks, and payment processors will exchange their fiat currency reserves for digital dollars, and subsequently distribute them to customers via apps or debit cards. 

Pros and cons of a digital dollar 

The main advantage of a federal issued digital dollar is that it will enhance financial inclusion. This is especially important with the ongoing issuance of stimulus checks whereby the unbanked population missed out on the first disbursement due to a lack of access to financial services. Even for the banked population, the current payment processors are inherently slow and costly to send money. However, the blockchain architecture supporting the digital dollar can facilitate efficient transactions at a more affordable rate than the existing infrastructure. 

Besides the advantages, there are various concerns about the use of tokenized dollars. Most of these concerns are centered around the privacy and centralization of users’ data. The CBDC will be issued by the Federal Reserve, meaning that the government will gain absolute control of users’ financial data. Also, with the government’s reputation for running mass surveillance programs, the incoming digital dollar may be a new system of monitoring the masses. 

Beyond payments

The digital dollar proposal is yet to get a green light from Congress. But, having sparked the attention of legislators, it conveys an overwhelming sense of urgency that the government should work on a CBDC sooner than later. Moreover, the Digital Dollar Project whitepaper emphasizes the need for digitizing the dollar by laying out that other national governments have already started pilot programs for their native CBDC. 

China, in particular, is testing its native digital currency, which will be included in payment systems of various multinational companies such as Starbucks and McDonald. Of particular concern is China’s potential to push its digital Yuan in emerging markets and international trade. If successful, the digital Yuan has the potential to unseat the U.S. dollar as the ideal reserve currency. 

Facebook’s plan to launch its digital currency – Libra – has also had a hand in spiking the government’s interest in designing a digital dollar. Even more recently, the Libra association modified its whitepaper to include a series of fiat-pegged stablecoins rather than just one multi-currency backed token as initially planned. 

Conclusion 

It remains unclear how soon the digital dollar will come into existence. However, given the economic pressure from the Coronavirus outbreak as well as competition from China’s digital Yuan, the digital dollar debate will continue to linger in the minds of policymakers for long. Ultimately, it is great to see legislative attention on digitizing the dollar using blockchain technology, as this promotes the acceptance of cryptocurrencies. 

Categories
Crypto Guides

Can ‘Discreet Log Contracts’ Potentially Gear Bitcoin for DeFi?

Introduction The term “DeFi” has gained significant popularity in the cryptocurrency space since the beginning of 2020. Over hundreds of projects have already been implemented on Ethereum based on the intersection of blockchain and decentralized financial systems. The appealing ones being collateralized stablecoins and derivatives products. Given that the ecosystem can be feasibly built on […]

Introduction The term “DeFi” has gained significant popularity in the cryptocurrency space since the beginning of 2020. Over hundreds of projects have already been implemented on Ethereum based on the intersection of blockchain and decentralized financial systems. The appealing ones being collateralized stablecoins and derivatives products. Given that the ecosystem can be feasibly built on […]

Introduction

The term “DeFi” has gained significant popularity in the cryptocurrency space since the beginning of 2020. Over hundreds of projects have already been implemented on Ethereum based on the intersection of blockchain and decentralized financial systems. The appealing ones being collateralized stablecoins and derivatives products.

Given that the ecosystem can be feasibly built on a smart contract using Ethereum, the concept of open finance cannot be excluded from Bitcoin. For instance, sidechains like RSK (rootstock) can upgrade their smart contract capabilities, enabling more advanced financial products to build on Bitcoin.

That said, there are some other enthralling ideas on extending the Bitcoin’s structure to more sophisticated financial applications. Out of which, one exciting proposal that is in the talks over a few years is the discreet log contracts.

Bitcoin for DeFi – A Sustainable Approach?

Developers are uncertain about bringing in DeFi applications on Bitcoin. People believe that the reason for its significant value to date is due to its simple, stripped-down reliable design.

Contrariwise, ideas such as the lightning network for Bitcoin has resulted in an entirely new design for it. With the feature of layered scaling, applications can be still be created without hindering the security model of bitcoin’s core protocol.

The success has hence opened doors for exploring applications that help leverage bitcoin without having to compromise on its existing design.

But limitations exist…

The most significant trade-off is the complexity of DeFi applications. RSK could no doubt prove to be a valuable sidechain for Bitcoin, but federated peg sidechain essentially requires trust in controlling the chain.

Additional improvements in the underlying technology can reduce trust even further. The compelling DeFi projects on the Ethereum protocol is not possible to incorporate on Bitcoin’s protocol without compromising trust.

Cutting through the interesting project ideas, let’s get our feet wet to understand and generalize the concept of Discreet Log Contracts.

What are Discreet Log Contracts?

Proposed by Thaddeus Dryja, discreet log contracts are an ecosystem for minimizing the trust in blockchain oracles – assimilating data from external sources to the blockchain. Discreet log contracts pivot using Schnorr signatures to disguise the agreed upon contract information from the oracles.

This creates a scenario where payouts on data (public) are possible between three parties. The advantages of it being better security and flexible contracts without having to compromise on the trust.

Useful Ecosystem?

When applied to DeFi, the two parties can maximize their discreet log contracts and unleash the potential of derivatives, futures, and several other financial instruments. More advanced financial products when knotted to bitcoin, institutional practices like hedging risk on assets can become viable through the Bitcoin’s network. With the reliance on oracle-sourced data for payouts, micro-insurance contracts are possible using the discreet log contracts.

Conclusion

The prevalence of DeFi systems built on the Ethereum is hindering the notion of open financial products for Bitcoin. But considering the robust security model and consensus rules, the Bitcoin network does put forth a captivating medium for decentralized finance. And discreet lot contracts are an appealing tool that can help developers develop a more advanced open finance ecosystem with Bitcoin.