The rapid rise of cryptocurrencies, as exemplified by the huge run-up in demand in the third and fourth quarters of 2017, shows positive signs of continuing in 2018.
While crypto-investors force a shift in the way the current global financial system operates, another dynamic is developing. Increasingly, a sentiment is developing among the cryptocurrency trading community that blockchain technology represents a welcome and positive step forward towards a more equitable global monetary system.
Among the myriad of problems afflicting the current global financial system, limited freedom of capital movement is at the top of the list and is a major issue that cryptocurrency has helped to mitigate.
In nations with foreign exchange control, governments historically have had tight control over the flow of capital as well as the flow of information. However, there has been a dynamic shift in recent years towards greater freedom in both of these aspects. Cryptocurrency effectively reduces the difficulty of capital movement to the same level as virtual private networks (VPNs) have done for the movement of information in the past 20+ years.
Movement Towards Decentralization
Global interest in cryptocurrencies is driven by the potential for a globally-connected, decentralized monetary solution. Historically, this was never even a distant possibility before the launch of Bitcoin back in 2009.
This global, decentralized dynamic has fueled two parallel types of cryptocurrency investors:
--- Investors who aim to generate capital gains through short-term speculation.
--- Investors who are focused on the long-term development of blockchain and crypto's market applications. This group believes, not without cause, that cryptocurrency helps them to securely exchange and store their wealth with great freedom.
Both groups, however, are increasingly driven toward blockchain-based trading models that are decentralized - they firmly believe that a more open trading model makes cryptocurrency a better alternative to traditional payment systems.
Is that really the case? Yes, as the data backs that sentiment up, but there's always room for improvement, and the Stablecoin market is no different.
The main problem with most cryptocurrencies on the market today is not in their limitations of blockchain technology. No doubt, there are valid complaints about the scalability of ETH and BTC. However, these are only temporary obstacles. In the near future, blockchain projects will continue to solve scalability issues to meet user demand. The main issue is that volatile market prices have led to uncertainty. For instance, Ethereum can lose as much as 25% of its total value in a single day and regain it the next.
Investors don't know whether to "HODL" (hold on for dear life) or sell immediately, and that is a burgeoning issue for crypto-investors. If this same scenario happened to any national fiat currency, public panic and bank runs would surely follow. Since the early days of crypto, people have been frustrated by high volatility, and that's why the concept of more transparent, more reliable Stablecoins has escalated in the eyes of the crypto-community.
Why Stablecoins Have Failed Thus Far
Stablecoins were invented to solve the high volatility problem of traditional cryptocurrencies. Stablecoins are cryptocurrencies that are pegged to the value of fiat currency (usually US Dollars) to ensure price stability.
When Tether (USDT) became the first Stablecoin project back in 2014, it was viewed as a promising investment model by the entire cryptocurrency community. Stablecoin projects have been effective at creating some price stability in the crypto market amidst the constant rises and falls of most of the top coins/tokens. However, the problem is that stable cryptocurrency prices are inefficient if the technology platforms supporting them are not decentralized.
Even today, Tether and many other Stablecoin remain 100% centralized, meaning that the monetary system decision-making process is still left up to a handful of anonymous individuals. That's a big red flag to the cryptocurrency community, who rightly view that centralized blockchain projects are a threat to the possibility of creating a better, fairer, and more secure financial system - one the world desperately needs.
As Ferdinando Ametrano, bitcoin and blockchain technologies professor at Politecnico di Milano and Milano Bicocca University said in 2017, "Bitcoin and blockchain is more a cultural paradigm shift than just a technology. It is all about decentralization, so the attempt of intermediaries to repurpose it appears quite ludicrous."
After all, if a centralized Stablecoin like Tether (USDT) can be easily stolen from a centralized exchange like Bitfinex, how can we expect people to 'trust' the future of cryptocurrency projects and blockchain technology?
If we keep relying upon centralized cryptos and centralized exchanges as the future, we will only create more questions than answers about the future direction of crypto and blockchain technology. If we use 100% centralized Stablecoins (or any other centralized cryptos), are we any better off with crypto than a traditional banking system?
Decentralized Stablecoins are the Future
A 100% decentralized Stablecoin solution is the only way forward for blockchain.
In a volatile crypto market, Stablecoins do provide much needed stability. However, we should really look to decentralization as the key.
Cryptocurrency users shouldn't have to worry about restrictions on the flow of capital or have to 'trust' crypto when there are already technologies in place and more being built that run on "trustless" systems. Decentralized systems democratize the entire monetary system, eliminating the chances of hacks/stolen tokens either from cryptocurrency projects themselves or outside hackers. Decentralization can even completely eliminate the costs of clearing and settling trades.
Not only do decentralized blockchain systems create a better future for crypto but also massively reduce costs in other industries as well.
In our view, there's no doubt that a highly scalable, secure, 100% decentralized, Stablecoin is the future of crypto. This is the reason why we started the USDX Protocol project. The USDX Protocol will serve as the foundation for all future Stablecoin projects. As Stablecoins of the past, this project will focus on price stability. Unlike previous Stablecoin projects, USDX Protocol will put a greater emphasis on addressing the needs of the crypto-community as a whole by focusing on transparency and security as the guiding principles of blockchain technology.
We've tried the first- and second-generations of Stablecoin, with limited success. It's time for a new generation that finally fulfills the potential of the global cryptocurrency market.
Dennis Lee, Co - Founder of USDX Protocol - The foundation of 3rd generation blockchain's Follow:@NewMoneyUSDXTelegram:https://t.me/USDXBlockchain