We see a lot of interest in the stablecoin market. There is a good reason for it. We are watching the entire sector grow by leaps and bounds. Over the next couple years, it is likely we see this market enter the trillions of dollar range.
TerraUSD was making a lot of noise of late. It was just recently announced thatUST Becomes the Third-Largest Stablecoin Surpassing BUSD. There are now $17.5 billion UST, trailing only Tether ($81.8 billion) and USDC ($49.9 billion).
These are some impressive sums. However, the stablecoin market is still vastly under utilized. It is the ecosystem that properly builds out this market which will see it truly excel.
Of course, this is an opportunity for the Hive Backed Dollar (HBD).
Commerce
The tokens listed here have incredible market cap because of their access. They are listed on dozens of exchanges. There are wrapped versions putting them on different networks. Many liquidity pools allow people to swap hundreds of tokens for them. In short, there is distribution.
One thing that is lacking is the golden nugget of the stablecoin market. We still have not seen that truly emerge. When looking at taking on the world of fiat transactions, there is a glaring hole. What is missing is commerce.
In short, there has not be much in the way of payment systems surrounding stablecoins. Here is where another transition is required.
At present, it is all about swapping, trading, and yield farming. While that is part of the process, true stability comes from having a stablecoin that is actively used for purchasing. When it is a method of payment, the entire spectrum changes. Suddenly people are HODLing simply because they know they will need to use it. After all, do we swap out the currency we get our paycheck in for something else? The answer is obvious. We do this because we know we are going to need that money to pay for things.
This is one of the reasons why the USD is the most stable of all currencies out there. Globally, trillions of dollars worth of transactions are done in this denomination. The store of value comes from the fact that people are engaging in tens of trillions of commerce annually.
Essentially, it is a piece of the foundation of the entire global economy.
Cryptocurrency Volatility
One of the reasons why cryptocurrency has not taken off in this realm is the volatility. It is a drawback to the idea of Bitcoin as a method of payment. When the price of an asset can drop 10% over night, that makes it not only poor for collateralization, it is bad for commerce. What vendor wants to wake up and see all sales overnight were actually reduced by 10% due to the currency drop?
This is true no matter what the cryptocurrency. It is the reason why stablecoins were created. Simply, the industry needed something that it could utilize for commercial purposes. Of course, so far, we still see the swapping and speculation mechanism being applied.
Here is the opportunity. Stablecoins, as their name implies, should remove the volatility from the equation. While most depend upon arbitrage opportunities, the key is going to be establishing HODLers. In this instance, instead of it being for speculation purposes, we see this occurring due to the future need. If people realize they will have to (can) use the stablecoin for purchases, we see the desire to have the token.
Hive Backed Dollar (HBD) Opportunity
We discuss this topic a great deal of late. In these early stages, there are a lot of issues with the foundation we are dealing with. One of the first priorities is to improve the distribution of the token. It is difficult to make any progress in this area when people do not have access.
Many fear the potential attack on the network that could result from having too much HBD created. This is a viable part of the equation. However, it can easily be offset by the situation being described here. Ultimately, this all comes down to use case.
One advantage that stablescoins have is the fact the USD is the unit of account. The HBD has nothing to do with USD other than the fact it is the denomination. This is crucial because 4 generations of people know how many dollars are in a barrel of oil as well as a tuna fish sandwich. Ease of use, even mentally, is vital.
Stablecoins can extend beyond the financial sector. Again, this is the focus since most see cryptocurrency is nothing more than financial assets. We also have to consider them a major piece of the economies that we are developing.
When we look at the Hive Backed Dollar (HBD), we see a number of benefits.
- algorithmic stablecoin with no company backing
- base layer coin on a decentralized blockchain
- money equilibrium based upon market demands (elasticity)
- fee-less transactions at the blockchain level
Market cap is a metric that the cryptocurrency world focus upon. This makes sense when we look at most of them since they resemble stock more than currency. However, when it comes to stablecoins, the key is not market cap. That could be achieved with nothing more than "money printing".
What will ultimately matter is the transactions that occur using the currency. How much commerce is actually being conducted using these stablecoins? Again, we are dealing with the basis of crypto-economics. What is the velocity of money for these stablecoins? In the future that is the metric that will be most vital.
Essentially, when money flows through an economy at a greater pace, the larger it will become. Keep in mind, the idea of money as a medium of exchange means it is really nothing more than a tool of collaboration. This is especially true when it comes to labor.
The Hive Backed Dollar (HBD) Is Becoming A Stablecoin. This is an important step for Hive's crypto-economics. Having a tool of collaboration if vital. HBD can fill this role.
We have some work still left to do but the foundation is going in place. This can truly tap into the golden nugget for stablecoins.
Commercial activities are what we need to focus upon. As applications integrate HBD into their platforms, we can see where the growth will come from. This could far outpace what is done in terms of trading and swapping of tokens.
What are your thoughts? Let us know in the comment section below.
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