For stablecoins like Tether, banks remain their greatest weakness
The rise of bitcoin and its increasing popularity along with its ability to dominate the cryptocurrency world has led to a barrage of altcoins. Among these King Coin aspirants, recent debates have revolved around the role of stablecoins and CBDCs regarding their pitfalls and innovations that they bring to the table. While bitcoin provided a counter-narrative to traditional finance and currency usage, altcoins have tried to make improvements to various aspects of bitcoin. Some altcoins focus on privacy while others on better scalability and larger transaction speeds.
In the latest episode of the What Bitcoin Did podcast, Nic Carter, Partner at Castle Island Ventures discusses stablecoins and its relevance in our times. Stablecoins have been in the news recently as many countries are planning on releasing their own digital currencies and CBDCs that act akin to a conventional ‘stablecoin’.
In the interaction, speaking about stablecoins, Nic Carter says, “There has always been, since the dawn of the internet, a demand to take regular dollars and make them digital and then reduce the permissions around them.”
With regard to bitcoin, Carter goes on to say how digital currencies have been a fascination even before bitcoin. “The stablecoin idea precedes bitcoin, as we saw with Liberty Reserve and e-gold, those were basically stablecoins.”
When asked if he sees stablecoins’ use of blockchain as contradictory as it uses fiat denominated assets to back its currency, Carter said that he doesn’t really agree that there is a contradiction.
He went on to state that, “This has always been a really seductive idea, and lots of entrepreneurs have tried to create this product, stablecoins, just leverage the, you know, the nice assurances that we have of blockchains to replicate this. However, they’re subject to totally the same pitfalls as the predecessors, like Liberty Reserve and e-gold.”
Stablecoins serve as an onramp and were created to not be as volatile as bitcoin, in Carter’s view these features come at the cost of true decentralization. He went on to highlight that if it was possible to create a digital currency with a stable value in a truly decentralized way, that’s what we would have got instead of bitcoin back in 2009.
Popular stablecoin Tether (USDT) was cited to be the most ‘stable’ stablecoin for 2019 according to a CoinGecko report. Commenting on Tether, Carter said that the greatest weakness even for the most ‘stable’ stablecoin today is “They’re always dependent on these single points of failures, the banks.”