Stabilize money, stabilize the world. A short story.
This is a story about...
h/t Blockworks
Broke monetary policy fuels instability. Globally we find ourselves with hyperinflation, hoarding, unrest, and bank runs. In the US we’ve experienced the most painful inflation in almost five decades.
Monetary policy determines how a currency is created, backed, managed, and destroyed. A few important questions: How is the currency protected from losing value? Is the money system accessible? Who and how is the policy governed?
In the last century the United States transitioned from the gold backed standard to the fiat standard. A de facto oil peg partnership with Saudi Arabia that priced global oil in USD.
With newfound network effects of oil priced in USD, the US started printing money...really fast. The federal debt was $400 Billion in the early 1970s, today it’s over $31 Trillion (credit score not good!)
As a result, USD buying power is decreasing, losing almost 90% since 1971.
A major export of the US is inflation!
Currently, there are 5 countries worldwide with an inflation rate higher than 100%, and 23 countries exceeding 20%.
People are ‘robbing’ banks in Lebanon – to take back their own money. Depositors claim China bank protests are being targeted by Covid restrictions.
Money printing = painful human impact. Venezuelan Maigualida Oronoz in interview with TheGuardian says, “We are millionaires, but we are poor…we can just about eat, but if some health emergency happens we’ll die because prices of medicines are sky-high and rise every day.”
Some hope… In 2021, Reserve launched its first asset-backed stablecoin, the Reserve Dollar (RSV) and The Reserve App to help people in Latin America protect their livelihood from hyperinflation. Stats: 670,000 registered users, 25,000 merchants, $300M monthly volume. About the size of Venmo in 2014.
To go a little deeper on “How Broken Monetary Policy Fuels Instability”, Check out Blockworks' How Broken Monetary Policy Fuels Instability.
Decentralized asset backed currencies with proof of reserves on-chain = the next generation of safety, freedom, purchasing power preservation. Collateral basket could be mix of crypto, yield-bearing DeFi primitives, tokenized commodities, loans, equities, bonds, real estate.
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Vitalik recently shared similar excitement with “DAO-governed RWA-backed stablecoins”
On Oct 10, Reserve launched a permissionless platform for anyone to design, deploy and govern asset-backed stable currencies, we call them “RTokens”
RTokens are not your average stablecoins
Who is going to launch RTokens? DeFi entrepreneurs, crypto protocols and apps, hedge funds, TradFi institutions, rewards programs and game & metaverse developers.
Permissionless experimentation and regulatory regimes that balance protection and innovation...could produce a long-tail of multi billion dollar stablecoins in the short term and potentially set the stage for a new global asset-backed reserve currency in the long term
In Part 2 of the Blockworks series, they tease apart The Investor’s Guide to Stablecoins...diving into the strengths and weaknesses of collateral and monetary policy for Fiat, Crypto, Algo, Commodity and Multi Collateral Asset Backed stablecoins.
In Part 3 of the series, they examine What Is an Inflation Hedge? Finding Stability in Today’s Market.
In Part 4 of the series, Blockworks uncoils What It Takes To Tokenize the World.
The future could host lots of different stablecoins, pegged to dollars, euros or an index like the CPI or S&P, with unique features targeting different “jobs to be done.”
...maybe eventually a reserve currency that retains its value indefinitely and isn’t too volatile.
Are you an idealist, capitalist or hero? we need you. You are invited to the asset-backed currency revolution.