Bitcoin, which was founded a decade ago by the mysterious Satoshi Nakamoto, has gained worldwide renown. Yet its wild price swings — it gained 1,400 per cent in 2017 and is down 50 per cent this year — have rendered it near unusable as a currency. The explosion in stable coin ventures is, in part, another attempt at creating electronic cash for transactions.
“Satoshi had a revolutionary philosophy of what money could be and stable coins are carrying the torch forward for that vision,” said Ryan Kim, a Seoul-based entrepreneur working on a stable coin project called Xank who attended the event in London. “Bitcoin has become a speculative game and it’s just too volatile to use for commerce.”
The rush to create new low-volatility tokens is also, in no small part, fueled by the ongoing controversy surrounding Tether, the largest and best known stable coin. While its creators say each of its tokens is backed by one dollar, the coins have been dogged by questions about whether that’s actually the case, especially given the company’s long-running refusal to be audited.
Things came to a head in the past six weeks as the token broke out of its historically tight trading range around $1 only to rebound as the company behind the token said it had $1.8 billion stored in Bahamas-based Deltec Bank & Trust.
For the swath of developers working on alternatives, ensuring stability is the biggest challenge. Many of the upstarts are following the Tether model and pegging the value of their coins to that of a separate low volatility asset, such as the US dollar, and by holding large amounts of collateral. Other coins rely on algorithms to maintain stability.