Curious Case of Blockchain

Risky bets on stable coin and Libra

Technological front of blockchain enjoyed the hype and spotlight within past

couple years and even now. Such anticipated projects, armored with ambitious

approach to spread out its core benefits of decentralization in order to impact

current centralized economical system,

have drawn enormous amount of investment for optimistic future with attractiveness quest for uncharted territory.

However, fiat-currencies still go through

turbulence every year with its value

fluctuation worldwide. Then, will stable

coins be ever stable enough?

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Ever since human race started to produce,

then promote the value for trading, birth of

marketplace led to rise of finance with currency at its core introducing the world of trust and credibility. Transaction activities expanded not only market but also territories of commerce exponentially, shaping up the long history of past and modern economy and the world we live in today powered by digital technology. Historical transition of finance has resulted

in centralized system of government and

authorities such as banking, finance, and trade with policy makers handling over regulations. Regardless of pros and cons, such transformation led us from period of survival to abundance and prosperity. We work, earn, pay,

and eat. Simplest way for good living.

Financial ecosystem was accelerated toward new era with most innovative invention in

human history called internet, connecting

entire world in the form of online network.

The way of traditional financial system such

as money transfer, remittance, deposit, and withdraw changed entirely. Its economic

effect was so huge that international trade and finance were never the same. What we see today is the outcome of internet revolution.

However, rise of cyber threats highlighted by hacking and ADTs such as DDoS attacks challenged current centralized nature of internet and governance, putting data privacy at

enormous risk. Then here comes Bitcoin and blockchain to challenge current system and

structure while providing decentralized

application for possible solutions.

Since then, cryptocurrency became core

features of blockchain projects and related

business. The critical downside was that

majority of ambitious projects never lived up

to hype and stable coin was one of them until now.

Stable coin projects such as Tether, TrueUSD, DAI, and BASIS showed ups and downs.

None of them were stable enough to be the

best practice except for arbitrage in crypto

exchange for trading. There were continuous issues regarding transparency of actual reserve amount, value protection model, and technical roadmap. They were not tested enough, therefore competence was not there.

Here is the thing that crypto projects have been overlooking. They underestimated Central Bank. In state of every nation, there is a central bank that oversees domestic and international finance ecosystem under regulation of

government. That is the fact that will not

change regardless of scalability or benefactors of crypto-related projects. It is just that

simple. Finances such as banking, transaction, payment, trade, or any other activities that consumes the use of monetary values runs

deeply in the vein of entire economy.

Cryptocurrency can be very useful alternative, but it is still considered as an option.

Currency has very clear features and functions; store of value, medium of exchange.

Cryptocurrency was not able to match and

deliver equilibrium of same value to the

industries and users.

Furthermore, token economy is thrown around way too often, and its concept has lost its

credibility and adaptability, mostly due to lack of execution of featured roadmap and technical advancement. Without realizing hidden

logic and science behind fiat-currency, it is

just a long shot. Printing money for spending

is not how currency work. The standard for

global currency exchange is still US Dollar.

This goes way beyond the borders.

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Common elements of the nation are language, territory, ethnicity, culture, and sovereignty. Every country has built its own legal system

structured under regulations and policies

especially regarding finances in order to main the national power, domestic market, clear-cut national identity, and sovereignty. Modern warfare has already generational shift toward financial power with strength of currency,

system, and multi-national corporations.

This logic becomes more rational when you

think of the United States, maintaining its global prowess over politics, trade and finance,

and technology with mostly globally used currency, US Dollar along with influences of tech giants in geopolitical scale. Current ordinary

of US Dollar is traced all the way back to the

Bretton Woods Agreement after the World

War II, institutionalizing dollar’s importance

over global economic recovery, especially for Europe and Asia while officially ending gold

standard since gold reserve ran out for

supporting the war by European countries.

Dollar was in heavy demand by other countries as they tried to rebuild the economic and

financial stability following up on the aftermath of the war. International trade and finance

were dominated by dollar. This became the

new order of modern global currency in

geopolitical scale. Even though more than 60 years has passed since that point, mechanism is same after all. This is how complicated

currency standard is. Countries forcefully

agreed upon dollar standard as global currency, and such landscape is more similar to

originally intended blockchain technical

scheme and cryptocurrency ecosystem

under the name of consensus algorithm for

decentralization. Stability works both ways

with central banks and federal reserves. Its

system and structure may differ by each

country, however logic behind it is same.

It has to go through centralized system to

gain stability and credibility for any currency

to maintain its stature. On global scale with

involvement of multiple nations, regulatory

issues stretch out even further due to stability, volatility, privacy, security concerns considering anonymity, money laundering, and

counterfeiting.

Since the public announcement of Facebook’s Libra, its mission for stabilizing and utilizing

stable coin as global currency for use cases

such as purchase, remittance, and donation

through crypto wallet called Calibra all under control of Libra Association, collective governing body with participants including, Visa, MasterCard, PayPal, eBay, Uber, Lyft, Spotify, Andreessen Horowitz, and Facebook itself. You

can imagine this as digital version of centralized governance. Libra differentiated itself by

pegging its value to real-world assets in

reserve. However, values of assets, like

mentioned previously, is under the valuation of other regulatory or commercial parties.

Federal Reserve and policy makers of the

United States already issued serious concern about Libra’s stable coin and its business

while Indian government already regulated

the law banning dealings of cryptocurrency

and virtual coins. French government mentioned about Libra coin should be limited to

transaction purposes only instead of position itself as sovereign currency. Moreover, cryptocurrency has not reached a point of sale in

convenience like mobile payment to customers. It does not bring any significant benefits to its users yet. That matters in terms of

customers’ value.

Libra’s scalability will disturb, not disrupt, the

financial ecosystem, thus Libra’s ecosystem

is built upon the reserve of real-world assets of which is based on the valuation of assets

determined by government and regulatory

and monetary system directly related to central bank. As long as asset valuation is under

the control of any form of centralized, decentralization under the name of cryptocurrency

is hard to be executed. Blockchain is rather

different case.

Blockchain-powered system or infrastructure can be operated independently or separately within its sector and boundary. It has the clarity about service provider and beneficiaries.

Especially, payment with blockchain is adoptable. Payment system can be upgraded significantly through technical features of blockchain including P2P direct payment in global scale along with remittance, direct transfer without intermediaries while saving time, cost, and

paperwork.

Besides, regulatory issues, stable coin should be executing value protection program and

solution toward privacy, authentication, and

anti-money laundering. Until now, stable coin has not reach any success of doing it so. If

there can ever be true crypto stable coin

worldwide, then we may need a roundtable

for new Bretton Woods Agreement.