Volatility is the road block to cryptocurrencies taking over the ~$60T monetary system.
tldr — If cryptocurrencies can eliminate volatility, they can take over the world’s $60T monetary market. Tether.to looks like the best bet at making a stable cryptocurrency.
The bus halted abruptly on the edge of Vientiane, the capital of Laos. The city sits on the Mekong river mud-green on the border of Thailand, and has the rundown beauty and air of laziness and mystery that you would expect from a city populated with sleeping Buddhas, drunks, palm spirits, and paunchy communist bureaucrats.
In the muddy no-man’s-land of the border there live a jumble of the wheezy edge cases of humanity. A grimy casino filled with expatriated Koreans and Chinese would have been illegal if it were 100 meters north or 100 meters south, but had somehow found a way to wedge itself into the half kilometer of the border. Countless rickshaws filled with garbage or nondescript blue, white, and red woven sacks pulled here and there. Squat men and women wrapped in loose, modern rags held bundles of bills, some rosy red, others panettone blue with an off white of soiled linens, and still others a pepperminty green — the money changers. The king of all the currencies, anyone at a border will soon find, is that cottony money that coated the inside of my traveler’s belt like lies coat the throats of spies: the US Dollar, the Federal Reserve Note.
WWII & Bretton Woods
Why is the dollar so dominate in these border towns and across the world? The answer lies in its stability, its lack of volatility. The US Dollar’s stability is not an emergent or natural property of this frankensteinian bank bond. Its stability goes back to the end of World War II when the world powers needed to restructure global trade on some currency that was not gold. John Maynard Keynes lead a battalion of economists from the UK in support of a global currency called the Bancor — a global standard currency based on 30 globally traded commodities. As the only victor of WWII that hadn’t had their country blown to smithereens, the US was the global economic plenipotentiary and host of the conference. Harry Dexter White, the leader of the US contingent, acting the part, said “fuck no” to Keynes’ Bancor and setup the US Dollar as the global reserve currency backed by nothing but the good faith and credit of the US government.
So the US Dollar, the Federal Reserve Note, is “stable” because every currency is roughly pegged to it. And its stability is what makes it most desirable. If a cryptocurrency could be as stable, or more stable than the dollar. Guess what?
FYI — in recent time the Bancor has had somewhat of a revival with the IMF creating its own meta-currency based on a basket of IMF country currencies called SDR — Special Drawing Rights — which is currently valued at $0.77 USD.
The First Stable Cryptocurrency
RealCoin now called Tether is the first cryptographic currency that maintains a stable value with the US Dollar. But why be tethered to a sinking ship? Let’s tether cryptos to the value of a basket of real goods and transact with that…
If you think this is a neat idea, or are doing something similar, I’d love to help make it a reality.