Beyond SBD: A Stablecoin for the World.

in #bitcoin4 years ago (edited)

Until the bear market, SBD had been a great means to hold a stable amount of capital for transactions in Steemit. This makes SBD the only stablecoin that had a purpose beyond trading and it had served the purpose of providing a stable store of value quite well.

Stablecoins are one of the best means to shield oneself against the volatility of the market. Therefore, they are naturally in demand by traders. But SBD has shown that stablecoins can be a good channel for value transfer. Right now, 4 of the top 35 coins are stablecoins and they collectively have a volume that’s only beaten by BTC. The popularity of stablecoins is undoubtable but the vision behind what they can achieve has been limited to usage in exchanges—till now.

Stablecoins for Commerce

SBD has been successful at providing a means of value storage and transfer in Steemit because it’s backed by STEEM. Naturally, the Steemit community has faith in the success of STEEM and thus are willing to accept anything backed by STEEM.

Kinesis is a fintech startup that has a vision to extend stablecoins to the world. To do so, its team has backed its stablecoins with something the whole world has had faith in for millennia: gold. Utilizing blockchain technology to create cryptocurrencies for utility in transactions for global commerce has many benefits but has not been possible till now.

Most existing Crypto is too volatile for merchants to accept and the world isn’t ready to accept major coins like Bitcoin as a form of payments. Gold, on the other hand, is a well-recognized storage of value, and it has been for a long time. Kinesis aims to build off this fact to create a stablecoin that any merchant would be willing to accept, thereby carrying the benefits of blockchain technology to global commerce.

Creating a New Era of Stablecoins

The proposition of tokenizing precious metals is nothing new. However, there’s limited utility in simply tokenizing metals just for owning them in hopes of benefitting from the underlying metals’ appreciation. Some ICOs have allowed startups to raise capital to buy precious metals and tokenize them. While the tokenization of precious metals has been successfully done, the vision behind them has been as limited as the development of stablecoins.

The proposition of existing precious metal-backed tokens is to provide investors an easy means to buy and sell tokens that represent precious metals; they allow an easy means to invest in precious metals. However, Kinesis recognizes this as an opportunity to create a new stablecoin, one that the world can trust; one that can utilize a tested benefit of blockchain technology (tokenization).

Kinesis is looking to leverage the historic trust people have had in gold and silver.

Gold and silver had been the key means to transact across the world. Even fiat currencies were initially backed by gold. Global commerce’s reliance on gold had to eventually end as the metal was difficult to transport and safeguard. However, this hasn’t eroded people’s trust in gold as it continues to be bought across the world as a means to store value for long-term growth.

Even though gold is no longer used as a means to transfer value or to transact, it’s one of the few assets that has constantly increased in value over time. Thus is unsurprising that gold is of the few things in this world that are unanimously agreed to be of value, and gold is one of them. As currencies are able to be a means to transfer value that is unanimously recognized by a population, gold can still serve as a means of value transfer—if the factors that initially ended its usage as a currency are waived.

Tokenizing gold can unlock a new era of gold-based transactions for global commerce.

A New Emergence of Gold

Kinesis intends to build a monetary system that is once again backed by gold. However, this gold will be tokenized, thereby dodging the problems that caused the initial downfall of the gold-based monetary system.

Tokenization is one of the few tried and tested benefits of blockchain technology that has been successfully utilized. It allows an easy means to provide divisibility of an asset while providing an immutable proof of its existence and movement on a ledger. The tokenization of gold is certainly possible and it can be achieved by depositing gold in a trusted vault provider and emitting tokens that represent the gold.

As a gold bar is too expensive to be used for most transactions and is too heavy to be moved around for day-to-day purchases, tokenization makes it possible to make transaction (backed by gold) accessible to everyone thanks to the provision of divisibility.

Moreover, due to the digital presence of tokens, they pose no weight problems. And given that the world is already adjusted to digital payments and money, the introduction of digital gold as a form of money is an unordinary proposition.

Most existing fiat transactions are done digitally. Thus, the world is already utilizing digital money. The usage of physical notes is limited; this implies that the digital nature of tokenized gold would be in line with the vast portion of today’s transactions. As people and enterprises have adjusted to using digital fiat, the introduction of digital money (backed by gold) should be smooth. The difference, though, is that gold has many benefits that no single fiat currency enjoys.

Gold is not the currency of any specific country; Kinesis will be creating a monetary system that won’t be impacted by political problems. The greatest factor of tokenized gold is that it revolves around a storage value that is recognized across the world. Through tokenization, people will be able to pay with gold, an asset already associated as the most-trusted storage of value.

Incentivizing Usage

The factor that makes gold so good is that its value is not volatile and appreciates in the long-term. Unlike fiat, which tends to depreciate, this will be the first-ever issuance of money that won’t be impacted by deflationary pressures. This factor is what makes gold a globally trusted store of value. However, this, while making a gold-based currency so desirable, also pushes it toward a lack of usage. People have a tendency to not spend good money. Kinesis bases off this reality to build innate incentives into its monetary system that rewards velocity.

Velocity of money refers to the speed with which money is transacted.
Thus, Kinesis rewards people to spend its stablecoins. These rewards will be funded by the fee collection of Kinesis. In fact, the vast portion of the fees being collected will be used to fund the reward system. The fees are nothing to fret over as they are far lower than the current fees we’ve become adjusted to; Kinesis keeps its fees low due to the fact that it’s based on Stellar.

The Infrastructure

A global currency needs to be able to be scalable and Stellar provides that. More importantly, Stellar makes transactions incredibly cheap. These low fees allow Kinesis to have a competitive edge beyond offering a currency backed by gold.

Instead of pursuing a new blockchain development, Kinesis is aiming to leverage its strengths and utilize a well-established blockchain. This gives it the benefit of focusing on its gold-backed payments rather than the technological needs of the underlying blockchain. This passes the technological support burden on Stellar. As Stellar continues to advance its developments, Kinesis will likely be able to offer a constantly growing volume of transactions per second.

Due to Stellar’s low transaction fees, Kinesis aims to charge only 0.5% of transaction value in fees. This figure is a small fraction of the 3% fee merchants are charged by payment cards. Thus, digital payments, at present, are more costly than the ones that would be possible through tokenized gold. Cost-savings are arguably the most desirable value-additive any project can offer. While Stellar is an external infrastructural provision, Kinesis has a major internal platform to take advantage of: it's being launched by ABX.

Allocated Bullion Exchange

Kinesis is being created by an institutional-grade bullion exchange, ABX.

While most Crypto developments are in a seed phase, Kinesis is being formed by a well-established exchange and will be able to leverage the network, systems, and experience of ABX. ABX has major clients all over the world and a network of vaults in many countries. Building a monetary system that runs on gold is no small undertaking, but it fits well into the experience set of ABX’s team. This will allow Kinesis to swiftly acquire the gold while abiding by all legal regulations, ensuring the project sticks to its roadmap without trespassing any legal or political boundaries.

Also, Kinesis won’t need to acquire fresh legal permits and equipment or real estate for vaults. The gold will be stored in a functional network of vaults across the world. This limits the eating of fresh ICO funds and allows the team to point the money towards developing the monetary system itself rather than the foundation needed to get it rolling. With the aid of ABX’s reputation, Kinesis has been able to acquire a card provider, thereby allowing Kinesis’s gold-backed and silver-backed tokens to be expensible at point-of-sale systems across the world.

To sum up, ABX allows Kinesis to have the internal infrastructure needed for the project’s precious metal processes, Stellar provides the blockchain backbone, and partners of both ABX and Kinesis provide the business support necessary to provide consumer-side utility. Kinesis is taking the idea of tokenization to make it possible to pay with gold once again, except now blockchain technology makes it possible to remove all the problems associated with gold transactions while also greatly lowering the cost of payments currently involved with payment cards.

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This is a fascinating article. Question; Kinesis will use the Stellar Blockchain as a DAPP or as SMT ?
I think this project can be very successful.
How does this impact Stellar?

Glad you like it :)

So, Stellar provides the blockchain infrastructure and the payment flow channel. Thus, the system remains decentralized. Kinesis itself is a protocol on Stellar designed to create stablecoins. It's a creation of ABX, a well-established bullion exchange and they've already made partnerships with mega-merchants. So, the coins that they are emitting will be able to get quick spending opportunity in the real world. This is what Stellar's founders had hoped for their development.

Thank you
I will research this further. It sounds like a potentially profitable venture. I already own some Stellar so I will check how it’s doing with this news.

Dear @hatu, it's a pity you are stopped to use Steem-bounty service to promote your services, in the last weeks you was the best user of our family...
Anyway i would like to understand why i should buy a stable coin like SBD or USD coin and TrueUsd if i will not have any profit on it? I can keep my fiat coins, it is not the same?

Great questions!

Till now, stablecoins gave no benefit.
As I mentioned above, the stablecoins being generated by Kinesis:

  • Are transacted at lower fees than typical payment cards.

Most payment cards have fees of roughly ~3%. However, Kinesis aims to keep this around 0.5% and hopefully increased adoption can push it even lower. So, consider it as an ever-extended black friday sale of 2.5% lower costs on everything.

  • Are generating rewards upon usage.

The system will be cored around its users: the people. So, the fees being charged will be distributed to those who actively spend the stablecoins. Think of it as something similar to the cash-back rewards your cards offer. The purpose of this is to push people to use the stablecoin over fiat.

  • Will benefit from gold's appreciation.

Fiat currencies have depreciated since their placement. Gold has appreciated on the long-term.

I will discuss these factors in detail in later posts.

Do you really think that the users or crypto lovers are expecting for such stability? or may it will be much appreciated not so stable but less sensitive as it was performing during the last week about black friday and cyber monday? It can be observed that also for profitable objectives kind of sensitive performance is desired by cryptolovers, we believe.

As adoption increases stability will improve as well. It has less todo with the coins themselves and has more to do with popular favoritism. Stability will come when demand dwindles and adoption slows, until then its speculation.

In the case of the legacy coins, it's all about adoption as value is driven by speculation.
However, for coins backed by gold, the long-term trajectory will be positive. That's what Kinesis aims to deliver.

Looks like a good stablecoin. Nowadays many stablecoin are coming up after the tether crisis backed by nothing. Am happy that this stablecoin will be backed by real world entity -gold. A really good choice by the team. Reading what you have written makes me feel that this is going to be a really good and big project. Thanks for the info.

First off, Tether provided proof of a bank deposit of $1.8B+; so, that FUD was meaningless.

Now, Kinesis is aiming to provide a superior stablecoin. It's built on a decentralized blockchain and isn't backed by fiat, but gold.

There are already other gold backed crypto tokens, such as DGX by DigixDAO on Etherem, as well as , KaratGold, and others. I'm not sure how this one will be any different other than it's on Stellar. Not a bad thing, but overall, the thing about gold backed, or any commodity backed crypto, you have to be able to prove that you have the asset that backs the token. The cool thing about crypto, is you do not need a physical asset to back it for it to have value. I hold some DGX, and it's good that it's held its value in the bear market lately, so I'll watch this one, but overall, I just don't see the difference in backing by gold versus backing by USD, or any other fiat. They all have risk because the peg requires trust.

This is not just tokenized gold.
It's a monetary system. The coins emitted will be spendable in the real world and ABX/Kinesis has already made merchant partnerships to make sure it is spendable across a wide array of PoS systems. These coins will have use beyond holding in a bear market. I will detail the differences in a future post.

The difference between fiat-backed and gold-backed is that fiat devalues constantly while gold beats inflation in the long-term. Other differences include limited supply. I will cover this as-well.

Thanks for sharing. Great work.

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Gold is good option , however it will remian where it is , but this Bitcoin will change the game forever

Hence, gold-backed would provide a stablecoin.

Agree with you. Thanks for this post.

you are starting this article by proving that you do not really know what you are saying...

This makes SBD the only stablecoin that had a purpose beyond trading and it had served the purpose of providing a stable store of value quite well.

the fact is that SBD is not a stable coin. It was pegged on the downside but not on the upside. the fact that it is now trading at 80 cents even proves that the downside peg is not working perfectly...
this is the chart for the last year... what is stable about that.
Screen Shot 2018-11-28 at 11.30.11.png

I get that the sbd intro was just that, an intro to get people to read about this gold coin.
A little more research next time might help...

I don't need to research its price. A look at my account age might hint that I am well-aware of SBD's price history.

Unlike you, I've read the STEEM wp. The WHITEPAPER calls it stable. I'll stick to calling SBD what the wp calls it.

first of all I would like to apologise for the tone, it came across a bit harsher then i meant.
and just for your information i did take the time to read the white paper.
and it does state that indeed but even though it does that does not mean it should be treated as holy truth. In my opinion they just made a mistake and forgot to put a peg on the top and only set one in the bottom just because the creators assumed that no one would use it as a speculative coin. It assume it was oversight, but I do not know for sure if this is the case. (I mean to remember reading something along those lines from @dan though)

It is pegged on the downside but capped at 10% of the steem market cap. Now, sbd supply is more than 10% so it treats the steem price as 0.41$ to counteract that, this makes the peg at around 0.85$, so it makes sense why it is at 0.85$ right now

SBD is not a stable coin. It has a floor and not a ceiling. Witnesses pushed to remove the conversion option and to never reinstate this option for the average user. They also pushed to remove the conservative cushion that slows/stops SBD print rate. They did this to artificially drive the price down so SBD would not go over $1.00. This attempt to artificially manipulate price of SBD ceiling has backfired. Here is the crazy thing. SBD high price creates a stream of new revenue into the STEEM economy. This is because SBD is a mechanism to generate revenue through selling debt. Think of it like the US Savings Bond where the US sells these bonds to stimulate the economy. Why did witnesses do this? All because they believe SBD should be a stable coin when it does not have a ceiling. That term “stablecoin” confuses people including witnesses into thinkin SBD is something that it is not. Witnesses never understood the impact of manipulating the SBD ceiling. They also don’t understand that a low SBD price hurts the STEEM economy while high SBD price helps STEEM economy.

What everyone needs to do is stop calling SBD a stable coin. Then they need to go and research why economies sell debt. Once they understand what SBD is designed for, then we can use SBD debt mechanism to build the STEEM economy.

We also need to demand to our witnesses to consult an economist before making decisions about our currency. HF20 has driven a change to bring real testing to future Hard Forks. What was missed is there is zero action to bring in economic experts whenever a change affects our currency. Witnesses will still suggest really bad ideas that affect the currency or just blindly accept the change without understanding the impacts.

This is a fascinating article. Question; Kinesis will use the Stellar Blockchain as a DAPP or as SMT ?
I think this project can be very successful.
How does this impact Stellar?

It carries Stellar to the utility its founders hoped for: global scale of utility in terms of transactions.
Stellar is the main technology infrastructure; Kinesis will be like a stablecoin-issuing protocol upon Stellar.

You make a very interesting point. A lot of blockchain projects attempt to create a token or coin but the founders (or delegated nodes) have a poor grasp of economics.

It'd be best for Steemit if some economists would advise upon fork decisions.

In the case of coins backed by gold, attempts in the past were by tech teams that lacked the business/economic grasp of what they were undertaking and thus the projects did not end well. This time, a well-established bullion exchange is undertaking the project of developing gold-backed coins and thus the economics that are cored around a currency would be properly actioned.

You still going strong Socky. good to see you being active even in a bear market :)

It puts hair on the chest. :-)


^ This 100%!!!

I'm relatively new, but as I've been using it recently, I'm certain that the convert function still exists. And on the other point, is the SBD print rate stoppage not currently in effect (or recently)? Definitely seen payouts go to Steem instead of sbd before, or are you talking about a different cushion? And as to your point about the ceiling, I'm in favor of a ceiling for SBD to stop these boom bust cycles, which I believe therealwolf has written about recently (might be wrong as to whom). Is there a reason you'd prefer SBD to be a volatile debt instrument rather than a stable one?

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The cushion was there before HF20. Printing of SBD had stopped well before HF20. The cushion stops the printing of SBD well before the haircut takes place. The change was put into place to continue printing SBD right up to the haircut. Now we are in haircut territory. When haircut takes place, you no longer get $1.00 worth of STEEM for each SBD. Thus the bottom price of the SBD peg is compromised.

The conversion was once a thing built into the Steem wallet via the Steemit front end. Back when SBD prices were sky high, that option was removed to help prevent people from converting and only getting a dollar worth of STEEM for each SBD. I agree that this was the right thing. When SBD fell to a dollar, I argued that the option should be reinstated. This is where 99% of STEEM users actually use the wallet. Witnesses knew this and decided to keep the option out of the Steemit front end where most use the wallet. People found it more convenient to use the market which doesn't convert the SBD. This was all part of the plan to prevent conversions and over-inflate the SBD supply to manipulate SBD price. Changing the print rate of SBD was just another tool to over-inflate SBD supply. It was a gamble that backfired.

If you want a stablecoin, then create a stablecoin. SBD is not as stalecoin. It is a tool to grow the STEEM economy. You should research how governments use debt instruments to help grow their economies. You will find shocking similarities. It is genius really to have a debt instrument built right in our STEEM economy. The dumb thing was to try to manipulate it to artificially control price.

It's not very stable right now though, way below $1

Bear times.
However, gold is doing quite well.

Your post will give hope to many. As Bitcoin is still not acceptable to all and it's not stable, so what you are suggesting will be great.
We really need a new monetary system. Sitting here to see how it actually works.

In a future piece, I intend to discuss the best part of this monetary system.

While fiat currencies are innately deflationary, gold has beaten inflation rates decade after decade. Thus, a monetary system based on gold would not force those who hold cash to be on a sour end for not being financially literate.

great job ,thank you very much for your informations @hatu

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I really think that stablecoins have a future. But i don't want companies like kinesis trying to centralize all this flow of money. We require to work more in atomic swaps. Real solutions of scalability of gold and money born in the merkle trees and cross-blockchain with no intermediaries.

It's built on Stellar, a decentralized blockchain.
Think of Kinesis as a protocol upon Stellar, a protocol designed to emit stablecoins.

I think that even Gold is somehow became volatile. How will they hedge against this volatility ?

It's stable, not fixated.
Gold's day-to-day movements are rather slow, the only blip was caused during the influx of panic capital during the 2008 crisis.

I once saw an ad of kinesis and thought it was these scams that are on our screens today but after this article I have a different view.
Thank you for sharing

Haha, it's legitimate.

Good one, I will follow it.

Glad you like it :)

Hi @hatu. It will be interesting to see if it works as the markets are crying out for a safe haven. SBD has done pretty well compared to all the other coins but it still has dropped down to 75 c today. For a currency that should be pegged to the dollar it is still a big drop.

Given that the current bear market haven't had a negative on gold means a stablecoin based on them would fare quite well. SBD has been great because it has been backed by something a lot of people have faith in. However, gold has the backing of the faith of billion of people.

can not understand how sbd can be more than 1.01 or less than 0.99 ... It was said several times this will be the only task of sbd - to keep steem afloat. What about TrueUSD,USD Coin, Tether,STASIS EURS ..... how can they keep their price?

Right now, SBD does not give you $1 worth of STEEM. It stopped giving $1 worth of STEEM when STEEM price fell below $0.49.

Stablecoins don't necessary mean fixed prices. I doubt gold-backed tokens would be valued at the same exact same price forever. They'd actually appreciate against the dollar, in time.

That's what I'm talking about. When I started using Steem, sbd was over 2 usd. And I thought....that word steem "dollar" is bunch of baloney. I think same thing now

I'd say it stably follows the NPV of the underlying STEEM.

Yes it does. That's why it would be better to have dollar or gold based cryptos in blocktrades exchange

Kinesis's development of a gold-backed stabelcoin would trump fiat-backed stablecoins. It won't be deflationary or at political risk.

Until some time ago, STEEM was above the value of $, currently, unfortunately, it has fallen a lot, even below the value of $, however, there is hope that it will increase ... we have faith that it will soon increase again . ...
Greetings, excellent article.

I gave SBD as just an example to show a stablecoin can go beyond utility in trade.

The fall of BTC is the beginning and rise of STEEM.

They are two very different things.

Doge will have mass adoption before Bitcoin...

WHat makes u think so?

Well, in comissions. Doge has a ridiculous fee. Also, it works in countries with poor currency. That is the reason about why am i thinking that Doge will get huger mass adoption before BTC -which has it enough-.

Alright. You got a point.

Can you please tell me how to increase your upvotes ?

By reaching the number 1 spot of the front page.

Hire for bots, it worked a lot for me...

Can't say I really believe in this considering the drop in the value of gold over the past years.

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I loved this information, mates, really. This super cool and best of all is how useful it is! Many greetings from Margarita Venezuela! WE GO!!!

Yeah I guess SBD was great when it went up 400% in a year. Those gains are not sustainable though.

Hello my dear friend
At first take my loved and prayers. I hope you are good.
your post always be good

Yeah, you are absolutely right. I really appreciate your opinion. I am fully agreed.

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Good job 👍

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정말로 사용자 또는 암호 애호가가 그런 안정성을 기대한다고 생각합니까? 또는 지난 주에 검은 금요일과 사이버 월요일에 관해서 그랬던 것처럼 그렇게 안정적이지는 않지만 덜 민감하게 평가 될 것인가? 암호문에 의해 수익성있는 목표에 민감한 성능이 요구되는 것을 알 수 있습니다.

Now the crypto market is downtrend, but I still believe the crypto will thrive in the near future. Especially #Nexty -
I trust Nexty more than BTC or ETH. NTT surge is going to happen in no time. Instant transfer | Zero transfer fees Price stablisation system #crypto

As many witness wanted sbd to be peg to 1:1 ratio to usd and the HF is the solution for their cause. However, 1:1 ratio has never been true in all cases

SBD has never been stable

At present, it closely follows the value it is backed by, which right now is not $1.

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Yeah, you are absolutely right. I really appreciate your opinion. I am fully agreed.

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Interesting your post, I am new about the steemit, their politics, I am triying to learn How I must doing my post, you know, be more active in the website.

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