Gravity: Stablecoin Solutions

in blockchain •  9 months ago

As a follow-up to our article “Adaptive Emission: Making Blockchain Economy Real”, we want to add that solution to the volatility problem of cryptocurrency already exists. The solution is so-called “stablecoins” – tokens with a fixed rate and relatively low volatility. Stablecoins can be “associated” with various assets, including fiat currencies, precious metals, natural resources and other cryptocurrencies as well.

Stablecoins can be divided into two categories based on their types of collateral:

- Decentralized Solutions, based on the mechanisms provided by blockchains (including economic incentives for the participants);

- Trust-Based Solutions depend on the credibility of a counterparty which issues tokens where the collateral is external to the blockchain assets.

Decentralized Solutions

In this case, maintenance of the stability of the token price is handled without using resources external to the blockchain. A good example of this solution is the BitShares blockchain with its MPA (Market-Pegged Assets), also known as “bitAssets” with the notable prefix “bit”: bitUSD, bitCNY, bitSILVER, etc. The price of these assets matches the market asset price and should be secured by a collateral in a the form of BitShares, core-tokens equal to a minimum of 250% of the value of the issued assets.. This is managed by a corresponding smart contract. This is why bitAssets are usually called “smartcoins”.

This solution has its own risks for the individuals issuing bitAssets, depending on the core-token price. A margin call can occur in a strong bear market. This means that the collateral itself is used to buy back the asset and settle the debt in instances where the core token value drops below 175% of the value of bitAssets. However, this doesn’t affect token buyers at all, so if you’ve bought bitUSD, then you can be sure of its value. That’s why Bitshares workers don’t have any problem with receiving their salaries in bitUSD. In the 4 years of bitAsset’s existence, they have proven their reliability, and continue to play an important part in Bitshares ecosystem.

As of May 20, 2018 the BTS (core-token of the BitShares) capitalization was 671.5 million USD. At the same time, the capitalization of bitUSD was 14.5 million USD, while bitCNY was – 38 million USD. According to these figures, it’s clear to see that despite the intrinsic value of bitAssets, they did not get the widespread recognition that they may have deserved.

Regardless of recognition, there are some good solutions based on BitAssets. For example, PalmPay, a software-based payment platform that allows businesses to accept cryptocurrencies.

BitAssets are also a pretty effective implementation of stablecoins. Even now, they are being used in real business. And from our point of view, such a relatively low capitalization is merely the result of a lack of serious organizations who could have created solutions for businesses and integrators right from the launch of the platform.

Trust-Based Solutions

Trust-Based Solutions supply tokens with a collateral in a form of fiat currencies and other resources external to the blockchain. A great example is the Tether blockchain. Their token, which is connected to the market asset, is issued when the corresponding amount in equivalent assets (USD for USDT, etc.) arrives in a company account. When USD is withdrawn, USDT is destroyed.

This solution has great potential in business, which is confirmed by a USDT capitalization of $2.5 billion as of May 20, 2018. The most obvious advantage it provides real resources along with cryptographic security. In layman's terms, these tokens are essentially IOUs on a public ledger.

Of course, there are disadvantages as well. We should note that these tokens are secured by assets which are outside of to the blockchain. Due to the nature of centralized storage (outside the blockchain), participants can’t easily check the status of their collateral. This takes us back to the problem of trust in the issuer, who is responsible for asset storage and risk management, all of which is conducted in a centralized way. For example, the bank account of a token issuer may be frozen at any given time.

Gravity Stable Assets: Protocol Level

Gravity Protocol developers realize the importance of stablecoins in the crypto economy. Since the launch of blockchain technologies, business integrations have required fast and reliable solutions. Gravity Protocol is Graphene-based, which means that we initially add the possibility of creating all asset types on the protocol level the same way it’s been done in BitShares, including Market-Pegged Assets (or MPA) secured by a pledge in a form of core-token. You can freely trade these assets on Gravity DEX, using centralized and decentralized gateways of exchanging bitAssets to fiat currencies.

Any blockchain user can issue MPA by freezing core-tokens as a collateral. To answer the question of why you would need to do that, it’s best to start with a brief explanation of how bitAssets work.

The first aspect of bitAssets involves the creation of the stablecoin for pursuing rational economic activities. Many use it, but not many know that bitAssets can also be used for the creation of perpetual and interest-free loans from the blockchain under a collateral of existing core-tokens.

If a user has core-tokens, he can issue his bitAssets and freeze a particular amount as collateral. These bitAssets can then be used to generate profits. Below are just a few use cases (of course, there are many more possibilities than these!):

- A user sells bitAssets for fiat currency via the gateway and uses that money to create a business where he makes a deal or profitable investment. When the profit is gained, the user buys bitAssets using the gateway and pays off the debt and is, of course, left with the profit.

- A user sells bitAsset for another crypto-asset on the DEX, expecting that the price of this new token will grow. After selling the purchased token, the user will gain profit in bitAssets and pays off the original debt, leaving profit. This is similar to the bitAsset short position with respect to the purchased token. This user can choose any assets for this strategy, including core-tokens.

For a better understanding of how bitAssets work, we recommend you to read Stan Larimer’s (@stan) "Bookie Bob’s Solution to Bitcoin Volatility".

Gravity Stable Assets: Solutions Level

In order to provide a trustless and permissionless stablecoin that’s free from the counterparty risks, we’ve implemented Gravity analogs of bitAssets on the protocol level, and we consider this a reasonable solution. However, we do understand that if both options of the stable-coin implementation are associated to the mentioned risks, the blockchain participants should be able to diversify these risks and choose the most appropriate tools as well.

That’s why now, Gravity Solutions GmbH are developing cooperation with different payment services and systems, is looking for reliable partners worldwide in order to implement tokens secured by fiat currencies and other external resources to the Gravity platform.

Perhaps even a hybrid solution may be considered, which uses blockchain collateralized assets, that allows for not only trust in a counterparty, but with fiat backing as well, for ease of on and off ramping.

There’s no final solution yet, but we do understand the requirements for such solutions, and the necessary technology needed to implement them in Gravity Protocol. Gravity Solutions GmbH will develop this solution, together with several other final products, in order to provide the opportunity to its users to use the blockchain without interacting with cryptocurrencies directly.

In the future, both trust-based and decentralized implementations will organically coexist in the Gravity blockchain space, providing developers with the tools for solving various business integration tasks; which will significantly expand the amount of Gravity ecosystem members.

by Jahspear

📢 Gravity Launches Public Testnet

Come to our testnet and break our toys!

Want to join our team?

Gravity Protocol is hiring!

See the previous articles

Gravity Protocol Intro
Gravity Protocol Roadmap
A Deeper Look Into Dan Larimer’s radio
Gravity Protocol initial distribution
Adaptive Emission: Making Blockchain Economy Real
Gravity IPFS: Off-chain Data Storage
Gravity: Ecosystem Participants

Follow Us

Website: http://gravity.io
BitsharesTalk: https://bitsharestalk.org/index.php?board=122.0
Bitcointalk: https://bitcointalk.org/index.php?topic=4189531.0
Telegram channel: https://t.me/gravityprotocol
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Blog: https://medium.com/@gravityprotocol
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So there's going to be several core MPA within Gravity, but no user created MPA?

Have you considered creating an oscillating MPA similar to Hertz?


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Well, we will have user created MPA, so if you wish to create an oscillating MPA and get enough traction in the community for that, be our guest. However, all things in Gravity are geared toward ease of economic use, and for that reason we're sort of leaning toward a hybrid approach: MPA and off chain fiat collateral, that would allow to easily on and off ramp, but would most likely require KYC, if you wish to access it. The crypto side is same trustless & permissionless. And with some community run gates/bridges to Bitshares, this solution would benefit it as well. However, things are still in flux, so it is a bit early to talk about that.

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Definitely an interesting idea do you have any kind of timescale goals? or is it a bit too early to say on that front?

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You can see the Roadmap in our website: http://gravity.io

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I understood everything you wrote

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Nah I didn't....I was joking

Keep up the great work! Crypto needs more stable coins!!

The instability of crypto currency makes me nervous. Especially a newbie such as myself who’s just starting out .this kind of currency instability makes me want to really take life back to the olden days .were handmade,homemade and homegrown gave someone more power over there lives.in addition to bartering for goods and services.
maybe even living in a world were people had both crypto currency and grew there on food and such.i personally need stability.excuse my rambling.i appreciate your post by the way.it makes you think 🤔
6FA4BB4A-C65A-41C7-B10B-A5EEA5072F81.png

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I feel the same way......
That's why I always like to barter whether for services or items.

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Good deal 👍🏽

When I think about stablecoin the first thing that comes to my head is the effekt it has on the inflation. Money imprint has a big impact on the value of money, so how does a stablecoin affects on fiat. I encourage you to reflect on this matter.

How useful, for many to have this type of server, I think it would grant great freedom in terms of establishing a fixed rate of income without jeopardizing the gains, thanks for making this publication full of information and details that serve to learn more about the world of cryptocurrencies.

Is this a new crypto currency or just a token for.now I want to know the full information and positive features of this coin so I will further try to promote such project which is helpfully for the future economy of the users and i will be glad to be a part.fo this project in future. Thanks

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Gravity is an ecosystem in which a lot of tokens, including custom tokens will be implemented.

https://steemit.com/blockchain/@gravity-protocol/gravity-ecosystem-participants

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Gravity is a protocol with its core currency.
This article describes the stable coins that will be implemented in Gravity network as custom tokens

Yes stable coins like tether are really necessary in this industry.

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Sure, but tether is used for trading only

hello there!!!
great post, this one really is a nice post and i bet it will help us a lot for future reference to do trading.
good luck!!!!
have a nice day!!!!

Great read. Thank you for sharing this!

Great post! Upvoted you. Following you aswell. Have a nice evening.

Coins mentioned in post:

CoinPrice (USD)📈 24h📉 7d
BITCNYbitCNY0.169$2.96%6.3%
BITUSDbitUSD1.093$1.68%7.2%
BTCBitcoin7480.170$3.2%-8.57%
BTSBitShares0.200$4.23%-14.84%
USDTTether1.000$-0.16%-0.08%

looking forward to alchemint

nice sharing congratulations

Gravity is a myth

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because gravitons are only hypothetical particles they have never been observed in nature

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You can already see them in our testnet :)

All the best :)
May you get the solution earlier.
You are doing a good job.

Interesting post! Thanks!!

Ur hand is all u need

Interesting read. Thanks for sharing.

Congratulations

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These stable coins can be a very long term asset

Alchemint is looking good

your comment and reply please
image

This post was indeed needed cause it profers solution to a problem borthering evrryone's mind.

Well, actually the only way to know if the solution works it to test it first and give it time. Good work. Keep it up.

Another new coin something to look forward to. Very promising!

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I thank you first of all. I have gained a lot of information through you. you a very good writer, I hope you will be benefited by getting some new information through you.

Una nueva tendencia es algo que día a día iremos experimentando y que esperamos hacerlo de la mejor manera. Gracias por tu post excelente información...

Congratulations @gravity-protocol!
Your post was mentioned in the Steemit Hit Parade in the following category:

  • Pending payout - Ranked 3 with $ 690,98

So, what's the difference between this and Bitshares?

Is really something very interesting, it seems to me that it should be applied

splendid friend You have my support. I hope to count on your support to keep growing. regards

Good afternoon, please visit my blog. And give a couple of tips on what to do here. Thank you.

Interesting contribution in the search for a solution to the problem of the volatility of the cryptocurrency by applying "stablecoins", I will study it in detail, thank you for your publication!

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It is a good post!
Please also look at my lovely camp ♪

Anyone have any experience with PalmPay?

Sounds like a phone app.....

“Adaptive Emission: Making Blockchain Economy Real”, I think Only one way s out.. I believe your system solve this problem .. Thanks for sharing

Thanks for sharing! A link to your post was included in the Steem.center wiki page Steem Dollar (SBD): Links. Thanks and good luck again!

Definitely an interesting idea.. Woow Well done..!! Interesting! Congratulations Great Article..!! :)

Interesting. Does the value of bitAssets in BitShares have any impact on the price of the BitShares coin itself? Would it restrict the growth or is BTS price only speculation based?

Top 3 Breakout ICOs June 2018:

As i give you one upvote please give me one upvote thanks and follow me please

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we can do this exchange if you want just comment on my latest article and upvote ill do same for you