STEEMIT CRYPTOACADEMY [BEGINNERS' LEVEL]// SEASON 4 WEEK 5 : STABILITY IN DIGITAL CURRENCIES FOR PROF. @AWESONONSO BY @SRREBULLIENT

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Hello everyone, welcome to the steemit crypto academy season 4 homework post.
First of all, I would like to appreciate our Nobel Professor @awesononso for all his commendable contributions to our community. Thank you Professor.

QUESTION 1

Explain why Stability is important in Digital currencies.

WHAT IS STABILITY?

Stability can be regarded as the quality of being firm. It is a state of not being subject to fluctuations and changes.

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WHY STABILTY IS IMPORTANT IN DIGITAL ASSETS

The fact that digital currencies are considered as an asset makes investing in them very common. Every investment aims to get returns (ROI) and no one would want to invest in assets that won't achieve that aim. Cryptocurrency is a decentralized digital currency built on a blockchain with its activities backend by smart contracts. The decentralization of cryptocurrencies is what has nullified the activities of individuals, institutions, and governments from regulating it. This lack of regulations by institutions and government has made it very volatile for the fact that its activities, price movement, and directions are determined by the community actively on it. Cryptocurrency being volatile makes investing in it very risky. This volatility was what brought about the development of stable coins. Just as the name implies, stable coins are cryptocurrencies whose prices are fixed to that of other assets mostly physical assets like fiat currency. Unlike other cryptocurrencies, stable coins do not change much in price as their price is pegged to the price of another asset. These qualities of stable coins are what have brought stability to the world of cryptocurrency. Stable coins have been a very good development as it reduces the risk on cryptocurrency investments and serves as a better store of value.
Stable coins make cryptocurrency a better store of value for the fact that it doesn't fluctuate in price like other digital currencies and this lack of volatility makes it a good store of value as an investor wouldn't be worried about losing his or her capital investment due to price fluctuations. This stability also makes room for more investors who are initially scared of the crypto market volatility to come in. And as more investors are coming in, it helps in the growth of the world of digital currency.

QUESTION 2

Do you think CBDCs would be good in the future? Weigh the pros and cons in your own understanding and state your position

WHAT IS CBDCs?

CBDCs which stands for CENTRAL BANK DIGITAL CURRENCIES is a digital asset which represents the fiat version of a country's currency.

This digital currency is created to be identical in price and fluctuation with its fiat version. The CBDCs are not decentralized for the fact that it is developed by the central bank of a country. The only difference is that the middle man in fiat transactions is the financial institutions (Banks) whereas in the case of CBDCs the intermediary is directly the central bank.
This lack of decentralization makes its regulation by the government almost the same thing as that of its fiat version.

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Do you think CBDCs would be good in the future?

I would start by examining the pros and cons of CBDCs before taking a position.

PROS	CONS
The CBDCs will help in the reduction of money laundry. Due to its centralized nature, its activities can easily be monitored by the central bank.	There is no privacy when it comes to transactions due to the presence of a middle man which is the central government.
CBDCs nullifies the aspect of banking. The fact that the only one between a person to person here is the central bank makes banking of no use and this, in turn, removes charges issued by banks during fund transfer and withdrawals.	The CBDCs can be regulated anytime by the government and one's asset and withdrawal can be restricted due to certain reasons and all this are because it is centralized.
CBDCs help in minimizing the rate of money laundering due to its centralization. It also helps in getting funds across to diaspora, sending aid in terms of emergency, and providing and receiving foreign monetary assistance	Those in the diaspora are with little or no knowledge of technology and that will put them at a great disadvantage. Most of them also don't make use of smartphones and that also is a problem.
It is considered legal tender. The CBDCs are generally accepted as a medium of exchange. Unlike normal decentralized cryptocurrency that whose acceptance is still based on choice, the CBDCs is generally accepted just like its fiat version because it is backed by the government	This mandatory acceptance removes the aspect of opinion. The opinion of the citizens based on the currency count not and neither do their decision matter.

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MY POSITION

I do not think CBDCs will be good in the future and that is due to its centralized nature.

_{regulatory guidelines on the eNaira}
The centralized nature gives regulatory power to the government. The future we picture is that of total equality in various aspect of life such as governance which democracy is already working on achieving that. When it comes to socials, some laws are implemented to make every citizen equal and some examples of such laws are "Right to a personal opinion", " freedom of association", "freedom of speech", etc. The same thing goes with religion.
The development of cryptocurrency created an opportunity to achieve that same goal of equality in the world of finance. But with the introduction of CBDCs which is a centralized digital currency owned by the government, the aim of cryptocurrency being the future of finance is being fought and will likely be defeated.

QUESTION 3

Explain in your own words how Rebase Tokens work. Give an illustration.

WHAT IS REBASE TOKEN?

A rebase token which is also known as an elastic supply token is a type of stable token which achieves stability by adjusting its supply with regards to its price.
There are various examples of rebase tokens which includes OHM, TIME, MONSTA, AMPL, DIGG, RBASE, etc.

_{List of rebase tokens on coinmarketcap}

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HOW REBASE TOKEN WORKS

Just like every other stable coin, rebase token is created to provide stability in the cryptocurrency space. Unlike other stable coins which achieve stability by pegging to external assets, rebase tokens achieve stability by maintaining equilibrium between their demand and supply. It does this by either increasing the supply when the price of the asset is higher than its stable price or decreasing the supply when the price of the asset is lower than its stable price.

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ILLUSTRATION

An investor has 100 pieces of a rebase token, let's say AMPL. If the value of one AMPL is pegged at $1 with a circulating supply of 1,000,000 as at that time, the total AMPL asset of the investor is worth $100. If the price fluctuates to $2 for 1 AMPL due to high demand, this means the total worth of the investor's asset is expected to be worth $200 from the initial $100 assuming it is a normal crypto token (not a stable coin). But in other to maintain stability as a rebase token, the circulating supply of AMPL increases proportionally to the price increase which in turn will increase the number of AMPL in the investor's wallet to 200 pieces.

Looking at the law of demand and supply, an increase in demand increases price whereas an increase in supply reduces the price

For the fact that the supply of AMPL has increased due to rebasing, the value of 1 AMPL will reduce to $0.5 from the initial $1 and this means that even though the number of AMPL in the investor's wallet has doubled, it is still of the same $100 value.

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Note: A rebase token usually has no fixed supply and rabes often occur every 24hrs in other to adjust supply and maintain stability.
This adjustment in supply in other to maintain a fixed range of value is what is known as rebase mechanism.

QUESTION 4

Go to the https://www.ampleforth.org/dashboard/. Check the necessary parameters and calculate the rebase %. What else can you find on the page?

In other to calculate the Rebase %, the below formula is required.

Rebase % = {[(Oracle Rate - Price Target) / Price Target] x 100} / 10

Let me proceed to Ampleforth.org to find the necessary parameters to be used with the above formula.

_source
Looking at the above formula, the parameters required in calculating the Rebase % includes;
Oracle rate:$1.003
Price target:$1.061

SOLUSION

Oracle rate:$1.003
Price target:$1.061
Rebase % = {[(Oracle Rate - Price Target) / Price Target] x 100} / 10

Rebase % = {[(1.003-1.061)/1.061]×100}/10
Using BODMAS
= [(-0.058/1.061)×100]/10
= (−0.05467×100)/10
= −5.467/10
= -0.5467%

OTHER THINGS I FOUND ON THE PAGE

QUESTION 5

Trade some tokens for at least $15 worth of USDT on Binance and explain your steps. (Give necessary Screenshots of the transaction).

QUESTION 6

Transfer the USDT to another wallet with the Tron Network. From the transaction, what are the pros of the stable coin over fiat money transactions? (Give a Screenshot of the transaction).

I will be sending out the initial $34 usdt to another wallet.
Transfer the USDT to another wallet with the Tron Network.

• STEP 1
  First of all input the usdt wallet address (TRC20) from the recipient wallet. Then I choose the transfer network to be the same TRC20 and input the amount of USDT I want to send.
  

• STEP 2
  Confirm if every detail is correct and if they are, click on confirm just as seen below.
  

• STEP 3
  After clicking on confirm, the request will automatically be submitted.
  

• STEP 4
  This step shows the completed withdrawal of $33 USDT.
  1$ was taken as charge.
  

PROS OF THE STABLE COIN OVER FIAT MONEY TRANSACTIONS

• The USDT transaction was completed within a very short time unlike the fiat money transaction which sometimes take hours or even days due to confirmations by the intermediary (banks).

• The usdt transfer happens to be more private as there is no middle man who has to approve the transactions. The smart contract performs all the activities of the middle man.

• There was only a little charge of 1 usdt for the transfer whereas, in the fiat money transaction, charges are much higher during transactions.

• The usdt transfer is more secure as I had to verify the transaction using my Gmail and phone number in other to proceed, unlike the normal fiat transfer that demands just my password in other to execute a transaction.

• The USDT transaction can be done more often and freely than fiat money transaction because the bank server of the sender or receiver or even both can be down which will, in turn, put a hold on all transactions.

CONCLUSION

The volatility of cryptocurrency has been something to be skeptical about and that has prevented a lot of people from investing in it. The development of stable coins came with a lot of advantages because it brought stability into the cryptocurrency space which in turn brought in more investors.
This course by our awesome professor @awesononso has widened my knowledge on stable coins and CBDCs which also made me understand more the aim behind the eNaira my country Nigeria is working on. Terms like Rebase token came as something new to me and I'm glad I know what it is all about today. Thanks a lot once again professor @awesononso