Introduction The Decentralized Finance (DeFi) Revolution is taking over traditional finance (TradFi) and centralized exchanges (CEX), with billions in...
Back in October 2018, Stably’s Co-Founder, Kory Hoang (CEO) and David Zhang (CTO) gave a speech at Blockchain Conference Seattle. Take a look back to the very beginning days of Stably and see what the progress we have made so far until now.
— — — — —
Transcript of video below, there may be some grammatical errors.
KORY HOANG: Hey everyone, how’s everyone doing? Whoo! I’m Kory, and we are giving a presentation about stablecoins today. So just by show of hands, who here has heard about a stablecoin before, raise your hand! Wow, okay didn’t expect that here the last time. Okay cool, so let’s move to the next slide. Before we proceed, some disclaimer I just want to run over really quick, most importantly none of this is investment advice or tax accounting legal advice. Everything here is informational and educational. And none of the projects mentioned in this presentation is affiliated with us. Okay, so let’s start with some introduction. My name is Kory, I’m the Co-founder and CEO of Stably. We are a stablecoin startup based here in the Pacific Northwest. We are backed by venture capital including 500 startups. and I will let David…
DAVID ZHANG: Sure, and I’m David CTO. Yeah, my background is software engineering, math and econ. And the blockchain space was the perfect calling for me, so here I am.
KORY HOANG: Yeah, so before Stably, I forgot that I worked in banking investments, financial sector basically. Most recently, I worked at Pitchbook down Seattle and… you know, the crypto bubble last year, it caught me, and it crazed. And now I’m here. So we talked a lot about cryptocurrency and Bitcoin, digital money and blockchain and all this stuff, right? But what actually is money, right? Has anyone ever looked at the history of money and how it evolved over time before? All right, so if we look at the evolution of money, we started out with Seashells. All right, and then we moved on to precious metal. We found out about gold, and then we eventually figured out how to mint copper coin. And then long behold, the Yuan Dynasty in China realized they could print paper money and that people would still accept it for face value. And then eventually, we move on to credit cards, electronic money, and most recently cryptocurrency. But the number one problem with cryptocurrency, well I wouldn’t say number one, there are a lot of a variety of problems, but one of the top problems for cryptocurrency at the moment is price volatility. Price volatility makes an ordinary cryptocurrency unsuitable to act as a safe store value to be used for remittance or payment, right? Because the value of the valuation of the coin fluctuates so much, you could literally buy maybe a car or a house worth in crypto today, and a person who received the crypto maybe tomorrow, they will have lose 10 20% or they’re lucky to gain 10 20%. But something like that is very difficult to integrate into existing supply chain system. And here’s a chart of the crypto market on this bloodiest day this year in January or February 18, I forgot which one. But you can see that most cryptocurrency dived by you know more than 30 percent. And interestingly enough, Tether was the only green spot on this map. Just by raise of hand, who here knows what Tether is? Ok cool, wonderful, and so naturally the solution to the volatility… volatility problem is to create stablecoins. And a stablecoin by definition is a cryptocurrency whose valuation is pegged to that of another asset as considered stable, like the US dollar. Some people would consider gold more stable than a US dollar, so you could also have gold-pegged stablecoin as well “stable”.
DAVID ZHANG: Alright, so what are some use cases? So one of the most obvious use cases is for example, people that have their wealth and crypto, and they want to keep it in a stable asset, well right now, the most stable cryptocurrency is most likely Bitcoin, and even that will fluctuate 50% within a given week, so stablecoins are a potential safe haven asset for… I mean, right now a lot of traders for example when they want to exit the crypto market, and they don’t have a fiat you know off-ramp, what they’ll do is they’ll tether. So basically… you know, they sell their cryptocurrency, and they just hold Tether tokens essentially. And that is their proxy for the US dollar. Other use cases include payments, so people have tried doing cryptocurrency payments but merchants complained about…. you know, the price volatility, so now crypto payments have sort of just become… you know, transferring Bitcoin and then immediately liquidating it, which sort of defeats the point and gets rid of a lot of the benefits of using cryptocurrency. And then for use cases like remittance, for example, if you’re sending money… you know, to your family overseas, for example, you don’t want to send them something that’ll quickly depreciate or… you know, it’s very volatile especially if it’s something that they rely on for… you know, daily living.
KORY HOANG: Just that to the remittance point there I have a cousin in Vietnam. I’m originally from Vietnam. And I sent about three to four hundred dollars to him every… I say, two or three months. Usually I use Western Union, which means $6 and fee on my end, and $6.00 and fees on his end, a dollar is worth 22000 in Vietnam, so you know, for a sixteen-year-old who makes probably less than a dollar a day over there, it’s a lot of money. In April when I last wanted to send some money via Western Union to him, he told me to not do that and send him to Tether instead. And so I was like are you gonna use Tether? Whether people accepting Tether in Vietnam now? He said well, no, but I will bring it to a guy right down a block from me, and I will sell it for Vietnamese money. And the rate and difference that I’ll get is gonna be a lot cheaper than the $6 and fees from Western Union. Okay, alright, go ahead.
DAVID ZHANG: So other use cases include inverse trading. So in traditional financial markets, if you want to go… you know, if you want to bet against a company, for example, you would go short by borrowing money from either other people or the exchange. The crypto equivalent would be doing inverse trading using stablecoins. So stablecoins on margin lets you go short on like Bitcoin, for example or… you know, whatever coin that you don’t believe in. And then another use case is smart escrows, so one of the big things that stablecoins are really beneficial for our use cases where you have a lot of time sensitivity. So like let’s say, for example, I need to lock up $10,000 in this escrow contract, but by the time the escrow expires, all of a sudden it’s become 1,000 dollars and… you know, if the… even if the other person gets paid out, they’re not going to be very happy. And then the last use case and of course probably the most exciting one is powering Dapps. So a lot of these decentralized applications try to mimic what traditional applications do, but one of the big pain points is that you can’t receive traditional financial payment methods like you can’t plug your credit card into the blockchain and expect it to work. So what a lot of people are doing is they’re using stablecoins as a proxy for the US dollar, for example.
KORY HOANG: Here is the current state of the stablecoin market, but first on the left side, you can see the whole entire cryptocurrency market. I did this chart about two weeks ago, so the market capitalization at that point was 225 billion dollars, of which only 2.7 billion, which is only 1.2 percent belongs to the stablecoins. It’s actually less than 2.7 billion I think but right around there. And if you actually look at that tiny piece of the stablecoin, 90% of it is dominated by Tether. And I’m not gonna make this a show to talk about Tethers, so I’m just gonna include a little headline right there just to… you know, show how much credibility Tether actually has right now in the market. But you can see that there’s obviously a lot of room for other competitors to jumps into the space and help grow it further. So let’s talk about the different stablecoin types, so obviously our stablecoin and Tether stablecoins are considered fiat backed. This is the most simple type of stablecoin you can have. They are a token that is backed and redeemable for exactly one US dollar or one yuan or euro or whichever currency that you want. And with these type of tokens, you need a centralized custodian in real life to house the money, to keep the money for you, and also let you redeem it. So unfortunately… you know, you cannot achieve full decentralization with this model, you can utilize the centralized technology but the model itself is not decentralized. The second one, the crypto-backed stablecoins, these are completely decentralized because you don’t need any centralized custodian to hold a crypto and reserve for you. But when you try to back a stablecoin with a bunch of stuff that inherently not stable, it can create a lot of problems, so an immediate fix that… that problem is simply over collateralization. So instead of backing… you know, a $1 worth of stablecoin with $1 worth of Ether, back it with $2 worth of Ether, right? And so, that solved that problems, but obviously there’s a scalability issue as well with that.
DAVID ZHANG: All right, I think we’re running a little short on time, so I’m gonna very quickly breeze through this. So seigniorage shares basically rely on what is called the quantity theory of money, so the TLDR is… you know, if people value the token too much, you print more of it, if people value the token too little, you destroy it through some burning mechanism. I think we can very quickly just skip through these slides and… (KORY HOANG: Sure) A little bit about us before we wrap up…
KORY HOANG: Sure, so this is our stablecoin technology stack, most importantly is the custodian that we have a relationship with in the United State, they’re called Prime Trust, in Canada it’s ATB financial. And if someone wants to buy a stablecoin from us, they sign a US dollar, some once, and then we our smart contract will mint a stablecoin token and send it to that person. And that person can then transact it or send it to someone else or used to buy some other coin as a secondary market. Once it’s time for that person or someone else to redeem that token, they do the exact reverse. They send this stablecoin to the smart contract and we send the money back to them. Yep, our future plans. Beyond just currency is we are also going to tokenize other asset classes including stocks, bonds, commodities, real estate and eventually collectibles and creative content like copyrights and licenses. And generally speaking the idea is very simple. You take a real live asset. You put it into a trust account and then you use a smart contract to securitize that trust account. And then you create tokens from it. And you can start trading it. With our existing technology and legal framework, we will eventually get to the point of being able to offer other asset tokens. For now, we are mainly focused on our stablecoin launch. And for the next several months, we are going to be launching our retail platform as well as listing on major exchanges as well expanding into other protocols. And then next year, we’ll add other national currency as well.
DAVID ZHANG: All right let’s see if we can get one or two questions. I know we ran a little bit over.
KORY HOANG: So did you see the Prime Trust logo on our slides earlier? That’s TUSD custodian as well. So we actually use very similar model as well as legal framework and custodians. Just FYI, most of TUSD money is at Prime Trust, it is not at everywhere like they claim. And so well, I would say what difference from us, what differentiates us from Prime Trust, from TUSD is TUSD is only on the Ethereum at the moment, I believe. Whereas when we launch, we will launch simultaneously on Ethereum, Stellar and EOS. Our goal is to be protocol agnostic so we… we’re not confined on just any single protocol. And most importantly, we don’t charge any fees, so like when people buys token from us and redeem from us, zero fees, period. You might have to pay fees for Prime Trust to wire the money from you or like your bank charges wire fee to send the money to Prime Trust. But us, we’re not gonna charge anything. With TUSD, they charged with 0.1% to buy and then another 0.1% to redeem.
DAVID ZHANG: So taking a step back there a little bit, I just want to highlight a little bit the difference between… you know, Trust token and our approach. So Trust token plans on creating a decentralized version of sort of what we’re doing. But we’re trying to remove a lot of the friction that exists in Trust token system. And the sacrifice for that of course is a little bit of centralization on one end. So they’re just sort of different approaches that trying to solve a similar problem.
KORY HOANG: All right, thanks everyone.
DAVID ZHANG: Alright, thank you everyone.
Stably is a fast growing FinTech company from Seattle founded in 2018 by a team of former bankers and Amazon software engineers. The team has raised close to $3M in funding to date from angel investors as well as leading venture capital firms like 500 Startups, BEENEXT and Pay It Forward. Stably is also the blockchain developer for a wide range of cryptographic tokens and stablecoins backed by real assets, such as USD, EUR, CAD, precious metals and real estate. Our mission is to make financial transactions faster, cheaper and more transparent through a borderless digital money platform powered by open-banking and blockchain technologies.
For more information, please visit: www.stably.io
— — — — —