Beam 2022 Week #11 - For Your Eyes Only
Covering March 7th - March 13th 2022
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Beam continues to push forward with developments on the Confidential DeFi Ecosystem, the need for which has grows greater by the day. One such need comes in the form of Stablecoins. These have seen huge growth in the crypto space over the past years, however, there seems to be a key ingredient missing. Privacy.
As has been mentioned, this will no doubt be a wicked addition to the Beam lineup, and for this week, we will take a look at a few different types of Stablecoins.
Stablecoins
As the markets for stablecoins grow, so too do the types and iterations of them. Let us dive in and check out a few types of stablecoins, and how feasible they are for Beam.
Fiat Backed Stablecoins
First up, are the ‘fiat backed’ stablecoins. As the name suggests these are (at least in large part) backed by the underlying fiat currency, with most cases being the US Dollar. For now, these represent the biggest of the stablecoins in terms of marketcap, with $USDT being the front runner, followed closely by $USDC. As the backing is fiat currency or similar, this requires the stablecoin issuer to keep custody of the underlying treasury that backs the coins issued. This creates both regulatory issues for the issuers, and a centralisation that leads to users needing to trust said issuers. There are many cases of both $USDT, and $USDC having been frozen, for the likes of sanctions and hacks.
It is possible for Fiat Backed stablecoins to run on the Beam blockchain in a couple of different ways. The stablecoins can be issued directly as a Confidential Asset (or in contract form). Another way is for users to bridge the assets over from other networks.
Crypto Backed Stablecoins
Another type of stablecoin that has come to prominence namely through Maker DAO, is that of Crypto Backed Stablecoins. Given the volatility of crypto markets, at first glance this may seem a little counter intuitive. This however is circumvented with the method of issuance that crypto backed stablecoins utilise. Rather than a centralised issuer, any one can issue crypto backed stablecoins. A user simply provides enough crypto as collateral (with a decent buffer for volatility) to issue the coin. This creates a debt position that on issuance is over collateralised. To get back your collateral you must return the issued stablecoin. If the collateral falls below a certain threshold, your position will be liquidated and the debt repaid in order to keep the overall system fully backed.
One caveat of DAI is that of the crypto it is backed by. After the launch of multi collateral DAI, a large part of the collateral has become $USDC. This creates some questions as to its feasibility, given the centralised nature and censorship that potentially comes with it.
Various designs of Crypto Backed Stablecoins have come to fruition, all using tweaked versions of the collateralized debt positions. With the last hard fork Beam enabled Shaders which are essentially smart contracts. These smart contracts allow Crypto Backed Stablecoins to run on top of the Beam blockchain, using $BEAM or Confidential Assets as the underlying collateral.
Algorithmic Stablecoins
Depending on your stance, Algorithmic Stablecoins are illustrious, illusive, or both. These stablecoins don’t rely on collateral, which presents the potential for them to be far more capital efficient than their asset backed counterparts. Algo stablecoins have various designs (or attempts thereof), with a common theme being to utilise a 'decentralised central bank’ for issuance. These rely heavily on code in order to execute the issuance and have been met with various degrees of success and failure. New examples of Algorithmic Stablecoins are rapidly emerging, and they are at the bleeding edge of all stablecoins. Given the scalability they offer, this is a space well worth watching!
As with the Crypto Backed Stablecoins, the addition of Beam Shaders allows for Algo Stablecoins to run on the Beam blockchain. Despite no current standout designs it will be exiting to see some unleashed and experimented with on top of Beam.
Privacy
One thing prevalent with the above stablecoins is the lack of privacy. This is where Beam shines! Just like any crypto, addresses can be ‘black listed’, taking away any perceived fungibility. Privacy is essential for us all to transact in a free and uninhibited manner. Stablecoins issued on top of Beam will allow us all to do so without taking on the market volatilities that we find in crypto today. An exciting addition to the Beam lineup!
Community!
Know Your Rights!
Web3 + Privacy
Beam NFT!
The Only Option!
That is all for this week, but be sure to sign up, and stay tuned for all things Beam.