A Long Tail of Stable Currencies / James Glasscock

Transcript

foreign okay can you hear me okay you guys hear me yeah there we are all right hello everyone I'm James Glascock I'm from Reserve protocol I head ecosystem uh before we kick off I'm going to show you a video it's about 90 seconds so enjoy if we have the video ready to queue up I just want to settle for once and for all the point that inflation is a monetary phenomenon they ran out of

money and they needed more so they printed more a lot more the prices go up for almost everybody in almost every country this happens every year every decade every Century the prices just keep going up but what if that's not worked but if you're purchasing power project we want a world of asset-backed currency we want a world where your wealth is stored across a diverse range of tokenized assets an asset-backed currency built on the reserve protocol is called an R token and it runs on Smart contracts on the ethereum blockchain every R token that gets minted is backed by the appropriate

basket of assets pay is an app for Android and iOS today all balances in our pay are in US dollars since the only stable coin you can hold with it right now is RSV and RSV is pegged to the US dollar [Music] foreign can you actually create a currency that doesn't inflate that doesn't have this problem of price inflation we think that the answer is maybe yes foreign [Music]

I wanted to show you that so you could get a sense of where we're coming from this presentation is not about Reserve protocol though it's about a different topic it's about something that I've been calling the long tail of stable coins but um I think it's helpful to see kind of a little bit of background uh on where we're coming from and maybe at the end I'll just talk a little bit about Reserve so before we begin you can scan the QR code the deck is available you can copy the deck Fork it do whatever you'd like to do with it you can dive into the Discord and connect with people in the reserve Community if you'd like to do that as well I'm James Glascock I'm head of ecosystem at reserve and um let's see uh reserves mission is to

increase adoption of and expand access to sustainable inflation-proof currency around the world um I should probably use the clicker okay what is a long tail long tail represents the significant demand for Niche products that emerge in the digital age of online markets uh the y-axis is popularity and the x-axis is the number of products uh before the digital revolution of the 90s most industries were relegated to only making hits in order to survive everything was driven by Gatekeepers the long tail was also a essay in 20 2004 and it became a book in

2006 uh by a guy named Chris Anderson he was the editor of Wired Magazine at the time and you might be familiar with some of his other products he invented or created TED Talks whoops see if we get oh okay moving all right uh long tail markets have different expansion stages the first stage is they democratize the tools of production so more stuff lengthens the tail second stage is they democratize the tools of distribution more access flattens the tail and the third stage is uh they connect supply and demand which

drives business from hits to Niche now I keep saying they but who am I talking about well um in web one and two at centralized corporations but uh in the Next Generation internet of ownership and value some some call it web three the they is us or we open source and composability is a force multiplier for the long tail let's Dive In there's already 100 plus stable coins in existence this is vitalik's stablecoin

categorization he published an essay in December uh where he talked about the things that he was excited about in the ethereum ecosystem it's a really cool framework he dives into the three categories first category being centralized second category Dow governed real world asset backed and the third category being governance minimized crypto asset act centralized stable coins today make up over 95 percent of the market share but their IB cliche and say it's really early all right when I think about the long tail of stable coins why would there be why do we need more than one

and what we're already seeing is there are lots of different jobs to be done these are 10 of the very popular stable coins today they each have different jobs to be done tether was the first it provided a safe haven for Traders and it was bootstrapped by bitfinex um usdc very similar came along a few years later more regulatory um transparent also bootstrapped by poloniex and coinbase at the time frax is an uh on chain hedge fund for defy Maxis Al USD the one at the bottom is a pretty cool Bridge stable coin for people

accessing uh self-repaying loans different jobs to be done how did we get here so the tyranny of physical space it's uh you can kind of feel it just by looking at the image right um it's self-explanatory but uh it's not very fair and sometimes it becomes the basis for War people fight over space they fight over land they fight over assets but this is an industrial age paradigm old days were less Fair um prior to the printing press in 1440

knowledge and history were controlled by monks and scribes accessible to a few prior to 1994 when the commercial internet started to Blossom everything was available for free in the Yellow Pages actually it wasn't everything it was just for a few things that passed The Gatekeepers and ultimately it wasn't free either prior to 2008 pre-bitcoin we only had the Fiat standard at scale and the 99 get rugged it's still happening today Fiat money is not working for the every

man um the green line is the purchasing power of the US dollar the red line is U.S government debt which is now just above 31 trillion dollars in the United States today's dollar bought about four times more in the 80s and about eight times more in the 70s everywhere this is the same chart you saw in the video This is inflation across 30 countries since 1960. right now there's about five countries worldwide with an inflation rate greater than 100 percent and 23 countries exceeding 20 percent the cost of sending a two hundred dollar International remittance can be as high

as eight to thirty four dollars depending on the corridor getting credit may depend on the gray markets and sometimes results in unfair loans Data Theft harassment and physical harm the need for safe stable currency has never been more important so how do we create stable and fair currencies that retain their value indefinitely we need to run a lot of experiments and not all of them are going to succeed there's something we can learn from other Industries though

other industries that adopted digital production and distribution and connected supply and demand thanks to those Technologies what's about to happen in digital money has already happened in other Industries we'll take a look at shopping broadcasting and mobile apps shopping this is uh 1980s we mostly congregated in malls with a limited number of stores and products that again were approved by The Gatekeepers this is the tyranny of physical space today there are over 1 million merchants on the Shopify platform alone broadcasting in the 1980s launching a

broadcast channel cost tens of millions of dollars took years to launch today anyone can do it for free in just a few minutes I can tell you in 2005 I was at Turner Broadcasting in Atlanta Georgia and being the kind of incumbent uh gatekeeper they laughed at YouTube I was there um YouTube was not considered anything to be serious uh now YouTube is a far larger business than Turner Broadcasting mobile apps the OG phone app was talking on the

phone then we got SMS texting and now there's over two million apps in the App Store what do you think happens when we get a true web 3 app store at scale so in all of those three examples what happened well it's free tools creativity infinite distribution and incentives does it sound familiar it's already happening in the ethereum ecosystem remember those long tail market extension stages uh earlier in the slides I think it was slide four democratize tools of production democratize the tools of distribution and connect supply and demand

what is especially unique this time though is decentralization and composability which is a really powerful force for expansion to occur faster than we've ever seen in history okay back to money the applications of Industrial Age money are fairly basic they're ingrained in our lives just like fax machines were 30 years ago and horses were a hundred years ago digital age money though provides something new expressive program programmability there are a lot of different ways to sort of frame this uh

this was the one I chose when I made the slide but in the digital age programmability changes everything dilemmas and trilemmas for sure get more complex it depends on what you want to prioritize it depends on what the specific job is to be done take for example branding in the bottom right one you might think is the least important on this slide but the US dollar is a brand it's actually one of the greatest memes in history some of the folks in this room are ethereans maybe some are bitcoiners maybe there's even some lunatics left um

Delta Sky miles BR that's the brand of their money Roblox has branded their money Robux the casinos in Monaco started branding their money hundreds of years ago not for fun but to make it easier to use and to prevent counterfeiting it's actually a really important part of a thriving ecosystem everything on this slide offers different utility that might be important to each of you in a different way some may value privacy some may value speed um this list is not exhaustive either this is just what I came up with to get on one slide some of you will come up with things entirely different

you can also do mashups you can start to program the money to create whatever your specific use case is for um the asset backing for the money is customizable too I'll talk a little bit more about Reserve at the end but you can build an asset-backed currency on chain within a erc20 token today people are using Fiat stable coins uh Fiat stable coins with exposures to U.S treasury bills uh folks are looking at using um

gold assets we've already seen a uh an ass an asset basket of liquid staking derivatives really the opportunities are endless and we're starting to see real world asset tokenization tick up considerably I think at the beginning of the year it was around three or four hundred million dollars worth now it's double that and we're really excited about what the possibilities of all these assets coming on chain will enable this cube is uh kind of a just a depiction of what you could put in a basket you've got some die some true USD some usdc some three pool from

curve even a frax base pool without USD again it's completely up to your creativity just like what we've seen in those other Industries and the internet for the last 25 years lots of things have been created that folks couldn't really fathom in 1995. if history is a teacher stable coins are just beginning um when Google launched in 1998 there were already 18 search engines most people thought search engines were kind of done complete uh then came Google if you're familiar with 1990s internet

history you'll appreciate that America Online which is one of the first internet service providers AOL was one of the first tech unicorns it was the darling of uh Wall Street and the digital economy in the United States it's gone now for the most part we are right now in the AOL era of stable coins the long tail a long tail of stable coins maybe the future each with different jobs to be done but remember the long tail looks to be Niche initially but similarly Tesla was Niche when it

launched 2003. Facebook was Niche when it launched 2004. the U.S dollar was Niche when it launched in 1785. this is how paradigms shift whether in transportation or Communications or even in money so here's the sampling of what's new already in 2023 we're now six months into it this is just 10 of 10 of them uh curve USD launched a few weeks ago really exciting product it offers a more friendly soft liquidation engine for

Borrowers a specific job to be done High USD high yield USD it's an on-chain defy savings account with up to 80 percent apy everything's on chain asset backing on chain over collateralization on chain proof of reserves on chain third one uh let's see USD glow second from the bottom I'm sorry this is a cool one it's a charity dollar that donates t-bill yield to help in poverty this is really exciting because now we're talking about moving money from again this Industrial Age Paradigm to uh something that's more regenerative and more productive for

society like I said Innovation requires running experiments and not all will succeed okay who might deploy or utilize these stable coins in the future it's a lot of folks um short answer is maybe a lot more than we think each of these groups has a different motivation a different job to be done already inside of Reserve we're seeing engagement we've we've seen a protocol deploy one of these asset-backed currencies the electronic dollar we've seen entrepreneurs deploy and eat liquid staking basket and the high USD that I talked about on the

prior slide you might see Dows do this you might see rewards programs decide to bring their point systems into a on-chain environment and actually not inflate their uh currency which is a problem that's plaguing the industry right now you might see Banks video games and metaverses um uh launch their own stable currencies from what I can tell um there's lots of talk about currency systems within video games and metaverses I can't find a good rationale for why those currencies should be volatile especially now that tools exist where you can have a stable currency that can

provide ecosystem yield for whoever's launching it um so that's really exciting and then Network States and governments these groups are not all going to jump in at the same time this list is kind of more or less prioritized and how I think it'll play out so let's see QR code again scan it if you'd like join us in the reserve Discord if you'd like to talk more about this again the deck is available on the QR code as well and uh just a quick Glimpse these are the three that have already been created on the reserve protocol this year all the buttons in the deck are active so if you get the deck you can click

through and learn how to mend them trade them LP them or stake within the community who has questions yes here we go anybody have questions about the long tail of stable coins hi oh here so uh thanks a lot for the nice talk I wonder how you think about uh the kind of domination of the US dollar in this space it seems that most people still think in US Dollars no matter where they live no matter they are very long on

bitcoin or ethereum or whatnot they still uh seem to very much rely on the US dollar and then this comes with a lot of centralization baggage because you need to take this brace of something in US Dollars put it on chain and then do something with it thanks yep it's a great question so the question is um about the US dollar as being the reference point for a lot of stable coins it's uh obviously a very dominant influence right now on most stable coins but you've all been hearing increasingly about flat coins um which is I think it was a term coined by biology several years ago a flat coin is generally stable but not pegged to any

type of fiat currency it could be pegged to the net asset value of its basket it could be peg2 and inflation rate I'm sure some folks will come along in the future and have better definitions of flat coins but um the way I think about it is and there's a lot of kind of um different points of view about this uh especially if you're on crypto Twitter about the dollar losing its Network effects or gaining its Network effects I think in the long run uh you know I just wrote a uh a piece a few weeks back called money different you can find it on the reserve blog and I kind of uh reframe how Ray dalio has talked about

Empire currencies in history they don't last forever uh there's been he gives I think eight examples in his book um I think the Dutch guilder the British pound the US dollar the Roman Daenerys uh and a few others um so what I would say is what's cool about something like the reserve protocol or maybe some other projects out there you know Olympus Dao has ohm which is essentially a flat coin uh I believe uh the folks from trueflation have launched new on which is also a flat coin Peg to a CPI index frax has the fpi um

uh stable coin that's pegged to the uh American inflation index uh and then High USD is uh just a yield bearing uh ads uh percentage of yield every year um so I'm actually excited to see what people will create next you know uh thus far dollar Peg stable coins have been um really a network effect multiplier for the United States but at the same time uh lots of folks are also leaving the United States to go innovate elsewhere so it will we'll have to see how that changes but I would expect in a hundred years

um this question will be answered any other questions okay great yeah so the question is about uh what do I think about algorithmic stable coins either fully or fractionally blocked um our founder uh Nevin uh did a talk a few years ago um talking and he wrote a very lengthy paper on a project called basis protocol it was a project that raised a lot of capital and ultimately decided not to launch but it was a very deep dive analytical assessment of why the

protocol would not maintain its Peg and Nevin went on to sort of talk about that on a few panel discussions um even warning folks about Terra Luna so we have a lot of concerns about it um and that's why the reserve protocol in fact early on they evaluated lots of different algorithmic models and ultimately settled on something that would be one-to-one asset-backed always and over collateralized so I think you know our feeling on it is that it was not the right path for Reserve there were a lot of concerns around it that being said I'm intrigued to study all of

the models out there uh that are doing it with uh fractional uh or uh some some type of algorithmic mechanism um also I should just say algorithmic is a really broad word uh can mean lots of things lots of things get put into the bucket but I think kind of mostly what we think about with algorithmic is we're talking about something that might not be backed by exogenous assets that's how I think about it uh exogenous assets being assets from outside of your protocol versus endogenous which was really the Fatal flaw one of the Fatal flaws of Terra Luna was backed by its own governance tokens can't really build a stable coin very well with that

next question yes sir what do you think about let's say the next five years more adaption of other Fiat back stable points which are not US dollar effect or more red coins yeah the question is uh what will happen in the next five years will we see more uh Fiat backed stable coins like the dollar or maybe the Euro or will we see flat coins um my short answer is I don't know I'm kind of more excited though about the flat coin opportunity about the experimentation it's really the reason why I wanted to come here and talk today because

these what's what's really cool when you have a permissionless platform for people to create on we're seeing it right now right YouTube I gave you I mentioned the YouTube story when I was a Turner Broadcasting uh 18 years ago now there's just 37 million creators on YouTube they create more content get more viewing than any other platform on Earth um the App Store example I used also two million apps in the App Store you can go on and on looking at digital platforms and the impact now I don't think there's going to be two million stable coins but you know lots of people in 1995 didn't know what 2005 would bring and I just I'll mention one more thing on this in

1999 a lot of folks thought Amazon uh was a fraud they thought this is going to die this business is not going to work um and uh and in 2000 when the.com Bubble Burst it went from like 80 a share down to 80 cents and people did kind of the victory laps had told you so Amazon's not going to work it's going to die and a lot of people are really skeptical about the internet still in 2000 2001 it wasn't really until about 2004 and five when we got like Netflix streaming and Facebook the people recognize this is really here to stay um and so I just share that because that's I think right now we're like in

the 1993 or 94 internet with crypto that's how early this is it's uh it's exciting and it's frustrating at the same time do I have time for one more question no I do not all right thank you so much I'll be around so [Music]