EthCC 2: Chris Hermida

good to go welcome can you guys hear me cool so I'm Chris ramita from circle on the trader over there and I'm giving a somewhat brief talk about stable coins so my legal team is actually asked I say this really quick before I begin which is that nothing that I say here should be construed as investment advice a recommendation for one particular crypto stable coin over another circle trades and supports multiple stable coins and crypto is a new technology and there's still a lot of things that could go wrong do your own research thank you strong disclaimer so I assume most people here already somewhat familiar with circle somewhat familiar with circle coin or with stable coins but just in general you know we are one of the earliest crypto finance companies in the States most notably known for circle pay originally but also our recent acquisition of baloney X our OTC desk and then also US DC and being a founding member of the center consortium so just a brief overview of Center and what we're doing there so Center serves as a consortium for our US DC stable coin and what does that mean well Center is a consortium where multiple members can join and jointly issue US DC and we're trying to build an open governance model where we can have different partners of different people that can participate in sort of this ecosystem and set the standard for an open stable coin so what are we going to talk today so the talk was originally stable coin trends and sort of going through it I kind of realized you know I think the bigger thing to talk about especially what we're seeing here you know there's lots of other folks there giving great talks about say make or die maker Dow die and some of the other ones so I just like to focus on sort more of the why as to why stable coins are where they are why they become so big and sort of why the interest right now brief overview again I assume most people here are somewhat familiar with it stable coins stable right they can serve somewhat as a store value or at least are less volatile than say crypto they're fungible you can use them anywhere or at least anywhere in the crypto ecosystem send them to and from Exchange's pay you're friends with it etc and then accountable and by accountable I don't necessarily mean collateralized in some in a specific format as much as just you trust that the peg or the mechanism there will hold under certain circumstances and there's a variety different ways of accomplishing that so in general right you guys have probably seen this a million times most stable coins nowadays can sort of be broken down to fiat collateralized cryptical analyzed there are other ones you know there's sort of these multi collateral models that are coming on there's the hybrid models there's the algorithmic models but just for the sake of simplicity right now the majority of the market cap of stable coins or at least by issuance are neither fiat collateralized ie one-to-one fiat collateralized like USD see like tether like Paxos etc or crypto collateralized like maker Dow most notably Haven bitshares etc you know there's just sort of a brief overview of you know an example of sort of the accountability right a variety different stable coins now at least on the fiat side are issuing at the stations or some other way of verifying and proving reserves you are relying on that trusted third party to do it but again sort of that the key assumption there is that you do trust in that framework and in that model for that particular stable coin and on the crypto collateralized side die the same thing right you can open up on the blockchain and see you know how much eath is locked into CDP so why do we need stable coins so stable coins are one of the big themes of 2019 we've seen a number of different companies issued or at least explore issuing their own stable coins and explore it we've seen larger corporates like JPMorgan like Facebook rumors of them exploring the stable coin space central banks talking about issuing central bank issued digital currency to stable coins back by stable coins why now though Kryptos approaching five years old or sorry crypto is approaching nearly a decade and stable coins are nearly 5 years old if you look at older concepts even more well the benefits of incorporating stable coins in the ecosystem have been made pretty clear and they've been reinforced over the past few years they're solving real problems at a high level there's growing demand for stability most people well let me bet better sit let me ask this to the audience how many people here are ok holding a 65 ball asset ok I was hoping there'd be more this is crypto enthusiasts how many people here are ok holding you know an extremely volatile asset I'm using it as a mechanism I am - I'm with you guys but most people are not like that might argue you know most people outside of this room are not ok with extensive volatility you know you don't want your cup of coffee to cost two dollars one day and for the next so there's sort of that key driver number two though convenience that's crypto grows and people want to move money from one place to another stable coins can be or serve as that payment rail you can send us DC or us CT from one exchange to another a lot faster than you can wire a bank and then wire from that bank to the other exchange so purely from a payment rail and convenience perspective it's solving a real useful problem and then lastly more just from the point of financial inclusion anybody with a smartphone can happen ERC 20 wallet and the barriers to entry they're the barriers to entry to use and receive payments whether it be via stable coin whether it be via cryptocurrency are lowered dramatically versus a USD bank account and I think you know that's what the dominant themes and trends of crypto so just for to illustrate you know there's a charter Bitcoin volatility and even even in the past right you know it's still fluctuated anywhere between call it 30 to 150 percent in terms of realized ball so volatility isn't the only driver though if you look back at sort of this earlier slide you can see you know volatility Bitcoin has been volatile and crypto in general has been volatile pretty much since the very beginning but why did stable coins just relatively recently take off in terms of issuance right we've had stable coins since arguably since 2015 in some cases earlier you know we've had tether has been around for a while bitshares has been where I'm for a while steam dollars have been around for a while why just now well in mid 2017 a few things sort of came together to really cause a dramatic uptick in stable coins a was the rise of crypto crypto trading most of the people here probably I'd like to hope hat polonius accounts hopefully they also have Finance accounts hopefully they also have a variety of other exchange accounts that sort of crush in that that huge urge to sort of trade in these other alts and other cryptocurrencies created a big need to have stable coins on there especially when a lot of those exchanges could not get fiat banking be China banning see my crypto platforms when China banned access to crypto or not directly but in sense of the fiat operating platforms a lot of those traders and a lot of those folks needed some way to access crypto and in some senses USD T markets and other markets replaced CNY denominated markets a lot of that flow went over there and then lastly was more market dynamics USD D pairs traded at a discount to spot pairs and encourage people to buy tether where possible at a discount to them by cryptocurrency and arbitrage that spread so all those options made stable coins a much more appealing option for speculation particularly given the trouble entertaining USD banking many traders saw stable coins not just as a more viable trading pair but also as a better settlement mechanism would you rather wire or wait three to five business days for an international wire going through several correspondent banks or send someone a stable coin immediately to settle a trade consider the scenario of moving USD between exchanges for many exchanges you previously had to wire money to your own bank account waiting for it to be credited and then subsequently wire those funds to the other exchange and hope they credit it by end of day given the mid given the banking situation from any crypto exchanges in the mid to that mid 2017 it would take several days between layers or correspondent banks to have deposits credited in many cases staple coins were credited immediately as soon as they were confirmed and with that a lot of traders shifted over to trying to use stable coins as sort of that settlement Redemption and payment mechanism between crypto exchanges for speculation but also a stable coins have grown and become more liquid we've seen more of our flow shift towards stable coins part of this has been more counterparties want to settle in stable coins they're ok settling out trades in USD see they're ok settling out trades in USD T they're ok settling our trades and other stable coins rather than just Fiat because they know they can receive their money immediately but another big part of it can just be attributed to stable coins becoming more liquid with stable coin pairs for large kryptos fairly liquid we've noticed a trend or trend of counterparty selling crypto on exchanges for stable coins and then simply using OTC desks to redeem stable coin flow and in that sense stable coins have helped make the crypto market more competitive in many ways it's one of the closest examples to perfect competition will probably ever see anybody in the world can start trading crypto OTC or on other exchanges provided they process AML and kyc given the stable core and dynamic now you no longer rely on on having access to USD banking or having access to Euro banking or having a B have gone to a certain particular place or institution to be able to access the crypto trading market no bank account no problem but also in the defy ecosystem you've seen a lot of stable coins you're sorry pardon you've seen stable coins being shifting and being used in D Phi as well it's not just centralized trading it's not just I would call it distributed trading but it's not just the sort of distributed activity that you're seeing you're also seeing folks use stable coins to participate and trade on Dex's as collateral for decentralized lending platforms such as Dharma and in some cases even in games so what's next for stable coins as you'll see in later talks there's a moving trend to multi collateralized stable coins why well the addition of multiple forms of collateral means in theory stable atleast stable coins are a lot less risky than being solely backed on one volatile asset in particular in the case of crypto collateralized stable coins being backed by any sort of real world asset or any sort of combination of a world asset means they can now be isolated from this the so called gamma risk of being long cryptocurrency or margin long cryptocurrency with collateral and cryptocurrency and being extremely exposed to price fluctuations another dynamic of that though is if they're now collateralized by say security tokens or any sort of other income-producing asset will you see stable coins start paying interest will you see stable coins try to return some sort of gain to the holders of the stable coin it's an open question but with die moving a multi collateralization and some of the others sort of offering these interest rates would be a in the case of die the die savings account you'll see more and more projects likely talk about it and certainly explore the option pending legal and regulatory concerns and lastly there's been a lot of talk about sort of algorithmic and senior at shares based stable coins what do I mean by that and sort of this hybrid model well by that we mean stable coins that use some sort of algorithm or some sort of other mechanism to maintain that peg rather than being directly collateralized or solely cloud allies better said by say a Fiat asset or by a crypto asset there's Tara there was formerly basis but there are a number of other platforms working on these these sort of approaches and the last thing I wanted to write about and sort of what we're likely to see next with stable coins is multi-chain interoperability just this week you saw tether announced an implementation on Tron now regardless of folks feelings on particular projects or particularly or other particular blockchains interoperability is likely going to be a focus in 2019 you're going to see a lot more projects attempt or in some way incorporate different implementations across different chains that can be done with not just wrap stable coins but also duplicate implementations across different block chains and ultimately at the end of the day those multiple invitations give users choice reduce central points of failure and help create a stronger decentralized ecosystem anyways that's about it for this short talk about stable coins and part of some of the reasons why I think that they sort of exploded over the past few months happy to open it up to questions whether it be about stable coins in general whether that be about us DC and folks thoughts on that [Applause] so you talked about the Facebook coin a bit but what do you make of the fact that it will rain false Facebook has a big machine that it would just be the biggest bank in the world if they were to build a stable cool well in some cases right you still need to get user adoption you know it's not clear that even if they do build it right that the users will come and I think you've seen a lot of examples of big companies try certain very ambitious projects and it's the same way we chat wells in in China they are now almost the biggest bank in China I mean it's certainly possible but again you know I think there are counter examples right Google with Google Plus arguably the best position in the market to sort of capitalize on that and it sort of went nowhere I'm not saying that that's gonna be the case of Facebook but it's still an uphill battle right to gain users and particularly if it's in a closed-loop network right I think you see the advantages of open systems just being here of course but don't you think it would be a threat as well that they will just have everybody use their use the echoing and this would just make them bigger than they already are I mean it's certainly possible but look it's it's good for the ecosystem I mean it more choice especially more legitimate offerings from large companies I think are good it gives consumers choice and if you like that option if you want to use that centralized closed-loop coin all the power to you but at the end of the day as well if you want to use an open decentralized Network you have the choice to do that as well I think we had a question over here from the front where are you question awesome we have seen basically throughout 2018 a few crypto collateralized stable coins go through a baptism of fire where the underlying gas at lost huge part of its value and yet the stable coins held up but I'm wondering if there are some known examples of failures and what in general are the failure modes of stable points yeah I mean I think that's part of it that's definitely been the case where there have been some that have lost their peg and I don't want to comment on particular projects but come see you after this talk take it off chain but yeah no I mean it's pretty remarkable when you think of it that projects such as you know say maker Dow have maintained their peg or maintained relative stability despite you know net what a 95 percent drawdown from peak to trough in these price if I talked how do you envision the appearance of new tokens so stable coins that are quite regulated but quite open so like for example their prints of JP Morgan coin which is quite it's nowadays oriented to investment part worth could be that there's a position that it's open on a network and main net or permission of network how do you envision the usage of real fiat organized money on the may net because that's a game-changer in a way that anyone who has euros can work in the main it using a coin which is in Euros and moving around for example yeah I mean so going back to sort of the I think it's gonna have a similar or it's gonna suffer from the same things that sort of the Facebook coin might have right it depending on whether it's a closed versus open loop system what I'll say is again you know it's good for consumers you'll see more choice in terms of usage like that it's unclear exactly what it's gonna look like my understanding and I don't want to comment 2-foot much on it is the JP Morgan coin is sort of limited institutions and limited to sort of high net worth clients and individuals whereas you know some other coins are focused more on say a peer-to-peer payments market for somebody you say it about closed loop an open loop so if we face a regulation it's quite a closed loop no because you need to pass different key YC animals to have a well by closed loop I mean that it's on a private chain and sort of slowly lives in this ecosystem and again you know details are still forthcoming on some of these different implementations and projects that being said you know even if it is on a public chain you know whether it's US DC whether it's Paxos it really doesn't matter sort of if it's a Fiat back or better said USD back stable coin they do need to abide whether it be directly or via their banking partners that's storing the actual USD by MLK I see thank you very much for this I think great overview of the stable coin situation my question is about u.s. DC and its future do you see it is always remaining is feared backed stable coin and kind of relying on that banking relationship and what are the kind of part to the question what do you think are the biggest barriers to growing its market share in the stable coin market yeah so in terms of what will happen in the future you know I I'm not quite clear I think right now the the current model is you know to maintain that sort of Fiat 101 peg and be backed by traditional feel assets in some cases you know the the reserves will be invested in say money market funds and you know a limited amount of sort of low risk instruments but in general you know I don't see that main approach changing much and in terms of growing market share it's fairly liquid as is you know listed on a number of different exchanges including finance coinbase baloney acts etc will probably continue going down that route will continue exploring partnerships will continue exploring different ways of sort of expanding the US DC ecosystem and you know if anybody here is interested in that be happy to put them in touch with sort of our beady side on us DC thank you thank you for the the stability overview and you just said that the the doora on the bank account are invested in two assets money market funds does it mean that so if you had karate allah can if there is a big financial crisis loser some some value and then the so peg can be lost you know in a way so I should say can be invested in money market funds that sort of part of the draft of it right the second to my knowledge I'm not sure the specific breakdown but my understanding is the vast majority of it is in safe bank accounts that are extremely conservative low risk now yes if the entire financial system collapses then there will be issues but they'll probably be bigger issues than just us DC if that happens thank you thank you I have a question regarding use the C is it is it only used for p2p transaction or is it used also in the network merchants retailers what are the plans for for it yeah so they're plant different plans to expand it and sort of grow the ecosystem adoption I'd say right now you know the main use case is where we see the most value and and most recently at least where we've seen the most adoption has been with the trading in speculation side particular with settlement redeeming trades and sending us DC across exchanges as sort of a payment rail you know it's possible in the future we'll see a lot more say Peter Peter payment usage and there's a lot of different approaches that we can take but again right now in terms of where we're seeing sort of a substantial amount of activity it's still primarily this bucket of activity okay thank you okay for my for my I couldn't use the US DC or us DT isn't stable coin because it's it's packet $2.00 do you know if there is some project for a stable coin based on the euro yeah so there's there's a there are a few euros stable coin projects tether actually does have a euro implementation stasis I believe is working on a gyro-stabilized the center consortium does eventually want to extend that to other currencies but right now you know we're focusing on the USD base stable coin and we'll go from there and see revisit expanding it to other currencies soon any other questions [Applause] hello