Towards Better Stablecoin Infrastucture | Parity | Common S3nse 2026

[music] Uh, right. So, the pointer's not working. I'll be walking back and forth. Doesn't make you dizzy, but hi, uh, Common Sense. I'm Donald Murray, and I'm really pleased to be here, uh, to Common Sense in the middle of Cipher Punk Week.

Uh, it's really nice to see topics like privacy and web 3 values being discussed. Um, I kind of got here because being from Belfast, you grow up already questioning the state. Uh, you grow up not not necessarily trusting the institutions or the people out for your best interests. In Belfast, uh, in during the troubles, the the state actually colluded in the killing of civilians. And if that doesn't make you distrust the state, then I don't know what would.

So I'm not going to make uh time in this talk. I won't be telling some tall tales about growing up in the war torn north. Uh I was born in 1994, so I was a ceasefire kid, peace kid. Um but I think that the after effects were still very visible as I grew up and it really shaped my mindset and sort of trend towards web 3 and privacy. Although I do have agency as well.

it's not just all predefined. So the last few years I've been working at Parody Technologies to uh start to bring this web 3 mindset to reality and get get it in the hands of everyday people and try to build infrastructure that enables people to uh make these decisions and and live a life that better suits their decisions. So, I think that one of the best or let's let's add an arguably to this. I think that arguably stable coins are the best uh or the clearest use case for the everyday person to have come out of web 3 so far. And I think this was really clear to me.

I was I already had stable coins on the brain um November last year and I went to Buenazaris for um a couple of conferences and in Buenazaris I had a really interesting time seeing web 3 stuff being used in people's day-to-day lives people who were outside the crypto bubble. So I would uh you go to so when you're getting taxis in um in Argentina you can actually many of the taxi drivers will accept crypto digital dollar um so either stable coins or they'll also some of them it's it becomes a smaller and smaller set but people will accept ETH BTC or in one case I heard of a guy who was able to pay for his taxi in dot. So try doing that tonight in Amsterdam. But other things were really were really uh recognizable in Argentina where you'd go to a restaurant and the menu would be obviously all they eat is meat. So it's meat meat meat meat meat but no prices.

So it made me wonder like okay why is there no prices? This restaurant's super expensive. But it turns out that that's sort of the norm there. Um, and this is an after effect of some pretty crazy inflation in the preceding years. So when I was there, November 2025, the inflation for that month was 2.

5%. For the year was about 30%, 2025. If you go back to 2024, it was more like 100%. And then 2023 was more like 200%. So obviously these are these rates of inflation are pretty insane.

And when you just want to get paid and then for that money to still be worth a similar amount even next month or next week in at the height of it, uh you need to turn to things that allow you to hedge against your um depreciating currency or your your uh de you're decreasing buying power from your wage. So in Argentina, people turned to stable coins uh specifically US dollar denominated stable coins that they would access initially on on the sort of gray market um just going with cash pesos and swapping it for uh stable coins in their wallets as in their online wallets. And over time this kind of was more and more supported by the state where there were easier ramps for people getting access to stable coins. Um, but it was really interesting to see this kind of firsthand. It really it made me think because stable coins are many things to many people.

To me, as a person who lives in a country where we have modern banks, there's they're not very heavily gatekeep. Any normal citizen can just go and open a bank account. They're cheap, get relatively good yield from savings interest. Uh you I can also through other platforms access socks and shares and send funds across borders with things like Revolute or Wise. And so things are all pretty easy.

So for me in my everyday life, the use cases for stable coins are basically just the middle one here, just accessing a bit of another source of yield, which is sometimes better than what you get in a bank. But these other aspects of it like I can already spend see move money uh with traditional banking. But then in Argentina or for just somebody else, even somebody who lives in the same country but has different requirements, these things become really really important where their ability to send money across borders or their ability to access uh some sort of stable store of value, whether that's stable to the money that they pay their rent and bills in and it just stops them from stuffing money under the mattress or whether it's a different currency altogether which protects them from the devaluation of their currency. So and there's another aspect in the kind of upcoming uh inflection phase of web 3 technologies people will be paying for services and expecting everyday people to accept exposure to volatile assets like ETH like DOT like anything else that you need to use to pay for the services that you use. Instead they can just use stable coins.

there's no need for them to the need is just for them to pay fees due to the systems that we have not that they are long on crypto. So stables are really powerful for this kind of stuff. Um now the problem with stables and sorry going back to the the previous mindset and applying this to here having these many uses for stables means that there is no oneizefits-all stable coin there's or even subset of stable coins. Some stables, people often talk about stables as only US dollar denominated stable coins, but in general, you can peg a stable coin to basically anything, anything you could get a price for or price information for, um, you just need the the mechanisms to back it up. So if if I were to launch a stable coin and I decide that it's pegged to this and it's backed by that, that might not appeal to everybody or everybody might not have a a kind of stable coin in the the many stable coins that we already have that they would want to use.

So launching stable coins um should have a lower barrier to entry. And we see that more and more stable coins come out and there there are kind of the two streams where some people want to define something that's more decentralized, more yield, more just it's whatever path that they choose and they for that they might need new mechanisms or um you know new things. They're testing stuff out. They're at the cutting edge. But a lot of people just want to deploy something that is battle tested, proven, and just works.

like they don't want to become uh getting ahead of myself. The so the I wanted to just talk a little bit about the failures that we see in stable coins and then the barriers to entry because setting up a stable coin is a path that is dark and full of terrors. You can have many failures at many different layers. So you I've got I've kind of if you um if you kind of have some time to burn, you can go through WCT on rec.news or uh web 3 is going great and you can read about all the different failure modes and um and problems that people run into in in these experiments.

And if you go back to what people actually fundamentally want from a stable coin, it is that it doesn't get direct. it's that it remains stable relative to whatever peg it has. So, um, if you go through all of these failures and problems, you can characterize them in or I've chosen to characterize them in four different ways. I'm sure you could choose different bins for them, but basically there are failures that are to do with the oracle, either a steel oracle price, a manipulated oracle, or one that the validators themselves are under attack. So, that's infrastructure.

It could be the code itself. So the peg mechanisms in their design or implementation. Um and then or even just the the configuration the parameterization of these models and then you also have the the fundamentals of the mechanism itself. You know we have economic assumptions from previous stable coins which have failed under stress. There were um algorithmic stables who launched and things seem to be going really well.

things were sailing perfectly with calm seas and a pleasant wind. But as soon as something just perturbed that system, there's the possibility that it enters a death spiral and collapses. So we know we have mechanisms that we want to avoid. We know we have mechanisms that we want to use and it's the kind of the implementation that is the infrastructure side. But the mechanisms we can still simulate them to get a better understanding of what we're getting ourselves in for.

So the the last one since we're talking about stable coins in general, not just decentralized stables, I'm including centralized stables in this as well. So the governance and control of both classes and then the reserves of the centralized stables. So just making sure that those reserves are not only actually there, which I think there were a few queries about in the past, but that they're accessible and that some random bank in California going down doesn't mean your stable coin dps. So launching a stable means getting all of this right. Um, and getting all of it right.

If you were to try to launch your own stable coin as a business or community, you might not necessarily have the expertise required. you're not a not necessarily an engineering organization or a security organization. Your audits in house might not be the top thing on your agenda because you're just you're focused on the use case. Um and so the expertise that you need to get on board for that to launch in today's in today's kind of paradigms. No matter what you do, you're going to need to deploy some code more or less.

There are like stable coins as a service, but it's arguable whether you've actually got control over that and you have to essentially accept some peg and uh collateral that somebody else has decided on. So you can start with some code. You can either write it yourself which is you know big engineering team or you can take reference implementations tweak them to your needs hopefully audit them and I assume that people are still auditing their stuff in this case. uh and then deploy that and in some cases you're accepting uh a new kind of um not only the governance system itself but the mechanism the the peg mechanism even sometimes the oracle is built from scratch. So and then you're also deploying it or operating it depending on what flavor you're going for.

So this kind of I've been hinting at it through the slides, but I think that trying to mitigate some of these problems by reducing the uh complexity and also reducing the barrier to entry is by having a um an infrastructure layer which is parameterizable parameterizable functionality that is already on chain. So having this shared platform on which you can uh you can just take something instead of forking somebody's code if you like that mechanism then the mechanism is on chain already if you can make an instance of that and just set it up then you can just use it. So the the key steps would be kind of thinking about what mechanism suits your needs depending on the volatility of the asset or what your governance decisions are. you might make different decisions, but once you've got a sort of concept and some uh kind of starting parameterization, you want to simulate that. You don't want to launch and see what happens.

You want to get a good idea of whether it's going to work, whether your parameterization is sane, back testing, testing in extremes. Um, and so once you've kind of convinced yourself that your thing is going to work, then you can reuse this functionality already on chain. And then you basically just have this. You still have to choose your governance or control whether it's centralized a DAO or just not controlled by anybody. And then you just launch it.

So we're tackling this on polka dot um by building out this infrastructure layer. And I think that so we're we're going at it from a few different angles. We want to have an oracle which is based on the existing validator set of the network. So the price information comes from this set which already has um it's kind of a it is itself a battle hardened validator set. the way that the prices are combined and submitted on chain is manipulation resistant and then it's sort of uh extensible in the way that you as an individual can just go and make a referendum and there's just this call that you can make to just say add this price pair.

You just submit two tickers. It creates the p price pair and then the validators then start like catching and submitting that information as well as whatever pairs they start off with. So it might start off with dot to US dollar since it's on polka dot but people could add price pairs which are uh you know dot to CNY or dot to Swiss Frank or even gold to BTC or just some random pairs that you wouldn't think of. Uh so you can establish any peg to any collateral. The mechanisms that we're going for, we're kind of starting with these battle tested mechanisms, but the aim is that you can register an asset and link up the ways that you can control the issuance of that asset.

So whether that is uh centralized control mint and burn or a liquidity v2 style mechanism or uh a mechanism backed by existing stable coins which doesn't even need an oracle. So you can kind of choose and compose these and even combine multiple under one asset. Um and then with the simulation, we're going pretty hard on simulation because if you look up what simulation has been done for existing stable coins, it's actually relatively thin people. Some of the earliest stable coins were really uh released on a wing in a prior I think or at least the the parameterization is oddly they're oddly round numbers. So we wanted to do something where we can simulate one of the price pairs or a few of the price pairs for a few of the models and create this framework which is itself extensible and if somebody comes along and wants to try a new uh a new peg peg or collateral they can just sub all this stuff in run the same simulations against the papers that we've published about the simulations we've done but using the same framework that we've published as open source code and then the tooling, wire it all up, few transactions and you're off to the races.

So, it's all open source all already live on chain. Um, and so I wanted to end on one of the key messages, which is people don't have the same requirements for stables. The stables that are out there right now don't necessarily satisfy those requirements and there should be a lower barrier to entry and lower well a mitigated risk space to deploying a new launching a new stable point. So I think that we can take this message as a general thing not just for the polka dot ecosystem but uh on polka dot hopefully expanding this out and creating not just because I I think that you could easily pick holes in this talk by saying I've ignored a whole problem space and then I'm only focusing on one side but and yes that that's something I I completely acknowledge but I think focusing on the lowhanging fruit of shared infrastructure and then building out to create um the structures that exist around this to make the whole stable usage story in web 3 uh more just forgotten the final word of my talk more usable. So thank you very much