Glo Dollar - Challenging the Status Quo: Diversifying the Stablecoin Ecosystem

all right thank you everyone my name is Jasper drens I am the CEO of glow dollar and today we'll talk about stable coin diversity um let's look at um let's first figure out how thises thing works all right the clicker uh is working I guess all right let's look at stable coins and defi um obviously stable coins are pretty important to defi they bring the units of accounts of the real world to our onchain Paradise where Finance is permissionless borderless programmable and of course censorship resistant um I think that without Fiat denominated assets defi would be a lot less appealing to many people um and specifically uh in defi Reliance stable coins is loan collateral uh they're a very core part of a lot of prodical treasuries and they are major Dex liquidity hubs and I want to zoom in on that last one so how important are stable coins really for Dex liquidity well if you run the numbers over the last 12 months then you will find that 49% of all the deck swaps involves usdt or usdc and that means that either uh um the swap was between USD or usdc or it was with different tokens but it was routed through one of these two stable coins 49% that that's that's massive I think and of course that dependency is not without consequences because last year we all saw that when usdc dagged because Circle was exposed to the Silicon Valley Bank Run uh quite soon after there was a liquidity crunch on Unis Swap and curve and for a lot of trading routes liquidity virtually evaporated uh because it was so dependent on pools that included usdc so what's up with that right how can our decentralized uh Paradise how can one company's failure disrupt it so profoundly that's not that's not the thing we're trying to build is it um and and that shows a little bit that this love story between stable coins and defi is a little bit darker than we often realize um USD and USC comprise 96% of all the centralized stable coins centralized stable coins trusting them means you're trusting a company so the result is that basically we we are relying on a duopoly to provide core defi infrastructure and that's bad for a couple of reasons so we just saw that it introduces single points of failure that's one issue another issue is that a dapoli can easily get greedy or lazy so Martin Kika the founder of uh Mountain protocol he pointed out a while ago that the risk-free rate is about 5% and somehow tedar is making 8% on their reserves it's interesting right um and then lastly a duopoly breaks censorship resistance and I don't just mean the fact that they can um uh deny list your wallet I also mean ethereum's censorship resistance because the last line of defense that e eum has against large scale censorship is hard forking and then ethereum relies on the social layer so that's us basically to pick the uncensored fork and make that the winning Fork the problem is that if that would happen today then Circle and tedar also have to pick which Fork they are going to respect for redemptions and if it's just two companies it's not very hard for a government to pressure them to pick the um censored Fork um that would mean that 96% of all centralized stable coins lose their value overnight on the uncensored fork and let's be honest that probably means that the uncensored Fork will lose and ethereum actually loses its censorship resistance so this is a problem um a defi that depends on two companies to function it's not actually decentralized um these two companies are too big to faill and that's a system risk so we we want to move away from that we want to have a more healthy world than this so what do we do well there's generally speaking two solution directions two ways to uh to go around this um one way is to say Okay so we're now over relying on two companies Let's uh make sure that we spread out our Reliance across many more companies so that is what I would call stable coin diversity the other way is to say no no no the problem is not the number two the problem is the dependency on companies altogether so let's avoid that and let's build decentralized Alternatives and um today's talk uh focuses on stable coin diversity so on centralized stable coins but I want to be clear that I I don't think this is really an a debate um these two solution directions they are not mutually exclusive and uh we we probably need both because I don't think centralized stable coins are really going to go away I think they're here to stay for a couple reasons one reason is as at least right now their demand absolutely dwarves the demand for decentralized Alternatives another reason is that um I can still sort of like try to explain centralized stable coins to my mom and dad and they might trust it if I put in some effort but I could never see how I could make them trust how D works for for instance and the last reason simply is the fact that uh the regulatory environment uh seems to really be um um pointing in in in uh in in the direction of centralized stable coins whether we like it or not so we're going to need both solution Direction so we need stable coin diversity and then I mean centralized stable coin diversity so let's get to way more than two very large stable coins let's get to at least 10 um because if we get there then one failing stable coin will break fewer things it's going to be very easy to migrate to an alternative if one does fail it's going to be harder to sensor ethereum and there going to be healthy competition and obviously that's going to be good for all of us okay so let's take action and let's take inspiration from how the ethereum community has improved on client diversity a similar kind of problem where you know we started this Movement we raised awareness we made it cool to diversify we applied peer pressure to large actors we threw some nice memes into the mix and you know this has actually given us some good results so let's do the same thing but this time for stable coins um and you can help do this today we we actually brought some tools so we launched a website called stablecoin diversity. org uh there are social media handles that you can tag and uh retweet um and we brought uh cards and you know there's on some of your uh chairs and if not uh we re brought a lot so you can have you can have some more and this is um this is initiative of the stable coin diversity Alliance of which the stable Summit is a part so thank you so much for uh for hosting a platform to have this important discussion so what's what's the action going to be what do we want people to do well um at the end of the day we want users to start using minority stable coins but we can already anticipate two common responses if we tell them to do that um one thing they will say in a lot of cases is no because they suck and the other thing is sure but which one should I use then okay so let's go to the first one first so the the reality is that stable coins minority stable coins are inferior stable coins at least in the beginning um they are less well-known less trusted less liquid less widely available and less integrated everywhere then the incumbents and that's what people obviously want um so that is an issue because um that means that no one wants to be the first to go into these minority stable coins of course with adoption it solves itself but no one wants to go first so you know the adoption doesn't grow and then we're stuck in this Loop where we're all worse off but it's not as big as a problem as it seems because stable coin adoption isn't binary if you're holding a large treasury of St stable coins you don't have to go all in on an unproven stable coin you can just take it a small step at a time so I want to applaud organizations like gitcoin polygon labs and the shudder Network down um who recently have swapped six figure amounts of their usdc to Glow dollar they're holding millions of usdc in most cases so it is a small step but it's a step in the right direction and if we all diversify gradually collectively then we get where we want to be without anyone taking an oversized risk in the in the process so that's uh uh one the second one yeah which one should I which one should I pick then right that's actually a good question which stable coins are we going to Shi for instance should we recommend true USD I mean maybe theoretically that is diversification too the problem is that true USD doesn't really offer any features or any benefits that usdc and usdt don't have right it's an undifferentiated carbon copy but it's less liquid it's less integrated and stuff like that so really for a user the only reason to move over to True USD would be the diversification argument and that's a hard sell on its own so that's going to make our life harder uh but we can make our life easier if we start recommending stable coins that have a unique competitive path because they do something that the incents don't so you know usdm is yield bearing UC Fe who we just saw here on stage incentivized distribution um and glow dollar funds public goods um I'm going to zoom in on my favorite I'm a little bit biased but with glow dollar for instance um you can fund public goods at zero cost how does that work well you're just using the stable coin like you normally would um but there's an app you can connect your wallet to it um and then you select your favorite public goods and then every month we donate our profits to your favorite public goods and we're funding organizations like gitcoin prodical Guild and give e uh and that comes at no cost to you the user so if you wondering if it comes at no cost to me where does the money come from then take a good look at this slide and compare it with the next one and see if you can spot the differences that's sort like how it works um we think that these billions could be used for something much better so that's that's glow dollar and it's it it offers a user something new and that might be a reason to already start using a new stable coin even though you know it's not the most out one there yet so that's what we want users to do we should tell users start using minority stable coins with a unique competitive path and take it easy diversify slowly diversify gradually um there's a third problem though even if we convince people sometimes they may tell us yeah but the problem is I do things with my stable coins that these minority stable coins can't for instance because they're not supported on on my favorite platform dab chain protocol on and off ramp or it's just not liquid enough for my happy duty industrial use case um so that's the last challenge that we have to solve because minority stable coins lack Integrations and liquidity and and they're faced with a double chicken an act problem and it kind of looks like this if you are a new stable coin with no adoption then obviously you're going to not be integrated in a lot of these product Les dabs Etc and Builders are not going to create these Integrations because there are no users asking for it and that's because it's not being used so you're stuck in this fishous cycle and the other fishous cycle is that you will have low liquidity or at least low organic liquidity um LP are not just going to spontaneously provide liquidity for you because you know there's not much you to be made if no one is swapping in and out of your token um so there's this other fishous cycle and of course for USD and usdc it's the inverse right they have it all figured out already so for them it's Network effects but new stable coins need a little push on these fronts to to solve the first um fishes cycle to break out of it we want some Builders to start supporting minority stable coins preemptively so before users actually ask for their um uh Integrations and to solve the other one we need uh some charitable lping meaning some people will need to provide some liquidity for minority stable coins even in situations where that might not be the most profitable thing to do and I know that kind of sucks because it's sort of like not game theoretic right um but yeah the stable coin duop also sucks so I'm afraid we're going to have to need a little bit of it and hopefully if we have a little bit of it we can get over the hump and then the market will take over and um get these minority stable coins in an upwards trajectory and of course in the meantime as users we're going to diversify gradually so these three things will be playing into each other so that's our final CTA start using minority stable coins with a unique competitive path users please diversify gradually Builders please support preemptively and LP please LP charitably let's make defi decentralized again let's ditch the duopoly um visit stablecoin diversity. org to learn more and um follow glow Dollar on uh X and forecaster thank you so much for your attention