About Stable Coins

I want to know whether the DFINITY team has plans to cooperate with some companies to issue stable coins in the Internet Computer ecosystem? Stable coins are essential for the Internet Computer ecosystem, especially the DeFi.

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Working with Circle to bring USDC would be excellent

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Threshold ECDSA / Bitcoin~Ethereum integration will allow you to send whatever assets are on those chains to canisters (which could be controlerless); so that the canister could “issue”/“burn” a twin of those assets on the ICP.

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Cylces can lead to long-term negative premiums and do not function as stable coins.

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Can you explain what you mean by negative premiums?

Anyone can convert ICP into Cycles at any time, so this will lead to a constant increase in Cycles. There are two options for developers who need Cycles, one chooses to buy them, and the other chooses to convert them into Cycles with ICP themselves. When the price of 1T Cycles is higher or equal to 1 XDR, developers will choose to convert ICP into Cycles themselves, and only when 1T Cycles is sufficiently smaller than 1 XDR, developers will choose to buy Cycles. So 1T Cycles in the value of the market will be lower than 1 XDR for a long time, and even in the case of not many projects, the liquidity for purchase will be insufficient.

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I am not aware of any conversations or plans, but the org is no longer the dozen or so people when I joined. At 200+ people, possible it is but I am not aware. I will ask team to see if anybody knows something I do not.

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Thank you very much for your reply. I like the effort of your team. Look forward to progress on this matter.

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I just heard from team, I can say that say our team is in touch with different potential partners for stablecoins but nothing to report at the moment.

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Great, looking forward to reporting!

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Sorry, I misread your reply. I am also looking forward to USDC’s entry into the Internet computing ecosystem.

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When the price of 1T Cycles is higher or equal to 1 XDR, developers will choose to convert ICP into Cycles themselves, and only when 1T Cycles is sufficiently smaller than 1 XDR, developers will choose to buy Cycles. So 1T Cycles in the value of the market will be lower than 1 XDR for a long time, and even in the case of not many projects, the liquidity for purchase will be insufficient.

As long as the market price of cycles is below 1 XDR (minus DEX fees), there will be buyers. I imagine there will one day be DeFi services that make it extremely easy for developers to purchase cycles on the open market, perhaps even easier than converting ICP to cycles. As long as developers need to burn cycles to run their apps, the price of a cycle will tend towards 1 XDR.

Dom’s Medium post has a great explanation:

On the Internet Computer, as it turns out, cycles will tend toward constant value, without need for a stablecoin scheme, thanks to the ongoing computation performed upon the network. First of all, the network allows users to convert ICP utility tokens they hold into cycles at a rate that is set by the NNS. The conversion rate will be anchored to IMF SDRs, which are made up from a basket of major fiat currencies, such that ICP utility tokens judged to be worth 0.65 SDR on external markets (which currently is very roughly equivalent in value to a Swiss franc or a US dollar) can be converted into 1 trillion cycles. Clearly, this provides a ceiling on the value of cycles, as nobody would ever buy them at a higher price, as they could simply buy ICP utility tokens and convert them into cycles themselves. But what about the floor? What happens if someone buys a large volume of cycles, for example, and then decides that they do not need them, making them available for sale? Here things get interesting! Such sellers must price their cycles below the ceiling, reducing the price. Consequently, those that wish to acquire cycles to power computation, either directly or by reselling them to others, will purchase them because they are cheaper. Naturally, these cheaper cycles will eventually all be removed from the market and burned by computations performed on the Internet Computer such that they disappear, and new cycles must be created from ICP utility tokens once again, returning their value to the ceiling. For this to be true, it is only necessary that the Internet Computer continue performing computations.

In the beginning, cycles will probably not be stable. In the long run, I think it’s totally possible they become stable, once enough developers start using IC.

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Yea, this is fundamental and written into ICP, making it a kind of stable coin. It’s quite genius actually because it’s a sort of stable coin, just without anything to make the SEC perk up! (I think/hope)

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If https://www.wtctoken.com/ and Cycles Token (XTC) - by Dank are used as a “stable coin” in DeFi/NFT markets or the like, then many users will hold cycles with the only intent on selling it for fiat. Hopefully, there is more demand for compute than people who want to use IC in general but I expect there to be far more end-users of IC than dapp devs. This is especially true with NFTs and the IC demand right now, one of these NFTs could blow up and millions of USD worth of cycles will flood the market.

In this regard, cycles can easily be dictated by supply/demand like any other commodity and not truly stable to fiat (which is what you want if you like decentralization, but that’s another topic). Real stable coins have an almost-equal demand on buying and selling, whereas 1T cycles has an unbalanced demand so it won’t stay stable according to its peg. The need for a real stable coin is present, otherwise, the cost of 1T cycles may approach extremely low prices and node providers can’t be compensated properly, or at least not as they would expect (but Dfinity has a lot of eager people willing to take less profit)

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I can foresee dApps charging users cycles to access certain features.

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It’s likely easier / less problematic for existing fiat transfers to go directly to cycles since cycles themselves cannot be directly converted back into a different cryptocurrency that can be liquidated. Or at least, this might make it easier for Stripe for instance to enable direct fiat payments to ICP based dapps.

Likely the best user experience is one that is “at least agnostic” to the underlying currency, whatever it is. That is, a user should be able to pay a subscription fee with their native token fiat or not which would then unlock availability of access of the dapp they want to use. Theoretically a company should be able to provide refund (at a cost) in the form of the user’s native token for the preferred experience of full auditability.

Finally I want to just say that given what’s happened recently, now is a great time for decent stable coins to emerge that are either all or in part based on the IC. The key is remembering that no single person should have been capable of making a decision that would tank the entire cryptocurrency ecosystem: that is to say, while there are still problems, UST should have been explicitly governed by a DAO itself, as no single person then could have been capable of making a decision costing cryptocurrency much legitimacy and hundreds of billions of dollars in valuation while some “other people” were able to profit millions from betting against their smart contract collateralized loans.

In any case my point was that stable coins are so new with so much potential, conceivably they could even be used to stabilize the speculative inflation of real estate value, although at that point I certainly hope there is enough technical functional literacy and available accessibility they don’t become another tool making less instead of more possible.

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In case anyone has an interest in this, Terra recently just voted on their path forward. Might be a good time to develop cross chain connections, as likely Terra’s new go at it could benefit from the IC, and it looks like dapp developers will be rewarded directly from the ecosystem at it’s launch:

wouldn’t want to be affiliated with anything related to terra, major pass.

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