In Part 1, we discussed the many dollar-like claims of stablecoins. That matters because once we stop treating “stablecoin” as one single thing, the more important questions come into focus. What kind of claim is it? Who issued it? What backs it? Can it be redeemed? Does it pay yield? Who gets the float, and more.
So Part 1 was about the mental model: stablecoins as dollar-like claims. Now it’s time to go over why those claims are not all stable in the same way.
[Read more…]Stablecoins are moving what we call Crypto more towards just “this is just Digital Money now.”
This two-part article series examines the current landscape of various “stablecoins” to clarify labels that often sound functionally descriptive but frequently aren’t. It also highlights under-discussed aspects in this evolving space. We need clearer understanding of what these assets are and as importantly, what they’re not. Even with the GENIUS Act and ongoing work on the CLARITY Act, significant ambiguity remains for some token types.
Stablecoins are not one thing. They’re a family of tokens with dollar-like claims, and the important questions aren’t whether they appear stable, but what kind of claim they represent, what backs them, who gets the yield, how they redeem, and what happens under stress.
Along the way, I’ll go into some of the oddities and implications of stablecoins. Some may seem slightly off topic. However, they’re all part of what’s becoming this ecosystem and therefore I believe useful in understanding how things fit together.
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Tokenization of Real World Assets (RWA) is on a tear, but will some aspects be held back from mass market adoption for lack of trusted information about certain types of assets? Today’s Oracles, (that supply external, off-chain information to a blockchain or smart contracts), don’t seem ready for richer types of information that we’ll need. Today’s oracle infrastructure is better suited to selected structured data points than to richer, messy reporting packages such as engineering reports, appraisals, legal exceptions, maintenance issues, lease details, or materiality judgments.
Mckinsey estimates tokenization markets worth somewhere from $2T – $4T by 2030. They aptly point out, “Tokenization’s rate and timing of adoption will vary across asset classes” and “Given their characteristics, certain asset classes will likely be faster to reach meaningful adoption.” In other words, easier things will happen faster. Obvious enough. Others assessing future tokenization markets show more of the usual charts with curves bending quickly upwards. The more challenging areas though, will be where they’ve always been challenging in terms of regulatory issues, information flows and so on. When we get into “REAL” real world assets is where things are harder. That is, things like gold, mutual funds, or others that are already virtualized really, should translate more easily to representative onchain tokens than messier deals such as a local shopping center development, a piece of art, or similar. Let’s say a token says you own part of a building. But what if that asset has a problem? Who reports it? Where does the report live? Who’s liable if nobody updates investors?
Traditional finance has longstanding reporting structures. And they still get things wrong sometimes or suffer from fraudulent claims. When we build an abstraction layer like a blockchain on top, we need ways to bridge a reporting gap. Successful adoption here isn’t going to be about just splitting things into smaller pieces with tokens. It’s time to look at why and suggest some solutions.
The idea for this post came out of a LinkedIn thread where Igor Samotesov talked about why trillions aren’t flowing quickly into onchain RWA instruments. And I just happen to be re-reading a book on taxonomies. So this is the result. Here are some more potential reasons for what’s going on and possible solutions.
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