The Art of Central Banking on Blockchains: Non Pegged Stablecoins

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Ethereum is an emerging digital economy in the early innings of a multi-decade economic boom. It now hosts tens of thousands of applications, stores $350 billion in assets, settles $2 trillion in transactions annually, and continues to grow at a staggering pace. Its potential to become the bedrock of the global economy is apparent to anyone paying attention.

The problem? Ethereum has dollarized, and the dollar is ultimately controlled by the Federal Reserve - clouding dreams of an independent monetary system.

The industry has taken notice. On the horizon is a new wave of projects aiming to create stablecoins that are not pegged to fiat currencies at all. Called “non pegged stablecoins,” these projects offer a radical opportunity for Ethereum’s monetary system to achieve stability while eliminating dependence on fiat currencies. In the process they would not only free Ethereum’s monetary system from the influence of the nation state controlled central banks, but also introduce truly trust-minimized stablecoins fit for use across Ethereum’s economy.

In our second of two reports on central banking on blockchains, we cover the problems with dollar pegged stablecoins, the market potential for non pegged stablecoins, and the most promising non pegged stablecoin projects on or coming to market including Reflexer (RAI), Float Protocol, and Olympus DAO.

Dollar Pegged Stablecoins' Problem