The Evolution of Stablecoins: From Mastercoin to Libra

"Give me control of a nation's money, and I care not who makes its laws." -Rothschild

“We can't sit here and assume that because America is today the leader that it will always get to be the leader if we don't innovate.” - Zuckerberg

Econ 101 teaches us money is something that must act as a medium of exchange, a unit of account, and a store of value.

Today, we look at money in terms of relatively stable fiat currencies like the U.S. dollar, Chinese yuan, and Euro. Yet cryptocurrencies have begun to change the narrative around what currencies could be - or should be. In recent years, global fiat currencies have been intrinsically linked to governments and their central banks, who tend to favor price stability and control above all else. Cryptocurrencies, on the other hand, fulfill many of the classical criteria for what makes sound money, while offering the advantages of public, open, borderless, neutral, and censorship-resistant transactions -- but are anything but stable.

The path forward hasn’t been, and won’t be, easy for crypto. Governments and private tech giants have attempted to introduce new digital monies that sidestep some of their advantages, with new high profile proposals like Facebook’s Libra, and the PBOC’s rumored digital currency angling to replace existing payment systems without crypto’s volatility bug.

The volatility bug

The Bitcoin community understood, even in its earliest days, that for bitcoin to become a stable store of value, it would need to first transition through a speculative phase. Given its disinflationary supply schedule and the constant uncertainty surrounding its future acceptance, bitcoin proved to be a very volatile asset throughout its bootstrapping phase. Lest a bitcoin spender end up like Laszlo (the original Bitcoin pizza guy), using bitcoin as a medium of exchange also remained unappealing for most users.