Matt Chuen

15th October 2018

How Stablecoins will lead to consumer adoption of crypto

Cryptocurrency mania reached unparalleled heights in 2017.

The feverish hype ushered in explosive growth in this new technology sector. With money pouring into the blockchain sphere from every direction, it’s more important than ever to have an unbiased review of the underlying technology. While the public interest has certainly been grasped, it’s of the utmost importance to keep in mind that this new technology is very much still in it’s infancy.

Mass adoption is the most important aspect when you consider the longevity that this technology, or any technology for that matter, will have. It’s without debate that cryptocurrency has not gained even a fraction of the adoption rate that it will need to be successful in the future. This includes merchants, big corporations and individual users. In technology and marketing, often “killer features” are discussed. Crypto’s killer feature is adoption. Without the everyday use factor, reliability and consumer dependance, there will not be a bright future for the cryptocurrencies of today. If adoption doesn’t grow at the same rapid pace that public interest grew in 2017, then cryptocurrencies will remain a speculative financial instrument, and before long they will be forgotten.

At current moment, blockchain and decentralized applications, more commonly know as Dapps, have little real world use. Nothing close to the hype and promises of the thousands of ICO’s that have been launched in the last few years. On the contrary, most of these blockchain based businesses are not live and ready for consumer use yet. This sector is still full of new and experimental technology, and this comes with big risks and big expectations to fulfill. Dapps and Blockchain have a lot to offer the world, and their integration in our daily lives and the technology we already use could very well usher in the next great industrial era.

For these new technologies to be adopted by consumers, they need to provide a user experience that is straightforward, simple, familiar and ultimately better and cheaper than what consumers already use. These are the foundational principles of mass adoption of any new technology that has ever existed. The population at large is not interested in complicated technology for the sake of something different or new or unique. They are interested in things that make their lives simpler, easier and make their transactions and purchases cheaper. Blockchain and cryptocurrencies have some huge hurdles to jump before we get to the blockchain utopia described by the proponents of this new technological sector.

Crucial Steps for Consumer Adoption of Crypto

Currently in the financial world, centralized applications are the leaders and always have been to some degree. These are the biggest names that are known the world over and are the leaders in the financial sectors. These include the biggest banks internationally like Citibank, HSBC, and JP Morgan. The legacy credit card payment networks like Visa and MasterCard. Even the new transaction networks and wallets like Paypal and Venmo that exist through online and mobile applications to reach people anywhere in the world.

While Blockchain and decentralized applications have yet to gain real world use traction, they have a lot of promise and could potentially morph to exceed the hype in any of the ways we can imagine today. To get there, we need adoption on a mass scale to make these options competitive and enticing. Here are some of the biggest steps that crypto needs to take for consumer adoption.

User Friendly Wallet Interface

As an industry, we need to accept upfront that the vast majority of people are not technologically inclined. While younger generations are now being born with smart phones in their hands, the older generations are grasping only what they want or need from day to day. The past and present challenging of storing your cryptocurrencies are not things that will be welcomed by the mass audiences today.

During crypto’s inception, the only way to store your cryptocurrency was through archaic and clunky desktop wallets. These required setup and installation and basic to advanced knowledge of computers and command line interpreters just to store your money. Even today, newer web wallets are clunky and daunting, and that is before you bring in transaction hashes and blockchain explorers. There is simply too much to consider for the average consumer and as a result, they are turned off and instead leave their crypto on exchanges. This is a terrible habit to get into in a time where numerous exchanges have been sited for their poor security practices and the track record of high value exchange hacks is well known and documented in the public’s eye.

Wallets must be easy, streamlined and consumer friendly. Venmo in particular is an industry leader in just this, easy to use wallets for the everyman. Venmo seems to follow the philosophy of Leonardo Davinci and other great minds. That principle is that the key to perfection lies in simplicity. With Venmo there is a wallet, username, and an optional security feature. This is a stark contrast to industry leader in crypto wallets, MyEtherWallet. MEW uses complicated transaction addresses, long signatures that are easy to mistype. The delivery process is shaky and time consuming. There are moments of uncertainty when sending any transaction and often times people are prompted to check constantly that they sent their money to the correct address.

Most crypto wallets are also poorly designed. While many other popular and well known services like Venmo have crisp clean designs, many web and desktop wallets are made by small independent teams in crypto. These teams are often programmers and not designers, so little thought is put into the actual design or layout. They are more concerned with function, security and reliability, which are admittedly very important. However, it is already daunting enough to use crypto wallets and the blockchain for transactions as is, and these wallets are hard to navigate and find the correct features to use, just adding to the uncertainty of the user with every transaction.

These wallets interfaces need to have easily identifiable usernames to distinguish the end point of the transactions, instead of long strings of characters. The Ethereum Name Service (ENS) is attempting this for the Ethereum network. Gas for transactions should be calculated in wallet, and give the user choices such as slow or fast transactions, resulting in low or high fees for the user.

We are an increasingly mobile based society. For some people, their mobile phone is their gateway to the internet, rarely using desktop or laptop options. For this reason, all crypto wallets need to have mobile friendly options that are fast, reliable and lightweight on their devices. This will enable users to send and receive transactions anywhere in the world and is crucial to mass adoption.

Low Transaction Fees

High transaction fees are something that consumers will have trouble agreeing to. This is something that will certainly pose a barrier to entry for the average consumer. Especially when these fees fluctuate daily and cannot be relied on, like what we saw throughout 2017 with Bitcoin. The more that Bitcoin was used, the higher the fees became when people were gladly paying even more in fees to make sure that their transaction went through as fast as possible.

Consumers are used to paying fees when sending money, especially with credit card transactions, but if you want people to switch to your service, you need to offer a better alternative. Not the same thing they already dislike. Also, many Dapps require multiple transactions, greatly increasing fees overtime. Merchants in particular simply cannot have these fluctuating fees. Their businesses depend on accountability and they have to know upfront what they spend to accept and receive crypto payments. There is not many ideal options out there now in crypto, but there has to be a low cost transaction alternative to the current issues crypto is facing.

Quick Transactions

In addition to the low fees, there cannot be transactions that get stuck in limbo before reaching there destination. If crypto really is the future of money, and money over the internet, then it needs to be as instant as email. This shouldn’t depend on a certain time or how full the blocks are, this needs to be anytime anywhere transactions that are solved instantly. This is crucial for mass adoption and our current needs as a society. Even more importantly, the biggest hurdle for mass adoption of crypto revolves merchants accepting it for their goods and services. The only way this make sense for them is if it is a low cost and instant transaction for them. This alone can take customers from Paypal, who is infamous for blocking transactions, holding payments, and freezing accounts. With online shopping at all time highs around the world, lighting fast transactions is no longer a luxury, but a requirement.

Mass Adoption Scalability

Every individual cryptocurrency has their own idea on how to properly scale for the mass adoption that is promised to come. Unfortunately, all solutions at this time are either completely theoretical or still deep in development with no posted release date. This includes the Lightning Network with Bitcoin, and sharding with Ethereum. Two of the most promised and coveted solutions to the ever present scalability issue. This foundational issue is one that nearly split the bitcoin network apart in 2017 over disagreement on what the solution would be. This in turn spawned Bitcoin Cash, a Bitcoin fork with bigger block sizes.

There simply cannot be arguments in these emerging technologies that cause splits between communities. For crypto to be flourished and adopted, there has to be unified scaling solutions. Consumers will not wait around for crypto to work itself out.

Transactions become cheaper with different scaling methods. With Lightning Network, transactions with become almost free because nothing is recorded on chain except for the details regarding the initial settlement. To be effective, Lightning Network will need an ever increasing amount of user nodes to run.Ultimately, scaling will bring more throughput which makes transactions faster and more reliable for merchants and users. Currently, the network is often congested, leading to pitiful throughputs, like Ethereum processing around 15 transactions per second. Comparatively, Visa processes 150 million transactions a day, almost 2000 transactions per second. There is no comparison with current crypto networks. If Bitcoin for instance received just a percent of Visa’s business every day, the network would be completely unusable for everyone.

Mass Adoption of Stablecoins

It seems as though most of the cryptocurrency markets are coming to the point where they must decide to be either a speculative instrument for investors and traders, or a means of everyday commerce for merchants and users worldwide. Transactions in Bitcoin commonly means the user pays too much and merchants lose money due to volatility. In fact, many merchants that accepted bitcoin from its inception to now have dropped their support in 2017 and 2018 because of this fact.

The last few years, the world has watched the volatility of crypto currencies and decided that it is not quite ready to be used for daily purchases. On the contrary, at current moment, people are afraid to spend it at all. Most seem to be terrified of missing out on increased value for their dollar. If no one uses cryptocurrencies for transactions, then this is defeating the need for them at all. It seems as though people have woken up to this and are ready for an alternative that is reliable, and can be used efficiently everyday, anywhere in the world.

Stablecoins are the Holy Grail of Mass Adoption

If there is one thing that the crypto market desperately needs to survive, it’s stablecoins.
The crypto market is absolutely starved for asset backed tokens that are trustworthy, reliable and immune to the daily fluctuations of other big name cryptocurrencies. This immense need for this instrument has prompted some to call stablecoins “the Holy Grail of the crypto markets.” While asset backed financial instruments are nothing new to the financial world, they are something that will be a novel and new implementation in the crypto world.

Stablecoins, put simply are cryptocurrency tokens that are pegged to a stable price and value. While they share all the features that make other cryptocurrencies so popular, they do not have the same volatility that exist in other areas of the crypto markets. This in turn enables them to be better candidates for the store of value proposition that was expected of the earliest cryptocurrencies like Bitcoin. These stablecoins are still able to be stored in wallets, sent anywhere in the world, and preform all other functions that crypto is famous for.

While there are some stablecoins that exist today, like Tether, there are several problems with these options. There has been many public issues with Tether, with some accusing them of being insolvent and the individual Tether units being unredeemable. Some have also speculated that they have quickly fleeting banking relationships. This is troubling considering Tether has state numerous times that they have 1 USD for every USDT token in existence. Now more than ever, the crypto sphere needs a stablecoin that comes from a verified, trustworthy source.

Other needs for a stablecoin comes from the very lifeblood of this new financial market, the exchanges themselves. Exchanges need a value pegged instrument to serve as a financial pairing instrument such as BTC/USDT. They cannot use an instrument that fluctuates wildly. This has led several exchanges to create their own stablecoin, like Gemini with GUSD. Also, Circle, who owns popular exchange Poloniex, has plans to launch their own stablecoin, USDC.

There are numerous other projects in development, such as Basecoin and MakerDAO. Most of these projects are still well in their infancy with lots of production still needed. I predict we will see immense amounts of these stablecoin projects in the future. It will take some time however, before we see a truly successful stablecoin at scale, and used by the public at large.

There are certain qualities that stablecoins and asset backed coins need to prove to truly be ready for adoption. First off is the obvious, price stability. Along with any other cryptocurrency, it also needs scalability. Finally, resiliency is needed. These few attributes are the absolute minimum a stablecoin needs to have. While some might argue that privacy and decentralization, the core of the cryptocurrency philosophy, are non-negotiable necessities, it is had to argue for them when it comes to stablecoins. While they might be great additional features, we need secure and trusted sources to back up these assets and make them truly reliable.

Stablecoin Model #1 Centralized IOU Issuance

There are several theoretical models behind stablecoins. The first is to issue what are essentially IOUs. This is the model that is used by tokens like Tether and Digix. In this instance, a centralized company holds assets in a vault or bank account and then issues tokens with the promise that they represent a claim of the backing assets. This gives the token value because it is claimed to represent another underlying assets with clear defined value. One of the issues with this model is that it is a centralized approach, which therefore requires trust in the issuer. You have to believe that the issuer actually own and hold the asset represented by the token, and that they will honor the IOU in the future. This model has obvious risks involved, and there has been serious public concerns about stablecoin issuers Tether in recent history.

Stablecoin Model #2 Collateral Backed

The second model is based on pioneers BitShares. This model consists of trust-less assets that are verifiable on-chain, an important distinction. This model is also used by companies Maker, Haven, and numerous others. In this model, decentralized crypto assets are what backs the stablecoin. For instance, Maker’s Dai stablecoin is backed the amount of ETH held in collateral in an Ethereum smart contract. The collateral is held trust-lessly in a smart contract, so users aren’t relying on any third party. This option is decentralized and not at risk of any insolvency.

Simply put, this model would allow users to create stablecoins by creating a smart contract, and then locking collateral that exceeds the amount of tokens issued. If a Maker user wanted to generate $100 worth of Dai stablecoins, they could then lockup $150 worth of Ether. The benefits of a smart contract is in its usability. The collateral could be obtained by paying back the stablecoins, or the contract could be terminated with the collateral assets sold if certain pre written requirements aren’t met. The biggest benefit however, is that there is no trust in central parties required. Central parties controlling funds is the very antithesis of the cryptocurrency movement.

There is one glaring issue with these smart contract stablecoins. The issue is the collateral that backs the stablecoin is often times an incredibly volatile crypto asset such as ETH or BTS. These assets have wildly swinging values, and as a result, most of these projects require the stablecoins to be greatly over-collateralized enough that compensates for the sharp and sudden price falls or drops. There is also no protection against unforeseeable catastrophe in the crypto markets.

Stablecoin Model #3 Seigniorage Shares

The last model is the seigniorage shares approach. This approach is very similar to what central banks do with fiat currency controls. This approach uses algorithms to control the supply of the price stable currency. However, unlike other models, there is no backing asset to these stablecoins. The only thing backing them is the expectation that they will retain their value over the course of their life span.

In the seigniorage shares model, there is an initial creation of stablecoins that are pegged to a certain value of a popular and well known asset like USD. Over time, the supply will automatically change in response to the demand for the asset. There are different methods to control the supply, but perhaps the most common is the method using bonds and shares that was introduced by the stablecoin, Basecoin.

The demand for these stablecoins grows as the network grows. What initially was a fixed supply has to increase to meet the growing demand. Normally with an asset, an increased demand then in turn increases price. In this model however, new coins are issued to counter the increased demand, continuously inflating supply to keep the price pegged at a specific value.

The biggest challenge of this model is figuring out how to expand and contrast the circulation of the stablecoins in a way that cannot be gamed or abused, while simultaneously being decentralized. While expanding the supply is straightforward and simple, when it come to contracting the supply, that is quite different. The rules revolving around this action need to be clearly outlined and agreed upon. Users must somehow be incentivized to voluntarily part ways with their stablecoins, normally through the use of bonds. These bonds have a par value with $1 and are then sold at discounted prices to holders who surrender their stablecoins to be removed from circulation.

Shares can also be used in this instance. Shares are like equity. They represent a claim on a future stablecoin distribution. Dividends on the asset are paid to shareholders, and often times share holders also have voting rights.

Upcoming Gold Backed Stablecoins


Location: Isle of Man

Kinesis is the next step in the evolution of cryptocurrency. The Kinesis tokens, KAU and KAG represent 1:1 stores of 1gram of gold and 10 grams of silver. The Kinesis team has developed their own cutting edge native blockchain forked from Stellar. The Kinesis Network has rapid transaction speed and percentage based fees that are customizable, creating the best conditions for the native Kinesis tokens. Their Initial Token Offering runs until November, 2018.

Kinesis also supports their own debit card. The Kinesis debit card will allow for instant conversion of KAU and KAG into fiat currency for use with any Visa or MasterCard system. Users of this debit card can even withdraw fiat from traditional ATM’s. This debit card is something that crypto users have been requesting for years, especially as less and less merchants are accepting cryptocurrencies every year.

This is in addition to the new Kinesis in house designed wallet. The wallet was built to accommodate all their native currencies. There is the ability to save the addresses of payees for repeat transactions. You can also name accounts to remove the need for lengthy account keys. Security minded users can even choose the optional multi signatory function and sign and verify functions to increase their transaction security. Overall the web wallet boasts some very unique and useful features.


Location: Zug, Switzerland

AgAu is named for the chemical signs for gold and silver. They enable completely decentralized ownership of gold and silver assets. Their tokens are backed by 1:1 grams of gold or silver for the Ag and Au tokens respectively.


Location: Dublin, Ireland

The Airgead token provides an interesting concept in the crypto community. Each token can represent any amount of precious metals ranging from gold, silver, platinum and even palladium coins and bars. These precious metals can be merged in any amount into a single token.


Location: Jakarta, Indonesia

Cyronium comes from Indonesia and is another gold backed token. Each Cyronium coin consists of 20 grams of 99% pure gold. A stark difference between other projects, Cyronium actually allows you to take the option of receiving physical coins that represent their native CYRO token. The coins are shipped to the purchaser and the CYRO tokens that correspond are destroyed to prevent any duplication. They have gold reserves in Singapore.


Location: Gothenburg, Sweden

EAU-COIN is another gold backed token that implements smart contracts based on the Ethereum blockchain. All EAU-COINs are backed by gold reserves that are owned outright by the company. Each year there will be at least two issuing rounds for the tokens correlating to market demands and how much ground gold assets are being mined.


Location: Zimbabwe

Goldma is a unique and interesting proposition. Unlike most other gold backed tokens, this token is based on future mined gold and not any gold in vaults. Goldma is a token backed by a fully operational gold mine in Zimbabwe. When gold is mined, it is sold at spot and Ether is bought with the proceeds.


Location: London, UK

Jinbi tokens (JNB) are backed by a gold supply that increases from the production of gold by their mining partner. Jinbi will pay dividends to token holders at every production milestone, payable in either physical gold or the JNB token.


Location: Cossato, Italy

Karatcoin is a platform that deals in the exchange of Karatcoin tokens and gold certificates. The token used is KCG gold token that represents 1 gram of gold secured in their own vaults.

Kinesis Prepares for Market Rollout

Right now in Crypto there is a massive need for a secure and reliable stablecoin. Kinesis aims to be the one to live up to this hype and fill this niche. With their specific yield, they will have continuous returns made to holders of their tokens that spawns from activities that their token is used for, essentially dividends to token holders. This includes referral bonuses for users that bring new clients. It will involve less risk than other traditional assets and ultimately, this can entice many new users. They are building strategic partnerships with industries like the Allocated Bullion Exchange which will allow for even more exposure.

Kinesis is even creating their own exchange, appropriately name the Kinesis Currency Exchange. This is their own wholesale market where it’s native currencies will be created and then connected to the global market via their partnership with ABX. This puts them distinctly ahead of competitors in this field.

There is also the Kinesis Blockchain Exchange being built. This will provide deep liquidity to the Kinesis token which is necessary for this stablecoin to thrive. The exchange will be a traditional crypto exchange where all the Kinesis tokens and other big market cap cryptos like Bitcoin and Ether can be traded.

It seems Kinesis has all the challenges figured out and is providing creative solutions to these. There is numerous aspects to the Kinesis project that are breaking new ground and providing value to users. In time they will prove to be a leader in stablecoins and cryptocurrency in general.