New York blockchain startup Carbon-12 Labs (“Carbon”) has released a new stablecoin on the EOS network as per a November 9th announcement. The stablecoin is known as CarbonUSD (“CUSD”) and was previously launched on the Ethereum blockchain on September 12th. The coin can be swapped between the Ethereum and EOS blockchains.
What is CUSD?
Stablecoins are designed to remove the volatility associated with cryptocurrencies, and each stablecoin has a unique method of achieving this stability. In the case of CUSD, the tokens are backed on a 1-1 basis to US dollars, and funds are held in FDIC-insured accounts. The long-term plan, as per CEO Sam Trautwein, is to transition to a fiat-backed algorithmic hybrid approach, once scale is achieved on the network. This is the first stablecoin on the EOS blockchain. Trautwein cites the difficulties faced by the Tether stablecoin, mainly compliance related, and indicates that these difficulties are addressed with CUSD –
“If the auditor, the bank, the trust company, the smart contract auditor, or the software provider fails (in any sense of the word), the entire structure comes tumbling down. As the stablecoin scales it undergoes significant strain. In many ways Tether outscaled its compliance. They lost their ability to withdraw and deposit through Wells Fargo overnight. It’s difficult to build a new paradigm within the old paradigm.”
The benefits of stablecoins
While the CUSD CEO and many others believe in the capabilities of stablecoins to facilitate global crypto adoption, most view them with skepticism. The idea that Tether merely “outscaled its compliance” seems a very thin argument given the many issues associated with that particular coin.
Stablecoins are arguably even worse than fiat currencies, as their sole value is derived from a) fiat money that cryptocurrencies were designed to replace b) regulatory audits that cryptocurrencies were designed to replace c) centralized governance that cryptocurrencies were designed to replace. Further, the marketplace is becoming saturated with stablecoins, as well as state-backed cryptocurrencies which are not materially any different in their centralized effects.
Stablecoins do provide benefits to traders who need to cash out on cryptocurrency profits, made difficult due to regulatory procedures that, again, cryptocurrencies were designed to replace. But, in truth, stablecoins offer little material benefit aside from serving as distractions to value-based cryptocurrencies. Despite the ingenuity of the algorithms (many of which are quite sophisticated) used to maintain parity, stablecoins are fundamentally no different than fiat with cryptocurrency attributes, minus the core component of decentralization.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.