Marek Olszewski is cofounder of cLabs, working on Celo, a mobile-first permissionless platform that makes financial tools accessible to anyone with a mobile phone.
Stablecoins emerged in 2018 with exciting promises of being used across the globe to improve financial access and help countries plagued by hyperinflation or cross-border payments and remittance friction/headaches. In practice, they were primarily used to shield traders from the wild volatility of early crypto markets and for arbitrage.
The global crisis brought on by COVID-19 is an opportunity for stablecoins to deliver on these promises and use cases, especially as governments try to deliver stimulus money quickly to large populations that desperately need it. The global economic and health crisis has reinvigorated the use of stablecoins, as well as the discussion of digital dollars and central bank digital currencies. With close to 6 billion smartphones with active mobile subscriptions in the world, we are nearing a reality where an easy-to-use stablecoin can reach a significant portion of the world’s population.
Over the past month, stablecoins have lived up to their moniker and value proposition. We’ve seen a flight from traditional crypto assets to stablecoins similar to 2018. The market cap of all stablecoins has swelled from $5 billion at the start of the year to above $8 billion in April. And the improved stability and usability of stablecoins equips them to rise to the occasion and prove utility beyond demand from exchange arbitrage and safe haven appeal.
Although most stablecoins in use today are fiat-backed, efforts like MakerDAO and Synthetix have shown it is possible to construct stablecoins pegged to real world assets such as the US Dollar, but that are collateralized by other crypto assets in a decentralized manner using smart contracts. There have been a number of hiccups and growing pains for…