1/ Stablecoins are the Trojan Horse that will bring smart contracts to the masses


They’re the probably the first and only real-world use-case of crypto today that is fully sustainable and rapidly scaling

A 🧵 on #Stablecoins and how they’ll take over the global economy
2/ Stablecoins are fundamentally a simple concept

A blockchain-based token whose value is pegged to another currency (typically the US dollar)

This results a superior form of fiat:

Fast settlement
Highly liquid
3/ Fully collateralized stabecoins can achieve these desired properties without external incentives

The economics incentives of DeFi have helped fuel their growth (subsidized yield)

But ponzinomics are not required for $USDT, $USDC, $BUSD, $DAI to exist and thrive
4/ In other words, collateralized stablecoins do not require new money to keep entering the system to stay afloat

Exchange rates on exchanges may temporarily slip, but redeemability for the underlying assets leads to repegs

Stability is naturally achieved and strengthened
5/ The total marketcap of stablecoins ($155B) would make it a top 25 bank in the United States by AUM

They simply cannot be ignored by institutions, academics, or regulators at this point

Stablecoins are the bridge between the crypto economy and the real-world economy
6/ However, stablecoin regulation is inevitable

This will probably include:
- Guidelines on what can be called a stablecoin
- Shutting down fraudulent schemes
- Require KYC/AML on specific actions

Regulation could go more strict, but I am optimistic
7/ It’s really not in a regulator’s best interest to crack down on stablecoins

They reinforce the dollar as the global reserve currency in this new economy (on the surface)

A CBDC (in the US) won’t happen for a long time and won’t have the properties that consumers care about
8/ But regardless, risk of a full regulatory crack down still exists and centralized stablecoins are by far the most at risk

It’s why so much focus have been put on decentralized stablecoins, but it’s an incredibly hard problem to solve

Generally there’s three approaches
9/ Overcollateralized is safe and stable, but capital inefficient and can’t meet demand without centralization

Undercollateralized is capital efficient, but much too risky and can easily death spiral collapse

1:1 collateralization is ideal balance, but inherently centralized
10/ Given their simplicity and efficiency, centralized USD-backed stablecoins remain by-far the most widely adopted

Hopefully one day, we overcome the challenges and create a decentralized stablecoins that safely exist at scale

But until then, USD-backed approach is the way
11/ Regardless of what the uncertain future of stablecoins will look like, one thing is true

Stablecoins are the Trojan Horse that will bring smart contracts to the masses

Once you experience the benefits firsthand, there is simply no going back
12/ There are still many improvements that need to be made around the user-experience and onboarding process

But the network effects of permissionless blockchains (+rollups) that stablecoins operate on are unparalleled

Such challenges can be solved
13/ The idealist would say that people should just ditch their dollars and begin transacting in crypto-native assets today

The purchasing power of the dollar has indeed collapsed -96% in the past 100 years

The dollar is the ultimate shitcoin (infinite supply, central issuer)
14/ But in reality, a more pragmatic transitionary phase is required

People get paid in dollars, price things in dollars, spend in dollars, and pay taxes in dollars

You can’t throw people into the deep-end, you have to walk with them

Stablecoins are the entry point
15/ A large part of this shift towards stablecoin usage will happen on the institutional front

First for internal operations, then for external operations

The ability to transmit dollars between institutions becomes frictionless and orders of magnitude faster and cheaper
16/ They can then being leveraging existing DeFi protocols

- Exchange one stablecoin for another (@CurveFinance)
- Earn yield on the stablecoins (@ConvexFinance)
- Borrow/lend the stablecoins (@AaveAave)

Again, first internally and then externally
17/ It just takes one institution to make the leap and the rest follow as they don’t want to be left behind

This will more than likely require identity protocols, and ideally one that is privacy preserving

At this point, the advantages of smart contracts are evidently clear
18/ Existing paper-based agreements begin to be replaced with deterministic smart contract agreements

With each deployed smart contract, interactions between counterparties become increasingly trust-minimized

Assets get tokenized and value-flow becomes entirely frictionless
19/ Likewise, there will probably be a parallel track focused on retail

This will be driven by greater education around self-custody and by a number of FinTechs focused on simplifying the experience

There will be a @Venmo scale app based entirely on transacting stablecoins
20/ This will evolve to merchants widely adopting stablecoins via Point-of-Sale solutions due to user demand and lower fees

@Visa is likely to lead or quickly join this bandwagon

This is the OG P2P digital cash narrative, but a reality for a large and growing number of people
21/ Users will then demand to be able to do more things with stablecoins, which will lead to the creation of full stack “superapps”

Like @Alipay in China, but self/MPC-custody and providing a simplified + holistic view into the Web3 economy including DeFi, P2E, NFTs, etc
22/ At this point, stabecoins and smart contracts will have become an integral part of the global economy

Just as we couldn’t imagine the world today without Internet

Naturally, Chainlink will play a crucial role in making this a reality both in its initial stages and at scale
- Proof of Reserve for automated on-chain audits of collateral
- Price Feeds for DeFi apps using stablecoins
- CCIP for transferring stablecoins between blockchains
- Enterprise abstraction layer for enabling seamless access
- DECO for privacy-preserving identity credentials
24/ Ultimately, the end-result is a more trust-minimized society where people can exchange value freely

Crypto as a whole isn’t quite mainstream ready, but stablecoins are the most clear use-case that already meets real-world user demand today
25/ The path that I’ve laid in this thread is not necessary the future, but a future that I think has a high probably of occurring

More thoughts on the current state of the crypto ecosystem and what steps are needed going forward are below 👇

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with ChainLinkGod.eth

ChainLinkGod.eth Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @ChainLinkGod

May 15
Last Thursday, the minimum value circuit breaker for the Chainlink LUNA/USD Price Feeds was automatically triggered

This occurred exactly as codified in the aggregator smart contracts

It was not a manual intervention by node operators, Chainlink Labs, or third parties
The min/max value circuit breaker is a security mechanism to protect Price Feeds against flash crash outliers and malformed oracle reports

This is one component of a greater defense-in-depth employed within Chainlink Price Feeds
The parameters of circuit breakers are transparently viewable on Etherscan where the source code of aggregator contracts are verified

It is important for smart contract developers to understand the external contracts their dApp is integrated with, even for forks
Read 9 tweets
May 10
When you’re an outsider looking in, our industry looks like a fucking joke

And honestly, kinda hard to blame them

The incentives for crypto devs are simply broken

If you’re not providing xx% yield or a token to speculate on, 99% of your user base just don’t care
If we want the industry as a whole to not just survive, but thrive

We need to begin providing real value to society, not just JPEGs of a monkey or token printer machine

It’s not just about building useful applications, but pruning the speculation focused use cases
Being in crypto just to make some money is distinctly different than being in crypto to create a more trust-minimized society (and then profiting if that succeeds)

Unfortunately much of this comes down to legal blockers, but efforts here are mostly reactionary, not proactive
Read 12 tweets
May 5
1/ Oracle networks are not static set and forget objects, but dynamic configurable services

A 🧵 on upgradability and multi-sigs
2/ When you deploy software, you learn over time what works and what needs improving

The first early versions is very unlikely going to be the best and final version

Continuous iterative improvements creates a more secure and reliable system for users over time
3/ When it comes to oracle networks and Chainlink, this is particularly relevant

New software releases (OCR lowering costs 10x), nodes being added to feeds (ETH/USD going from 3 to 31), and fallbacks to backup networks all require a form of upgradability
Read 15 tweets
Apr 23
There is little to no reason you should launch a new blockchain versus deploying a L2 rollup

A 🧵 about the advantages and misconceptions about rollups
1. You don’t need to dilute your own token to subsidize security

Rollups only need to pay for a small amount of bandwidth on an existing chain for security

The cost of this bandwidth is 100% paid by user fees

(But can be subsidized too if you so choose)
2. You don’t need to bootstrap a large validator set for security

Rollups only need at least one honest validator to be secure, more is just a bonus

This is a 1-of-n trust model (most chains require honest majority n/2)

Less validators needed = less token dilution
Read 13 tweets
Apr 5
Ethereum gas fees at the baselayer are unlikely to significantly reduce, even in the long term

And yet the per-user transaction fees will continue to drop over time

Seems contradictory right?

It comes down to data compression and execution outsourcing (aka rollups) Image
Rather than executing every transaction individually directly on the baselayer

Rollups batch transactions together (redundant data compressed) and outsource execution to off-chain clients

The clients prove their off-chain computations on-chain as needed via succinct proofs Image
Therefore, the only load on the baselayer itself is storing batches of (compressed) transaction data and executing the occasional proof (cheaper than executing all the transactions individually)

Danksharding increases baselayer data capacity futher Image
Read 13 tweets
Mar 31
A thread of random thoughts on #Bitcoin
Bitcoin is never going to switch to Proof of Stake, simply because it would never be accepted on the social layer, would always lead to a chain split

And I think that’s fine, it’s healthy to have to the two largest crypto assets take different approaches
My views on Bitcoin have significantly evolved over time tbh (same with PoW)

The protocol’s largely ossified nature is one of its largest value propositions

Simply optimizing for something different than smart contract settlement layers
Read 14 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!


0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy


3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!