Why you’d issue a branded stablecoin
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Why you’d issue a branded stablecoin
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Re: Why you’d issue a branded stablecoin
#2Seems like a really inefficient way to do points… my CC company gives me 3 points and I eventually redeem them for USD.
Is that not the L1 L2 network stuff, but just far less efficient than a DB write?
Re: Why you’d issue a branded stablecoin
#3Seems like a really inefficient way to do points… my CC company gives me 3 points and I eventually redeem them for USD. Is that not the L1 L2 network stuff, but just far less efficient than a DB write?
The story of literally all blockchain-based solutions.
Re: Why you’d issue a branded stablecoin
#4Seems like a really inefficient way to do points… my CC company gives me 3 points and I eventually redeem them for USD. Is that not the L1 L2 network stuff, but just far less efficient than a DB write?
From the consumer perspective totally - but those credit card points come from the interchange the issuer makes from issuing the card / your card txns (ie. as a proportion of your _spend_ using the card).
The sort of rewards you get for storing your business's cash at eg. Mercury, or using a wallet like Cash App - have to come from yield generated by the actual cash deposits, which is the sort of program that is much harder to operate / requires close ongoing partnership with partner banks / etc.
If I'm eg. Mercury, storing the dollars you (business) deposit into my platform in a "branded" stablecoin will get me the same rewards - bc it's backed 1:1 by eg. a money-market fund at Blackrock - for much less of the operational burden, _because_ I'm not participating in a stored value program at an actual bank. The alternative today is that Mercury does store it at a bank, does have to maintain a "stored value" program with that bank, and the yields are standard bank interest (rather than eg. MMF).
Moreover - through Bridge, I can withdraw fiat USD and deposit fiat USD into that "branded stablecoin", and it's just an in-app balance in the fintech app - so the fact that it's a stablecoin doesn't change my experience at all other than in conferring standard rewards. If you look at how eg. Stripe Stablecoin Account labels the balance, it just calls it "Digital dollars" - so it's not much more than a backend implementation detail, really.
Re: Why you’d issue a branded stablecoin
#5(For those of us who remember what runs on a bank with your savings in it feel like) What if any protection is there, that you will be able to withdraw your money when a massive dunk in Bitcoin crashes a bunch of major holders and you want your savings back?
Re: Why you’d issue a branded stablecoin
#6(For those of us who remember what runs on a bank with your savings in it feel like) What if any protection is there, that you will be able to withdraw your money when a massive dunk in Bitcoin crashes a bunch of major holders and you want your savings back?
It's a good question - Stripe's Stablecoin Account documentation is good reference here (they denominate balances in USDB, one of these "custom stablecoins" from Bridge): https://docs.stripe.com/crypto/stablecoin-financial-accounts...
"It’s always backed one-to-one by the equivalent value of US dollars held in cash and short-duration money market funds at BlackRock."
So while there are other (potentially novel) sorts of counterparty risks - the backing is definitely more robust than (and pretty much entirely decoupled from) Bitcoin/the rest of the crypto sphere, and is closer to dropping funds off in a Fidelity money market.
Another good (early - 2023) read on this topic: "There are now two types of PayPal dollars, and one is better than the other " https://www.moneyness.ca/2023/09/there-are-now-two-types-of-...
Re: Why you’d issue a branded stablecoin
#7I'm not sure if I'm missing the point here, but stablecoins could be exchanged for something of value at a fixed price. The USD used to be this - you could exchange it for gold. But it was more convenient to give paper money than exchange gold.
A Big Mac may cost $5 now, $10 in the future. But I would like a Big Mac Coin that lets me exchange it for one Big Mac in any time in the future. It has value as long as McDonald's exist and is willing to accept the coins, which is better than you can say of most crypto.
It may be a different sized burger, it may have somewhat different ingredients. Even our "classic coke" is nothing like the original coke. But this is what I'd expect from branded stablecoins.
Re: Why you’d issue a branded stablecoin
#8I'm not sure if I'm missing the point here, but stablecoins could be exchanged for something of value at a fixed price. The USD used to be this - you could exchange it for gold. But it was more convenient to give paper money than exchange gold. A Big Mac may cost $5 now, $10 in the future. But I would like a Big Mac Coin that lets me exchange it for one Big Mac in any time in the future. It has value as long as McDon…
I think you have a much cooler, futuristic vision of a "branded stablecoin" than what I'm talking about :) Almost like a more practical/feasible version of the "flatcoin" concept Balaji Srinivasan (of Coinbase/a16z/etc) had a while ago: https://x.com/balajis/status/1422993084002934788.
Frankly also my initial source of disappointment when I found out what this _actually_ is.
But yeah - in the case of this post / Bridge's offering, "branded" stablecoins are still redeemable for 1 USD, the only point of the "branding" is who is entitled to the yield and for how much "program management" around the stored value (relative to eg. a "stored value" program at a partner bank).
Re: Why you’d issue a branded stablecoin
#9This is how I understand the uprising of stablecoins, let me know if I am wrong:
One of the best businesses is to offer this service:
Give me your money, I'll give it back to you later.
Give me your money, I'll give it back to you later. Plus some interest.
Doing so is regulated. You need to jump through a lot of hoops and you are very limited in whom you can lend out your customers' money to.
But you can design the same type of business with stablecoins. By offering:
Hello! I have two offerings: 1: I sell someNiceCoin for a dollar. 2: I buy someNiceCoin for a dollar.
But now you are not a "money holder". You are a trader. A trader of some coin you invented. You don't need to jump through so many hoops and you can lend out the money you earn from selling someNiceCoin to services with higher yields.
Re: Why you’d issue a branded stablecoin
#10This is how I understand the uprising of stablecoins, let me know if I am wrong: One of the best businesses is to offer this service: Give me your money, I'll give it back to you later. Because then you can lend out that money to someone who offers this service: Give me your money, I'll give it back to you later. Plus some interest. You now have a business which, at almost no cost, generates money. The interest offer…
I think this is somewhat reasonable, but with plenty of asterisks / not the "arbitrage" this would imply.
There is still a "real", regulated money-holder in the loop - it's just Bridge (the manager of the cash reserves backing the coin - and licensed money transmitter etc etc). Or in the case of USDC - Circle, the "money-holder" / manager of reserves (also has tons of licensed / is very regulated). And the ETH network (where the coin itself sits) for much of the tech / logistics of making that held-money usable.
In fact - because neither Bridge nor Circle are banks, they can't do the fractional reserve that banks do, and are only allowed to do the 1:1 backed thing, with super regulated entities like BlackRock. "you can lend out the money you earn from selling someNiceCoin to services with higher yields" is strictly not true - they _cannot_ lend the money out, they have to store the money in ways that the end-consumers could do themselves, directly.
In that frame - the "efficiency" for you as a fintech is that instead of having to work with a bank on a "stored value" program, you can just work with Bridge and Circle, whose technological primitives are leaps / bounds ahead of the bank, but more importantly - who are much more flexible to work with than the median "partner bank", because they are not banks.
The whole "partner bank" ecosystem only really even scales because there are API providers like Increase.com / Unit.co etc to wrap them.