There are already a large number of stablecoin protocols on the market. It is logical to ask why we would want to create yet another. But before answering this, it is necessary to ask another question:
Satoshi Nakamoto defined Bitcoin in his 2008 whitepaper as “an electronic payment system based on cryptographic evidence rather than trust, which allows two willing parties to transact directly with each other without the need for a trusted third party.”
These were the founding principles of cryptocurrencies. Decentralized, trustless and permissionless money. That’s how it all started but…
How is that going?
Okay, let’s accept that perhaps Bitcoin’s monetary policy design with completely inelastic supply was not the best possible, and that the resulting volatility is not for everyone’s stomach. But that is no excuse for having created, and worst of all, massively adopted, centralized currencies pegged to fiat.
Let’s leave the little elephant of dubious Tether reserves for a moment inside the room. Right now there are eight centralized issuers of crypto USD. All of them, and when I say all I mean ALL of them, have “blacklist” functions implemented in their tokens to block any wallet (or smart contract) at will. To make it clearer:
These things have NONE of the advantages of cryptocurrencies as per the Satoshi Nakamoto’s initial conception. None. They have all the drawbacks of traditional money (well, except for being told by the bank cashier that you can only pay bills from 8 am to 10 am on Tuesdays and Thursdays after awaiting in the queue for 30 minutes, let’s give them that). Again, they have almost all the disadvantages of traditional money, in addition to the disadvantages of cryptocurrencies (difficult to use, lack of privacy, high fees and various risks).
But, is it really that bad?
Well, it’s actually worse. In an attempt to provide decentralized alternatives, someone had the idea of creating stablecoins as debt-money from collateral, but guess what. As they began to receive criticism for the capital inefficiency of the new system, they began to use as collateral the same centralized currencies which they wanted to fight. They even invented coins that only used other stablecoins as collateral. And here we go again.
And then came the DeFi explosion, and everything was filled with DEXs with stablecoin liquidity pools, stablecoin lending protocols, yield farming protocols with stablecoin strategies, protocols that invested in other protocols… and centralized stablecoins, either directly or as collateral to other coins, spread like a virus infecting the entire DeFi ecosystem. It’s the systemic risk my friend.
No matter what they say now, it’s only a matter of time before central banks end up issuing their own cryptocurrencies, AKA CBCDs. And when that happens, trust me, they’re not going to want competition (heard about China?). They’ll come up with something to justify it, or more likely they’ll resort to any of their wildcards: financing of terrorism, money laundering, or, my favorite, to protect consumers. And when that happens, and believe me, it’s going to happen sooner than later, you won’t want to be around one of those Trojan horses that have a built-in button to turn them off remotely.
And speaking about protecting consumers…
How are those prices going?
Yes, I know. The fault is not with the government (whatever it is). We all know that the inflation that appeared in 2021 was transitory and would have ended by the end of the year. And the fact that 60% of all dollars in circulation have been printed in the last two years has had nothing to do with prices having skyrocketed in the last 12 months. It is not as if there is a cause-effect relationship between the massive printing of money and the inflation described in all the economics books because every time in history that a government has started printing money massively, prices have ended up skyrocketing shortly after…
Anyway, that is the other big elephant in the room for current stablecoins: they are pegged to currencies that aim to lose 2% of their value each year.
“History is largely a history of inflation, and usually of inflations engineered by governments and for the gain of governments” (Hayek)
So, why Geminon?
Because it is the answer to all of these questions. There are very few purely algorithmic stablecoin projects, and none of them are tied to anything other than inflationary money being printed out of thin air. In recent months there has been a lot of improvement in the decentralization issue thanks to the massive adoption of Terra, but there is still a long way to go, especially regarding the use of price peg sources other than the US dollar. The crypto market cannot (if it hasn’t already) become a new branch of the US government where export hyperinflation to.
For this reason, and now more than ever, protocols like Geminon are needed to provide secure, decentralized, uncensorable and inflation-resistant stablecoin solutions through mechanisms to keep peg to the prices of consumer goods instead of to paper money in constant depreciation.
“I don’t believe that we should ever have a good money again before we take the thing out of the hands of government” (Hayek)
WHAT is Geminon?
Geminon is a protocol that allow you mint, redeem and use super stablecoins. A super stablecoin is pretty much like a stablecoin except in that this year it won’t lose 1% of its value per month if you leave it alone in your wallet.
“Though there is every reason to mistrust government if not tied to the gold standard or the like, there is no reason to doubt that private enterprise, whose business depended on succeeding in the attempt, could keep stable the value of a money it issued” (Hayek)