How to explain stablecoins to your friends in 1 minute

Since the beginning of 2010, a group of people have been playing an online gambling game that can only be traded in cash.

As the gambling profits become more and more amazing and can be participated in worldwide, more and more people are playing. With more people, troubles also arise. It's not that someone cheats at the gambling table. When this game was originally designed, it basically eliminated the possibility of cheating. Instead, some people started to defraud at a little distance from the gambling table and put the defrauded money back into the gambling. Fraud may be okay, but some people directly rob, buy and sell drugs and trade on the black market.

This makes other gamblers who just want to play quietly dissatisfied. Your money comes from an unknown source. In a few days, the police may close down the gambling game, and no one can play.

There must be a rule, at least cash cannot be directly put on the table.

What should we do? Since it is gambling, learn from professionals.

Like traditional casinos, get casino chips (stable currency).

In reality, casinos provide gambling games, venues, and chip exchange services, which is a means for casinos to ensure fairness and avoid risks. However, the current gambling game is online and "separately operated": gambling games are decentralized (Bitcoin is designed to ensure fairness), and casinos are centralized (cryptocurrency exchanges provide trading platforms). Logically, casinos (exchanges) should provide chip exchange services, but casinos are unwilling to do so.

The reason for unwillingness is also very simple, too much uncertainty. The opening of traditional casinos requires a license, which means that as long as clear regulatory requirements are met, it will be fine. However, the current gambling game is still a niche, and governments of various countries believe that it is entertainment for a small group of people. It is still uncertain whether it will be suppressed or regulated, let alone the details of compliance.

At the same time, around 2012, chip technology was not mature (there was no Ethereum ERC20 type token), and there were problems such as cumbersome chip casting, troublesome redemption, and unstable prices.

Don't be afraid of difficulties, as long as you can make money. This chip exchange business later proved to be very profitable.

For traditional casinos, people hold chips for a relatively short time. Generally, they will soon put them into gambling after exchanging chips. They will either lose all their chips quickly or make a fortune overnight. In short, they will get the results quickly and then exchange the money and leave. This is very similar to online gambling. After exchanging chips, they will either play at the Bitcoin table or buy some at the Litecoin table. In short, the chips will not stay in their hands for a long time.

Later, this online gambling became more and more popular, and everyone focused on not wanting to leave the card table. So people hold chips for longer and longer periods of time, which means that the chip companies hold the gamblers' money for longer and longer periods of time.

Time is money, my friend.

Time is even more money. The chip companies try to make a lot of money from gamblers make money here, and all the interest income belongs to themselves, which has nothing to do with the gamblers. Therefore, the major chip companies have their own special skills. Some of them deal with commercial bills, some deal with money funds, and some even lend money to casinos.

Yes, some even lend money to casinos. Here we have to explain an early chip development factor:

1. User trust. In a decentralized world, if you take other people's gambling money and run away, the chip will lose its value and cannot enter any casino or gambling game. Winning the trust of users is the cornerstone of development.

2. Channels are also very important. Users' trust is a problem. At the same time, your chip company must convince the casino of its professionalism, otherwise the casino will refuse to use it, which will greatly limit the development of chips. Chip companies must maintain a good relationship with casinos (for example, USDT was strongly bound to Bitfinex in the early years, and USDC is now bound to Coinbase). Of course, this binding cannot be just talk, and you must give the casino some benefits. For example, if the casino encounters some difficulties and asks your chip company for some money, you have to give it (USDT loan to Bitfinex exchange constitutes a major scandal in the crypto industry).

The development of the chip industry is inevitably accompanied by the emergence and death of a large number of chip companies. In the end, the strongest king at that time survived the fight (Tether's USDT). Later, as traditional financial institutions discovered that this gambling game could make money, they also participated in it. In order to adapt to the high requirements of institutions for chips, some more compliant chip companies came into being (Circle's USDC, etc.).

For the future, from the perspective of the development of chips, these chip companies now hope that you can use them when you go out to buy mineral water or stocks, especially in outbound travel or cross-border trade, eliminating the cumbersome procedures and high costs of currency exchange abroad. Many foreign merchants accept this chip, and you can pay for services and goods quickly, easily and economically. In the end, you can even use chips to buy properties overseas.

This is the story of chips (stablecoins).

I am not actually very willing to turn the entire crypto market into a casino, but for better explanation, I chose this metaphor, and I hope everyone understands. Stablecoins are bargaining chips to some extent. The underlying currencies of the chips are different in different countries. This technology itself is an extension of the original currency. Its underlying assets determine the confidence in a certain stablecoin. If people lose confidence in the underlying assets of most stablecoins, the US debt, then this US dollar stablecoin will lose its value. In other words, it will not have a revolutionary impact on the existing currency credit.