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01 Tokens have existed since ancient times
Tokens generally refer to the use of some representatives or certificates to represent the original real currency, and can also perform some of the functions of currency in terms of function (not necessarily all the functions of currency, such as tokens can serve as payment tools within a limited range), and these certificates can be exchanged back into currency.
Tokens are not new and have existed since ancient times.
In the era of precious metal coins, if a merchant needed to carry a large amount of coins over long distances to purchase bulk commodities in a distant place, it would be a heavy and dangerous task. But fortunately, he knew another local business that happened to have a branch at the destination. So he found the business and proposed to deposit his coins in the business, and asked the business to issue him a bill or voucher. He took the bill to go to another place, went to the branch of the business to withdraw the money, and then made purchases, and was willing to pay a certain fee for this.
The business felt that it could make a fortune without doing anything, so it readily agreed.
This bill is the token of money (coins).
After the merchant arrived at the destination with the voucher, he found that the company had an excellent reputation in the local area, and other local merchants accepted the bills issued by the company as a means of payment. Therefore, the merchant did not need to go to the company's branch to exchange for coins, and directly took the bills to purchase in the market. Therefore, the token replaced the original currency and fulfilled a certain monetary function. Of course, its monetary function is more limited than the original currency, and can only be used in places where the reputation of the company is affected.
Note that it is clearly written on this bill that it represents a certain amount of currency. At this time, the merchant really deposited the money of that amount into the company. This is a token with full reserve and complete reserve.
Are there tokens with insufficient value? The story continues.
After the merchant spent all the bills he brought, he found that the local goods were better than he expected, so he wanted to buy more goods to take back, but he didn't have enough money. So he found the branch of the business and wanted to ask them to borrow some money first, and then return it to the head office of the business after returning to the original place, and pay interest. The business was very familiar with this merchant, so it readily agreed.
The most critical step is here: the branch of the business does not need to lend the merchant real money, but only needs to issue him another bill (at the same time, the merchant can also give the business an IOU), which says "this merchant has such and such amount of money in this account". The merchant can go to the market to purchase with this new bill.
The question is: is there real money behind this new bill? Obviously not. Thus, modern commercial banks, currency derivatives, and incomplete reserves (partial reserves, insufficient reserves) came into being. The aforementioned full reserve businesses are called "narrow banks." Of course, nowadays, except for regular banks with state-issued licenses, all other token operations are basically full-value reserves, otherwise they will be punished by law. For example, game coins, stored-value membership cards, payment company account balances, and the recently popular stablecoins are all full-value reserve tokens. Then, in history, there have often been cases where tokens replaced the original currency or the original currency disappeared. For example, when some gold standard countries issued paper money in the early days, the paper money was actually a token of gold. In other words, gold is the real currency, and paper money is just a token of gold. The holder can exchange it back to gold from the country's paper money issuing department. But gradually, for various reasons, almost no one would exchange it back. In the end, the country simply announced that paper money was decoupled from gold, and paper money became a currency stipulated by national law and could not be exchanged for anything.
So paper money changed from a token to legal tender, and gold withdrew from currency. Later, paper money was deposited in banks, and deposits became tokens of legal tender. Now paper money is not used much, and deposits have become a more mainstream "currency". Later, there were tokens of deposits, such as paying company balances... Therefore, the status of tokens and original currencies is not immutable.
Therefore, tokens are not the currency itself, but they can also perform some of the functions of currency and can be easily exchanged back to the original currency. For example, bank deposits can basically perform almost all the functions of currency, so they are also included in the statistics of money supply. Of course, we still cannot say that deposits are money, after all, deposits are not included in the "Renminbi Regulations".
It can be seen that the emergence of tokens is because people have found some new representativesthat can replace the original currency to perform some of the functions of currency (such as payment), and in terms of use, can achieve certain conveniencesthat the original currency cannot achieve(this certainly includes some behaviors that circumvent supervision or laws). Therefore, as long as the current monetary system is not perfect and still has inconveniences, then tokens will inevitably appear to replace the original currency to perform its duties.
02 “+Blockchain”
Stablecoin is also a token, and it is a token running on the blockchain, that is, "token + blockchain". With the empowerment of blockchain, stablecoin has achieved some conveniences that could not be achieved in the original Internet environment.
Blockchain is not as old as tokens, but it cannot be said to be a new thing. It has been running for many years. Blockchain uses a mathematical algorithm of distributed ledgers to achieve a function that could not be achieved in the past Internet environment: transmitting trust.
The Internet has been around for about 30 years and can transmit information almost in real time, causing a sudden change in the way humans act. However, there has always been a problem in the past, which is how to verify who the person on the other side of the Internet is dealing with, and the authenticity of the information he transmits. In various Internet applications, chat spamming may not require high authenticity, but if it involves real goods or capital transactions, it requires high authenticity and security.
When the two parties to a transaction cannot trust each other, the traditional approach is to find someone that both parties trust. For example, bank account settlement is a typical example of this idea: everyone trusts the bank and opens an account in the bank. The bank is responsible for verifying the authenticity of the identity of each customer, and the bank is also responsible for verifying the authenticity of the transaction between the two customers. This model requires a "center", which actually relies on the reputation of the center and will lead to higher transaction costs.
And if the center does something bad, the consequences will be disastrous.
Therefore, humans try to find a decentralized model that does not require a center, and any two people can achieve trusted transactions, that is, peer-to-peer transactions (P2P). Blockchain and distributed ledgers are designed to solve this problem.
Therefore, the greatest significance of blockchain is to achieve the transmission of trust on the Internet. Although the two people do not know each other, and other people do not know who these two people are, they can ensure that the transaction between the two people is credible and will not be tampered with. In this way, a decentralized, mass-autonomous Internet model has been truly found. So far, Web3.0 has come into being.
It can be seen that stablecoins are particularly suitable for use in scenarios where no center can be found, and the most typical one is the international trade scenario.
In short, as a "token + blockchain" stablecoin, the token guarantees its sufficient reserves, and the blockchain enables it to complete payments when there is no trusted center. Therefore, it is also an attempt worthy of attention. However, in a borderless Internet world, two problems need to be solved:
(1) Choice of reserve currency
As a token, a stablecoin replaces the original currency to perform the monetary function. Therefore, the premise is that the original currency is accepted by the public for payment. On this basis, it is hoped that greater convenience will be obtained, and then the token of the currency will be created. Therefore, under normal circumstances, everyone will choose a stablecoin with the most commonly used original currency (generally the legal currency of the country) as the reserve. At this time, the original currency determines the choice of reserve currency for the stablecoin, and the two remain consistent.
But as mentioned above, the biggest contribution of blockchain technology is to achieve true decentralization and mass autonomy, that is, scenarios where there is no center, such as international trade. In other words, the biggest application scenario of stablecoins is likely to be scenarios beyond the jurisdiction of sovereignty (the original currency in the scenario within sovereignty can solve the problem well), because it is difficult to find a suitable center in this scenario. Sovereign states do not stipulate what legal currency reserves everyone should use in this scenario. This brings a difficult problem: in the future, all stablecoins will compete on the same stage in the same borderless and centerless digital world. Which one is better to use will be more popular with users.
By then, if some stablecoins are very convenient and are welcomed by more and more people, and some people are even unwilling to use their own legal currency and hold this stablecoin instead, this is actually the replacement of their own legal currency. At this time, it is the stablecoin that has eroded the space of other legal currencies. The difficulty of each country's legal currency "small courtyard high wall" has increased.
Faced with currency competition in a decentralized digital world, if a country wants to maintain its monetary sovereignty, it still needs to develop its comprehensive strength, develop and master more things that people around the world want to buy, and maintain the convenience of its own legal currency stablecoin, so as to maintain its monetary sovereignty in the future digital world.
(2) Risks of complete decentralization
Blockchain can achieve true decentralization. In the absence of a center, two strangers can also achieve efficient transactions. This is its most significant innovation compared to the past Internet. But this obviously also provides space for criminals to hide in illegal transactions.
To address this risk, a newer regulatory model needs to be introduced. For example, in a distributed ledger, it is possible to reasonably set up regulatory or judicial authorities to obtain specific transaction traceability data under legal authorization to ensure that transactions are legal and compliant. Because stablecoins are borderless in the digital world, these regulatory arrangements require international coordination. The regulation of decentralized financial systems is still immature and there is still a long way to go.
YouQuan
Joy
Hui Xin
Brian