Stable Coins and Banking with Kory Hoang – Transcript
This is a transcript of the Podcast – Stable Coins and Banking with Kory Hoang – You can listen the audio here
Nye: What is going on everybody? What is going on? Welcome to another episode of Evolvement, the podcast where we talk about Bitcoin, cryptocurrency, and the future of our financial systems.
Nye: Today I have a really special guest on. We are speaking with Kory Hoang. And welcome Kory, how are you doing?
Kory: I’m doing great. Thanks for having me on the show Nye.
Nye: Yeah, glad to have you on as well. Kory is the head of Stably. Very heavily involved in the stable coin area. And that’s what I’m really excited to talk with about today man.
Nye: You’ve got a really cool background. You’ve got a lot of really cool knowledge on a specific part of the blockchain and the crypto industry, that I know a little about, and I think everybody knows a little about, but I don’t think everybody knows a lot about it.
Nye: And it’s becoming more and more relevant as we see more and more stablecoins coming into the market and coming into the atmosphere. So I’m excited to have you on man.
Kory: Thank you. Yeah, I’m excited to shed some light on the stablecoin sector, talk a little bit about what we’re doing, what other people in this sector are doing.
Nye: Perfect. Well let’s just start off my, can you just tell us a little bit about yourself? How did you get into crypto? I know that you were into banking a little bit before that.
Nye: Could you just share the story of your transition from your past into what you’re doing right now?
Kory: Sure. So I’m 27. I graduated from the University of Washington [inaudible 00:01:47] in 2014. I had a degree in finance and marketing.
Kory: Once I got out of school I worked in banking in investment management. And eventually, most recently I was working at a private equity data firm called PitchBook, right here in Seattle. Thankfully a very popular data platform for private equity and venture capital.
Kory: While I was working at PitchBook, I was tasked with researching a lot of the blockchain topics. And this was I think, during the beginning of 2017, which is when the crypto bubble as they say, was just getting started.
Kory: And also while I was working my day job, I was also doing a little of algorithmic trading on the side. I learned how to code and build trading algorithms on my own.
Kory: I was trading a lot, things like options, stocks, derivatives like fixed derivatives, fixed futures. Which actually helped me understand enough about quantitative analysis and understanding price behavior that I was able to, during my spare time, outside from the day job I was able to build trading algorithm for cryptocurrencies, primarily Bitcoin and Ether.
Kory: And while I was working my day job at PitchBook my trading algorithm on the side, which is running 24/7 and they were making decent money. But I realized that in the middle of 2017 as I was trading, and as I was researching, and been watching the industry for PitchBook I realized that there wasn’t a reliable stablecoin, that anyone could use.
Kory: The only one that existed at that point was Tether. And we all know the story behind Tether, so I don’t want to go too much into it at the moment. We can definitely discuss that in a bit.
Kory: But I thought that there was a hole in the market that needed to be filled. And during that summer of 2017, during the fall, I got together with some Amazon software engineers who are my friends, and also algorithmic traders. And we decided that, “We’re gonna write a white paper about a stablecoin, a better, a one that’s more transparent, more stable, that’s more credible than Tether.” And that was just basically our idea.
Kory: And by the end of the year we started quitting our job. I left PitchBook at the end of 2017. And then we went out and raised venture capital funding. Took about three months as our first time fundraising. We’re all first time founders as well.
Kory: But we were successfully able to raise half a million dollar from venture capitalists. One of them is [inaudible 00:04:34], which is a very big VC here in the United States.
Kory: And yeah, ever since the beginning of the year, I mean April of 2018 we’ve been busy building our product, and making sure that everything is ready for us to go to market, which is right about now.
Nye: That’s awesome man. Congratulations. I know you guys have got a lot going on. I know that you’ve got a lot moving into what you’re doing over the next couple of weeks, which is really, really exciting.
Nye: We’re gonna get into all that. I want to talk a lot more about stablecoins. But before I do, I think there’s two interesting parts here. I think the first interesting part, what I really want to touch on is, you’re in like full blown in the banking industry. How is that switching from banking into crypto?
Nye: And now that you’re kinda in crypto, do you have a different perception of the banks and the way they run? Has anything changed for you there?
Kory: So working in banking definitely gave me a lot of fundamental and foundational knowledge on how the monetary system works, how money is moved between banks, between entities within the economy.
Kory: You know, just gave me enough context of what the movement of monies looks like. Be it at the teller counter, I remember my teller days, during my college times. Or be it you’re processing wires, or transactions that’s worth hundreds of thousands, or millions or dollar for international businesses.
Kory: So being able to have a lot of those contexts, and knowing how it might work, you know the ACH system, the international clearing system, it definitely gave me a lot of knowledge to be able to see what works right now, and what needs to be improved.
Kory: And that is part of the [inaudible 00:06:31] one of the reasons why I decided to build a stablecoin actually, because I saw a lot of inefficiencies in the banking system.
Kory: Such as there are banks holidays, you can’t really send money to people during banking holidays. Well, what if you can do that, right? What is you can still be able to send something like US dollar equivalent during the holidays when banks are shut down using the blockchain?
Kory: So yeah, it definitely helped me get started in the right direction to where I am right now.
Nye: I love it dude, I love it. I mean that’s kinda like where I really get interested in this stuff, and where I’m like really intrigued by it is when I do international transfers through my business, people send me money and it won’t get here for a week, you know?
Nye: Or it’ll be a week and a half, two weeks, and it’ll be like I’ll have to message them, and be like, “Oh did you send it?” And their bank didn’t even call them to say that the transaction was actually canceled and that there was an error and that we needed to go through a different process or another process.
Kory: Oh yeah, definitely.
Nye: Yeah. It’s some interesting stuff. And I think that leads me into my next question is like, how do you see banks and crypto cooperating in the future? Do you think they’re even going to cooperate? And really will banks be forced to be more transparent? And do stablecoins play a role in that? Or do you think that stablecoins might play a role in that?
Kory: So I guess two questions right? Will banks employ blockchain technology to be more transparent in the future? And the second question is, will stablecoin play a part in it?
Kory: So the first question is, yeah. I think definitely banks will 110% will employ blockchain technology in the future in order to power their back end, and process transactions.
Kory: And doing so actually will help them save a lot of money, and cut down on a lot of infrastructure cost. And the transaction speed, as you may know, of a lot of blockchain platforms nowadays are very competitive with traditional payment processing system, as well as settlement systems.
Kory: So yeah, I mean banking system getting into using blockchain is a no brainer. And I think that whether or not that will make them more transparent is debatable.
Kory: Blockchain technology at it’s core is all about transparency, it is all about being decentralized. However, banks don’t necessarily have to follow that philosophy. Because for what it’s worth, some banks don’t, certain individuals or entities out there don’t have an active interest in being transparent about your financials to be frank.
Kory: For example if you’re like a billionaire, and you have a lot of assets, and you have a lot of wealth, a lot of those are likely in entities, LLCs, trust companies, [inaudible 00:09:38] set up in their name, or maybe not in their name, right? They are spread out everywhere.
Kory: And they have a lot of privacy, and a level of secrecy that they don’t want other people to know about. And that’s understandable. I mean if you’re a billionaire, you’d probably have that kind of need too.
Kory: So there’s, in certain situations it doesn’t really make sense for transparency to be the case for everything right?
Kory: So I don’t know. My answer is, I don’t know if banks will become 100% transparent just by using blockchain technology. I think they will start heading towards that direction, but whether or not it will evolve to be completely 100% transparent bank where you can see anyone’s transaction that’s anonymous, it’s not private, but it is anonymous.
Kory: And kind of like how the Bitcoin system operates, so debatable. I don’t know if that is gonna come anytime soon. But we’ll see.
Kory: Your second question is about stablecoin. Stablecoin I think will definitely play a crucial part in the crypto revolution, and transforming our financial system.
Kory: Stablecoin removes a lot of inefficiencies that traditional money would have. For example, if you wanted to send PayPal, or Venmo to someone in some remote country in the world, they probably don’t have that service, right?
Kory: You can’t really Venmo someone in, oh let’s just say in Pakistan, or somewhere in Tajikistan or something like that. Or in addition to just Venmo, or PayPal, banking, right? Banks have holidays. There are people that bank in underprivileged parts of the world. And I could go on and on, and on about all these problems.
Kory: With a stablecoin, it can actually solve a lot of those problems. A stablecoin removes the need to have first of all infrastructure that is set up to support the stablecoin.
Kory: For example, you don’t need a local bank branch, you don’t need bank personnel or tellers to help you use a stablecoin. You simple just download a [inaudible 00:12:00] wallet, or a digital wallet for you to store the stablecoin on. As long as you have internet, you can receive it and send it to anyone in the world.
Kory: So yeah. I think definitely stablecoins will play a very crucial part in the revolution of the financial industry.
Nye: Awesome. I love it. I mean, to even just go from there, what is a stablecoin? Right? Because as we look at all of these things, we’ve seen … We’ll get into Tether and stuff in a minute, but we’ve seen Tether cause different reactions in the financial market, or potentially cause different reactions in the financial market for crypto.
Nye: But a stable is supposed to be stable obviously. We’ve seen stablecoins that are paired to the US dollar go down to 90 cents, 85 cents, things like that. We’ve seen stablecoins that are supposedly supposed to be stable completely crash and die. So what is a stablecoin? And what makes it stable?
Kory: So a stablecoin is a cryptocurrency, or maybe just a digital currency, that is price stable, relative to something. When you’re saying that something is stable, it has to be stable in relative to something else.
Kory: So for example a US dollar stablecoin would be stable in terms of US dollar. One coin is what it’s worth, one US dollar. Whereas if you would have a gold stablecoin, then it’d be one coin is always worth a certain amount of gold, or something like that.
Kory: The idea here is cryptocurrencies are very volatile in their prices, due to a lot of reasons. They’re a new asset class. There’s a lack of information on all of the cryptocurrency out there. A lot of people don’t understand them, and there’s a lot of speculation going on right now.
Kory: So the prices of cryptos as you may know, are very volatile. They can either go up 100% a year, or go down 99% a year as well.
Kory: So there’s a lot of risk in using normal cryptocurrency for everyday transaction like payment, remittance, or even escrow, or just holding it. That’s why using a cryptocurrency, something that has all the benefit of Bitcoin or Ethereum but without all the price volatility that comes with it, is extremely needed to essentially stabilize the blockchain economy, and help it grow from here.
Nye: I love that. And I think the thing that I’m most interested in is how they play a role in the ecosystem. So for the longest period of time, into part of 2018 really Tether was the only stablecoin.
Nye: Tether was the only thing that you could move into, if you wanted to sleep in a stablecoin, if you wanted to sleep in something that was more stable.
Nye: And there’s a lot of rumors. I don’t know how substantiated they are. But there’s a lot of rumors that Tether was the main reason that we pumped all the way to 20K because it was overinflated, and they just kept printing more and more Tether, and then buying Bitcoin with it.
Nye: I don’t know if, can you speak on that a little bit? Like is that why there’s more stablecoins coming out? Is because Tether actually isn’t paired to the US dollar, or whatever they claim it to be paired to? And is this an issue that we need to be worried about happening again for Tether as well as other stablecoins?
Kory: Well so last year I think, you know this is just not my allegation, but this is something that has been written about publicly in the media, so I’m just saying what I read right?
Kory: So according to allegations in the media, what Tether did was they printed tokens out of thin air, without any backing, and they used those token to purchase Bitcoin on Bitfinex and other cryptocurrency exchanges. Mind you Bitfinex is also Tether’s parent company.
Kory: When they used these unbacked Tether to buy Bitcoin and other cryptocurrencies, the prices of these cryptos actually get inflated, and they appreciate.
Kory: And once Tether received those Bitcoin crypto back in their inventory, they simply eventually liquidate them for fiat, and they put the fiat back into the reserve, as if it was there the whole time.
Kory: If these allegations were true, then this is, “Wow.” Because this type of power was only a privilege, it was only possessed by the Federal Reserve before this. Only the Federal Reserve could print money out of thin air without any backing, bring it to the market to buy assets of value, and prop up the market. They’ve been doing that since 2009.
Kory: For a private company to be able to do this, that’s insane. It should be illegal, because you shouldn’t be able to print money out of thin air, if you’re not the Federal Reserve, you shouldn’t be able to print money, or money equivalent out of thin air to purchase assets.
Kory: But this is exactly what Tether is accused to have been doing. So now you could see why people could say that that’s what caused the price of Bitcoin to go up to 20K and then when Tether finally paused the printing press, around the end of 2017, that’s when the bubble popped, and everything unraveled from there.
Kory: Now, going forward, I think everybody realized whether or not that may or may not have been true, everyone realized going forward that, you should not replicate what the Fed is doing in the private, in the regular economy.
Kory: Because one it definitely should be illegal, and two it could cause a lot of instability. Because if Tether did do that, and if that was what really caused the bubble of crypto, then you can see how much instability that that kind of mechanism could cause to the blockchain economy.
Kory: So going forward, any stablecoin, any fiat backed stablecoin projects that’s gonna come live online, I’m pretty sure that most of them will not follow Tether’s model, and print unbacked tokens in there and then use it to buy crypto asset.
Kory: I think that these projects, they will start out and they will wait for people to deposit actual money, actual reserve before they can start printing. And I think that’s the legitimate way, the best way to do it. You know, that’s the organic way to do it.
Kory: And having a lot of these stablecoins coming into the market right now, that was just natural to me because I kinda saw it coming, a year and a half ago. Because if you look at the money market industry for example, right? Money markets in the traditional equities market is very similar to what a stablecoin would be.
Kory: A money market fund, or money market ETF is invest in very short term cash equivalent securities, that pay really small interest. And they are basically cash equivalent.
Kory: And people use these money market funds and securities in order to [inaudible 00:19:40] during times of volatility in stock markets. And the money market industry, just mutual funds alone is I think worth over $3 trillion. Right?
Kory: There’s tons, hundreds, no, maybe I don’t know about hundreds, but a lot of money market providers. From JPMorgan, to Vanguard, to BlackRock, PIMCO, to whatever, right?
Kory: So I see that playing out similarly in the stablecoins. That’s why I think there are a lot of competitors and people coming into the space because it’s so huge.
Nye: And that’s kind of what I want to move into next, right? So we’ve seen this Tether thing happen, we’ve seen what has occurred. I saw a couple of articles that claim that Tether actually was backed by all that money, in terms of their reserves.
Nye: The truth is I don’t think we have full transparency around that. So I don’t even know what else to touch on in terms of Tether.
Nye: But what I do want to touch on is, we’re starting to see an entire ecosystem of stablecoins. To the point where I would argue there’s probably too many of them.
Nye: I don’t know the differences between all of them. I’ve seen TUSD, USDT, blah, blah, blah, a couple of others. I’ve seen a few pitches from stablecoins.
Nye: And my main questions is why do we need more stablecoins? And what makes these stablecoins different from one another?
Kory: There are a lot of reasons why I think there will be more and more stablecoins coming in the future. I think there are two top reasons I will list here.
Kory: I think the first reason is to help diversify away from risk. Having one big stablecoin is not enough. You saw what happened with Tether right? And even having two or three big stablecoins is not enough.
Kory: Ideally you should have a lot of them, you know? Let the free market do its job. Let people decide which stablecoin they want to use. And if the people decide that they want to 99% of the market decide that they want to use one stablecoin, then let the market decide that.
Kory: If the market decides that, “We should 500 or 1000 stablecoins, or 10,000 stablecoins one day,” then that might just be the case.
Kory: Again this is a very new industry, and sector, that you don’t know how it’s gonna evolve in the future, and what kind of barriers [inaudible 00:22:09] can or cannot be set up.
Kory: And to say that, “One day there will only be one major stablecoin,” I think that is a very tunnel vision kinda line of thought.
Kory: And it could turn out to be true, but if you look at industry like the payment industry, there are hundreds, and hundreds of payment companies out there. So that’s the first question, I mean the first point. Diversification, and just because if the market decide that they want many stablecoins then so be it.
Kory: And my second point would be, I think stablecoin will eventually enable businesses to create what I would call utility stablecoins essentially.
Kory: So last year we had the utility token phenomenon, when people decide to create unbacked tokens but add utility to it, add some sort of function, or features, or rewards to it, to be used in a particular platform.
Kory: And I would draw analogy to it, similar to Chuck E. Cheese token. Are you familiar with Chuck E. Cheese?
Nye: Of course, I love Chuck E. Cheese man. That was my jam when I was like eight.
Kory: Wonderful. So you know a Chuck E. Cheese token is essentially a utility token. Although I would argue that a Chuck E. Cheese token is actually a utility stablecoin. And once you acquire all these token, you pay it, and then you get tickets in return. There is a certain amount of tickets you can get for it.
Kory: So that token, that token at Chuck E. Cheese, the price for it, the value of it, it doesn’t essentially fluctuate much because people know that, “For this amount of money I can get this X amount of Chuck E. Cheese token.” And so that’s why it functions perfectly as a utility token within Chuck E. Cheese.
Kory: If that wasn’t the case and the Chuck E. Cheese token prices were allowed to fluctuate wildly, and they could appreciate and depreciate, what would happen is some big bully kid would try and horde them in a little corner. That would essentially ruin the game for everyone, and that’s what happened last year.
Kory: People horded utility tokens not to use them in the platform, but to simple just to get rich out of it. Just to profit. And that’s not healthy for any sort of blockchain ecosystem.
Kory: Going forward in the future, now what I’m starting to see it [inaudible 00:24:45] turning to me, and wanting to integrate our stablecoin into their platform as a mean of payment, or medium of exchange.
Kory: However they would like our stablecoin to have additional features. Such as if you use the stablecoin within their platform they get discount, they get reward, they get some sort of point, they get some sort of bonus.
Kory: So now we’re adding utility on top of a stablecoin to the point where I can even white label my stablecoin out to say, oh I don’t know for example Costco, right? Let’s say Costco wanted to white label my stablecoin, they create a Costco USD stablecoin.
Kory: Outside of Costco it’d function normally just like a stablecoin. Market forces and market makers will stabilize the pay. And Costco would issue it, and would redeem it for a dollar.
Kory: Now inside Costco, if you use this Costco stablecoin you get discount, you get 1%, 2% discount on Costco items or something like that. So not just Costco would probably do this. I’m not saying Costco will do this, just using it as an example.
Kory: But imagine if other retailers, other online e-commerce, other brands started doing this right? Now you can look at a future where one day you can have tons and tons of brands issuing their own stablecoin with their own little utility, and add a feature.
Kory: And the free market again at the end which one of these stablecoins they want to acquire the most. If Amazon would release a stablecoin right now, and I can get a lot of discount and benefit from that Amazon stablecoin, I might just horde a lot of that Amazon stablecoin just because, I can use it later right?
Kory: And if it functioned just as good as a US dollar, then I might just hold a lot of Amazon stablecoin in my wallet, just as if it was regular money. So I think that’s how this industry will evolve in the future. And that might be one of the reasons why we will see a lot of stablecoin projects out there. Hundreds, if not even thousands one day.
Nye: I mean it’s interesting. It’s really interesting. So are you kinda telling me that like … My next question was, can you have too many stablecoins? But you’re kind of telling me the answer is no.
Kory: There will be a lot of stablecoins. And the way that the market is unfolding right now, it’s conducive actually for there to be a lot of stablecoins, because not any single project can get too big. Because once any stablecoin project gets too big, for example say, let’s pick Tether.
Kory: Tether is over 90% of this market right now. Tether cannot stay there forever. Other competitors will eventually be better than them, offer better services, offer better utilities or whatever, and start taking away their market share.
Kory: And whoever the next big stablecoin that replaces Tether, guess what? In due time they’re gonna get replaced too, by someone that was bigger and that has more utility or whatever.
Kory: So perhaps one day there will be one big giant stablecoin that rule them all, but it’s gonna take a while before that one emerges.
Nye: That’s really interesting. I mean with so many of these stablecoins coming up in the market right now, and so many new ones getting launched over and over and over again, and I would say a large majority of investors are pretty uneducated on stablecoins, like what the differences are, why are they relevant? Things like that. How could someone differentiate a stablecoin that’s good, and a stablecoin that is trash, you know?
Nye: Because there’s a lot of them that I’ve actually seen, I’ve sat down with a buddy last week, and he was like, “I invested in this stablecoin, and it’s almost gone to zero.”
Nye: How can you tell between a good one and a bad one? What does it look like when a stablecoin is succeeding as well?
Kory: So he invested in a stablecoin and he said his investment went to zero. I wonder what project that was? Do you know which project it was by chance?
Nye: Yeah I can share with you. Probably just share it off the air to be honest with you. But-
Kory: [crosstalk 00:29:00].
Nye: I don’t remember the exact name, but I’ll look it up for you.
Kory: Okay. I mean there are a couple of projects out there, stablecoin projects that have failed, or had to return money to their investors.
Kory: But yeah I think there are a lot of stablecoin types. I think during this podcast we haven’t gotten into that yet. So perhaps before I can discuss what to look for in a good stablecoin, we should probably discuss different types of stablecoins out there.
Nye: Yeah that’s perfect, let’s start there.
Kory: Yeah. So let’s get into it. There are three types of stablecoin. First one there’s fiat backed stablecoins, or not just fiat, real asset backed stablecoins. Okay?
Kory: Second type is I would say crypto backed stablecoin, or digital asset backed stablecoins. These are stablecoins that are not backed by real life assets like fiat, or gold. But they’re backed by other cryptocurrency like Ethereum, or maybe even Bitcoin right?
Kory: And the third type of stablecoin is I will call them unbacked [inaudible 00:30:18] stablecoin. Or algorithmic stablecoins. These are the ones that are not backed by anything, but they simply use a smart contract based algorithm in order to adjust the supply of the coins in order to theoretically stabilize the price.
Kory: So [inaudible 00:30:38] so let’s start with the first type of stablecoin, which is the fiat backed. Fiat backed, or a real asset backed project is very simple to look for signs of a good company.
Kory: You look at the management team, you look at where they are based, you look at whether or not they are regulated, or if they work with a regulated custodian, where do they hold their money? Do they hold the money in an escrow account? Or do they hold it in their own account?
Kory: Do they do any audits or their reserve? And what is the frequency of the audits? And who do they use for the auditor?
Kory: How easy is it to deposit funds into the escrow account if there is any? And how easy it is to withdraw those funds when you redeem stablecoin?
Kory: So those are the basic features of a fiat backed, or a real asset backed stablecoin I would look at.
Kory: For the second type of project, or stablecoin, the second type of stablecoin is digital asset backed stablecoin. These, they tend to be a hit and miss. There are some projects out there that are still doing really well, like for example MakerDAO.
Kory: MakerDAO creates a stablecoin called a Dai. And the Dai, you know I could go really deep into explaining the whole MakerDAO system, but I don’t think we have enough time for that here.
Kory: So just in a nutshell, the Dai is a dollar stablecoin that is backed by essentially Ether. So I think you have to essentially lock up 1.5, or 1.2 Ether, 1.5, or 1.2 dollar worth of Ether, for every one dollar of Dai that you are able to issue.
Kory: So basically you back the stablecoin with Ether, but you over collateralize it, so that if there’s any sort of price volatility in Ether, there’s a good amount of cushion that serves as a buffer. And whenever that buffer is eliminated, then the system automatically liquidates, and [inaudible 00:33:06] sort of like [inaudible 00:33:07].
Kory: So this essentially has worked really well, and price stability-wise, I’d say has been pretty solid. So I think MakerDAO and the Dai is a very good project, that people should definitely keep paying attention to and provide support for.
Kory: Other projects that hasn’t fared so well, bitUSD is one of them, a variety of reasons why it hasn’t worked out so well. But as of right now, bitUSD is trading I think way below a dollar. Last time I checked it was trading at like 70 cents or something like that.
Kory: So yeah. The last type of stablecoin is the algorithmic backed stablecoin. Now there are actually a lot of development in that space that to be frank, I haven’t been keeping up with that much. Because I don’t view these stablecoins as a direct competitor to me. I view them more as, more of like a complementary sort of like cool competitor, but not a direct threat to me I would say.
Kory: These stablecoins they don’t need any backing, don’t need any fiat backing, or real life reserve backing, or even any digital currency backing. They rely on a smart contract to essentially adjust the supply of the token in order for the price of a token to be worth a dollar.
Kory: So if the price is for example less than a dollar, then smart contract would decrease, would essentially quote unquote “burn” the supply of token one way or another, in order to decrease the total number of tokens out there.
Kory: So if the number of token decrease, then theoretically the price should go up. Vice versa, when the price of tokens [inaudible 00:35:00] on the system could then, the smart contract could then issue more token into the ecosystem, which means the price should theoretically go down, back to a dollar.
Kory: This is basically how this system operates. And to my knowledge there hasn’t been a successful algorithmic backed stablecoin that has [inaudible 00:35:24].
Kory: The closest one that we had was a project called NuBits. And NuBit USD actually didn’t work out really well, and the price actually broke the peg, and is way below a dollar right now. And I actually haven’t checked into the status off that project for a while.
Kory: But other than that, every other projects that are in this category are currently in an experiment mode right now, it’s still in development. And none of them has gone to market yet.
Kory: And the largest one [inaudible 00:35:59] I was actually really looking forward for these guys to release their stablecoin because I think they’re working on something really cool, they had to announce that they had to return money to their investor, over $100 million of investor money, because they consulted with the SEC and the SEC said their algorithmic stablecoin model, would potentially violate securities regulation. That’s why they decided to stop the project [inaudible 00:36:29]. So …
Nye: Wow. That was STASIS that did that?
Nye: Basis. Okay. ‘Cause I know STASIS well, so yeah. Interesting. Very interesting.
Kory: Yeah STASIS is a really cool fiat backed project from Europe. They create a euro backed stablecoin. The ticker is EURS.
Nye: Yeah. They’re definitely very interesting.
Kory: Mm-hmm (affirmative).
Nye: So that pretty much gives us a good broad overview of the different types of stablecoins. That’s really, really interesting.
Nye: What’s the revenue model for stablecoins? So first off, if you are a stablecoin creator, what’s the benefit for you? But also as say an investor in a stablecoin, someone who’s put a lot of money into a stablecoin, how are they going to get returns? How does that all work?
Kory: So stablecoins for me, for us at least at Stably, for fiat backed stablecoins in general, we earn, our core income comes from interest income that our reserve generates.
Kory: So the reserve of cash that sits in the escrow account that our regulated trustee manages, it earns interest similar to the risk free rate, which is about 2.2%, 2.3% a year at the current rate, and as the interest rate increased in the future by the Federal Reserve, that rate will also increase for us. And the larger the reserve of our stablecoin, the higher the interest income will become. And so we rely on that as our core channel of income.
Kory: Now there are other ways for us to also monetize. Anything ranging from consulting fees, to working with local money service businesses to provide exchange or redemption services in the local currency and charging a fee there.
Kory: Or even some projects out there, they are contemplating implementing a small fees, whenever people send stablecoin to each other. There would be a small amount of fees that’s extracted and sent back to the smart contract, to the company’s address.
Kory: So that’s not something that we’re planning to do. We actually don’t think that’s competitive. But some projects out there are considering it. So that’s some of the ways that fiat backed stablecoin can monetize.
Kory: Now as for other types of stablecoins, because I don’t really actively work in those industry sectors, and I don’t research much into how to monetize a stablecoin, so I frankly can’t speak too much on that.
Nye: Interesting. Cool. No, that definitely makes sense. So I guess as we move out of this, I think we spoke a little bit about this in the beginning. We were talking about banks, we’ve gone through this whole section of what a stablecoin is, what’s happening in the ecosystem for stablecoins and things like that.
Nye: So kinda going back to the bank questions and things like that, do you see that banks will use their own stablecoin? Are they going to use the stablecoin that already exists? Or are they just gonna pretty much build their own blockchain and do it their own way?
Kory: I think it will be a combination of both. I think some banks will start creating their own stablecoins. At least banks in jurisdictions that are more crypto friendly, I’d say.
Kory: Some banks out there will probably, you know, won’t start their own stablecoin but will integrate with existing stablecoin maybe start accepting all of them. I don’t see any reason for a bank not to start providing banking and lending services with a variety of different stablecoins.
Kory: I mean that could totally be a thing. So yeah it’s gonna be very interesting to see how this industry evolves. I can see it play out in either way. So we’ll have to just wait and see I guess.
Nye: I guess so man. I guess so. I think that’s the most interesting thing to me. Obviously no one knows how it’s going to play out, but I’m so interested to see how this is all gonna play out, I’m so interested to see how stablecoins, how the blockchain technology plays into our current banking model.
Nye: And you’ve brought a lot to my attention over this last 45 minutes about it. So thank you for that.
Kory: Yeah. No problem.
Nye: I want to know before we move on, before we head into the conclusion, I want to know more about Stably. What is Stably? Why did you decide to create it with your group of friends? And why is it different from other stablecoins? What makes you special? What makes you unique?
Kory: Yeah absolutely. So Stably is the name of our company. Our stablecoin is actually called StableUSD. The ticker is USDS. And we are actually already listed on Bittrex, one of the top regulated crypto exchanges in the United States, and also the world.
Kory: We are listed against Bitcoin and the US dollar on that exchange already. And in the upcoming week or so, we will list on one of the top three crypto exchanges in the world. So there will be more news coming out about that.
Kory: We are fiat backed, very similar to other stablecoins like TrueUSD, or Gemini, or Paxos. We use a regulated trustee to hold an escrow account. And the regulated trustee name is Prime Trust, they are based in Nevada. They are a state chartered trust company in Nevada.
Kory: And we conduct a monthly attestation on our reserve to certify that we have the same number of dollar in our reserve as the number of tokens that we have printed into circulation.
Kory: We also plan to build on multiple blockchain protocol in the future. We are live currently on ERC-20, on Ethereum. Our engineers already developing prototypes of our tokens on those platform already, and we plan to go live within the next six months. At least on two of the platform I just mentioned.
Kory: Also we are working with exchanges around the world, to create a remittance network basically, so that you can easily convert our stablecoin into local fiat currencies. So I don’t think this is something that a lot of other stablecoin have focused on.
Kory: Besides crypto exchanges, and trading, at the end of the day what’s more important is how regular people, how people in for example from my country in Vietnam could use stablecoin to help their daily lives.
Kory: I have a cousin that live in Vietnam, and I used to send him Western Union, about a couple of hundred bucks every few months or so. And it costed us a lot of fees, like more than $20 worth of fee every time we sent money over there.
Kory: And my little cousin, he makes less than $5 a day, so the kid doesn’t have much money, $20 is a big deal to him. He started to tell me a year ago that I shouldn’t send him Western Union anymore. I should start sending him stablecoin, start sending him Tether instead.
Kory: And how he converts Tether to local fiat is he go on Facebook to this group of crypto traders, and he simply asks, “Does anyone want to buy some Tether from him for local fiat?”
Kory: And he’d literally just meet up with that person in real life, within an hour of me sending him those Tether, he already converted to Vietnamese fiat. And he got it, the exchange rate that he got was significantly better than what Western Union could have provided.
Kory: So we hope that we will become one of the fastest, cheapest, and most easy to use stablecoin in the world, with a lot of liquidity, and local conversion capabilities all over the globe.
Nye: It’s super interesting man. This is super interesting. I’m super, super glad that you were able to come on and join us today. Do you have any concluding thoughts? And can you share a little bit about where people can learn about Stably? And where maybe, I don’t know if you have any resources to learn more about stablecoins as well.
Kory: You can check out more about Stably on our website, www.Stably.io, or you can also visit our blog. We have a Medium blog, and we post a lot of very informative articles about blockchain, stablecoins, crypto, as well as our evaluation of other stablecoin projects.
Kory: So another very good site to gather stablecoin resources is Stablecoin Index, StablecoinIndex.com. It was created by I think Myles Snider. And he lists a lot of good projects on there, along with links, and resources for you to check out. So [inaudible 00:46:02] go there if you need to learn more about stablecoins.
Nye: My man Kory. Thank you so much for coming on dude. I super appreciate you joining me on the podcast here. Really excited to share this with the people. I think people are going to get really educated about this stuff.
Nye: I wasn’t heavily educated before we did this podcast about stablecoins, and I feel like I’ve got a good basis and understanding of what it’s about now, and the different, the categories really caught my attention. That’s really interesting. I didn’t even know that.
Nye: But anyways man, thank you so much for joining us. I really appreciate it.
Kory: Yeah, no problem. You are most welcome. It was my pleasure.
Nye: Awesome guys. You guys can go check out Stably. This has been another episode of the Evolvement podcast, with your boy Nye, where we talk about Bitcoin, cryptocurrency, and the future of our financial systems.
Nye: Thank you so much for joining us, we’ll catch you next time.