There are four models for stablecoins:
1. Algorithmic, such as NuBits
2. Crypto collateral, such as Dai-Maker
3. Bank account balance, such as Tether
4. Central bank digital currency, such as digital yuan
NuBits were the first stablecoin, released in September 2014. For the first time in the history of world, people anywhere in the world could transfer dollar stable money to anyone else using a simple phone app. It retained all the advantages of Bitcoin in terms of private, secure blockchain transactions. It was an amazing accomplishment we should be very proud of.
After we accomplished creating the first stable blockchain money, Tether emerged with the advantage of Bitfinex backing and liquidity. The money and the liquidity behind it early in its history (through Bitfinex) is what made it successful. While to date it is a functional product, holding all deposits in traditional bank accounts makes it extremely vulnerable to severe disruption and failure. It had no blockchain governance structure.
Dai uses crypto collateral. This is actually a functional and robust system. However, it is very economically inefficient and can’t scale well due to huge collateral requirements.
Central bank digital currencies are not decentralized in their governance, are not immutable or private. They don’t employ blockchains. They are closer to bank accounts than blockchain based stablecoins.
Out of the four models, only the algorithmic approach employed by NuBits is both decentralized (the network and the governance model) while also being economically efficient enough to scale. It has minimal pegging strength at low levels of stake and liquidity as we currently observe, but we believe this would be quite robust at reasonable scale. Given the importance of stablecoins and that it has become a large and fast growing industry, the algorithmic approach should be funded and tested, as the other approaches all have serious deficiencies. Surely this important technological development deserves more development than can be done with a $1 million NuShare market capitalization. Whether the market will give it the funding it needs to properly explore the potential of the approach is unknown, but it could get a boost if there is a traumatic breakdown of Tether or other alternatives. NuBits are the original stablecoin in an industry that is growing hundreds of percent each year and is now worth tens of billions USD. I think that makes a market cap of $1 million a great value. The risks are high, but the potential return is even more extreme.