In an appearance on Bloomberg, crypto visionary Rune Christensen has exposed mainstream viewers to key concepts about decentralized finance and how it actually works.
The founder of MakerDAO begins by explaining the key to making cryptocurrencies relevant for the masses: stability. Such stability will allow cryptocurrencies to become entrenched in everyday transactions without people fearing that they’ll lose all their money in the blink of an eye.
Christensen’s company issues DAI, which became the first decentralized stablecoin on the Ethereum blockchain. It uses smart contracts to respond to market dynamics, effectively eliminating volatility and producing a cryptocurrency that can be used by merchants, businesses and everyday people in a variety of use cases.
Stablecoins, a particular type of cryptocurrency that is pegged to other cryptocurrencies, fiat money or exchange-traded commodities to minimize volatility, are becoming an increasing threat to government-backed fiat currencies because of their technological ability to outperform traditional money by crossing borders and settling transactions instantly and without middlemen, intermediaries, paperwork or arcane bureaucratic procedures.
“The main thing about a stablecoin is, of course, that it’s stable. And the reason why that’s so important is because you need stability if you want blockchain technology and you want crypto to actually be relevant to regular people and businesses because the volatility that you see in something like Bitcoin simply doesn’t work in everyday life.
There’s a lot of stablecoins out there issued by companies. I think because something like if you look at Facebook’s Libra, you look at Binance stablecoin – the thing about these stablecoins is that they’re all issued by a particular brand. They actually get adopted based on how people trust that particular brand, but that’s because they’re centralized. So the issue is that with a stablecoin like this you have trust that the company will actually hold your money safe for you.”
Christensen says there’s another way – a new approach that’s a major departure from the old way of managing one’s money and wealth.
“What Maker is actually doing is trying to get beyond this model of just trusting some custodian and instead creating a stablecoin that maintains the core value of blockchain by being decentralized. So rather than having a central authority or having reserves that are sitting in an account somewhere or sitting with a company somewhere, we have managed to make a system that maintains this ability purely through code, entirely on the blockchain. In this way, we offer an alternative that is a little bit more, you know, less requiring of trust. Rather, it’s about just working through the technology.”
Christensen says a key distinction between a privatized corporate digital asset and a decentralized cryptocurrency such as the stablecoin DAI is that with the latter everyone can see what is going on with the transactions.
“In China we’re seeing a lot of people that like to use our DAI stablecoin to actually lend out to other people directly peer-to-peer, and this way they can actually earn a return on their assets. But rather than being through speculation, which is what you typically see in crypto. It’s a USD-denominated, stable exposure that you get and then you just get on that, which of course is quite desirable if you live in a country with a lot of inflation, for instance.”
He says MakerDAO is focused on building up its presence in Asian countries such as China, Japan, South Korea and Singapore where the opportunities are greatest for adoption.
“We are focusing on growing our use by everyday people in the region because they actually have a very relevant use case of escaping inflation, getting access to better yields. And we certainly think that this is a place that will have the most growth potential.”