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| By Chris Coney |
You probably haven’t heard about this new stablecoin, but it’s revolutionary.
It’s called DLLR — abbreviated “dollar” — and what makes it so groundbreaking is that it’s backed entirely by Bitcoin (BTC, “A-”) and is administered on-chain in a noncustodial fashion via smart contracts.
Indeed, these are all features you’d want to see in a stablecoin to give it great resilience.
In some ways, DLLR could be considered superior to USD Coin (USDC, Stablecoin) since it’s backed by a decentralized asset.
To be fair, a stablecoin like USDC is great because it is backed by real dollars. But the downside is that an organization is the custodian of those assets.
And that is a central point of seizure and/or control.
Rest assured, I’m speaking from a technical point of view here. Just to be clear, I don’t expect any such thing to happen to USDC anytime soon.
Where Did DLLR Come From?
Back in February, I wrote about Zero Protocol — a place in the DeFi world where you can borrow against your Bitcoin at 0% interest indefinitely.
In the past, the stablecoin you used to borrow on Zero Protocol was Zero USD (ZUSD, Not Yet Rated). Now, ZUSD has been phased out in preference for the new and improved DLLR.
Again, for the sake of clarity, you can go to the Sovryn (SOV, Not Yet Rated) app right now and borrow against your Bitcoin at 0% indefinitely. It exists, it works, and I’ve done it.
In fact, I still have an outstanding loan on the platform secured against some BTC, so I know the system intimately.
What’s So Special About DLLR?
It’s backed by Bitcoin, the most decentralized, most liquid crypto asset in the world.
These reasons — combined with Bitcoin’s 21-million coin supply limit — are why BTC is considered to be pristine collateral.
And in my opinion, that’s what makes it the ideal asset to back a stablecoin.
Why Didn’t Anyone Think of This Before?
They did, but it wasn’t the right time.
In the past, I’ve written extensively about stablecoins and the various approaches issuers have taken.
For example, the original model for Dai (DAI, Stablecoin) — now SAI — was to back a stablecoin exclusively with Ethereum (ETH, “B”).
Currently, crypto is still volatile and illiquid compared to traditional financial markets. But back in 2015, it was on an even more extreme level.
That made it difficult to maintain the price of DAI at a stable $1.
But the crypto market has mellowed out since then, allowing projects like DLLR to exist. And the closest thing to DLLR today is Liquity USD (LUSD, Not Yet Rated).
You see, LUSD is almost identical to DLLR … except it is backed by 0% loans made against Ethereum instead of Bitcoin.
And it works just fine.
At the time of writing, there is $777 million of ETH on the Liquity platform backing a supply of 283 million LUSD.
So, the collateral ratio for LUSD is well above 200%.
DLLR Added to the Balance Sheet
In June 2023, Exodus Movement (EXOD) — the publicly traded company behind Exodus, one of the world’s most popular crypto wallets — announced it would begin allocating part of its corporate Treasury to the DLLR stablecoin.
As you can imagine, that’s one strong endorsement.
Now, I wonder if there’s some meaning to the timing of this announcement.
After all, the launch of FedNow in the U.S. has made many people nervous about the Federal Reserve’s ability to completely control the payment system in traditional finance from a central point.
Perhaps Exodus wanted to move some of its money offshore but didn’t want to leave the dollar ecosystem or trust any shady jurisdiction. Maybe that’s why it chose DLLR.
If we consider Bitcoin to be a modern, digital version of gold, then DLLR is like the U.S. dollar on the gold standard prior to 1971.
If you are not familiar with the consequences of the U.S. dollar being taken off the gold standard, you can read more about this historic event here.
Conclusion
One of the biggest objections naysayers continue to throw at Bitcoin is that it “isn’t money because you can’t use it for payments.”
Now with the advent of DLLR, another one of these critics’ complaints can potentially be shot down.
Since DLLR is a dollar-based, Bitcoin-backed crypto stablecoin natively integrated into one of the most accessible crypto wallets in the world, this blows the doors of adoption wide open.
Anyone in the world with a smartphone and internet access can download the Exodus wallet and start transacting using a truly decentralized, censorship-resistant stablecoin with the confidence that it is backed by Bitcoin.
And if the U.S. administration truly wanted to maintain the dollar's global dominance, it would do well to support such things instead of trying to fence everyone in with the likes of central bank digital currencies.
But that’s all I’ve got for you today. Let me know what you think about the DLLR stablecoin by tweeting @WeissCrypto.
I’ll catch you here next week with another update.
But until then, it’s me, Chris Coney, saying bye for now.
