#270—The 7 most important stablecoin thinkers

Also, Nostr’s rise in China

Oct 16, 2023

Welcome to Yaka Stuff, our weekly newsletter that covers news, industry perspectives, and updates from the Hard Yaka ecosystem. Check out our last report here.

This week:

The 7 most important stablecoin thinkers (and how stablecoins are the new Eurodollars)
Nostr’s rise in China
FTX stuff
Stuff happens

1. The 7 most important stablecoin thinkers

That’s according to Nic Carter: “[These] are my stablecoin thinkers, who I get all my ideas from.”

They are:

Peter Johnson, Co-head of Brevan Howard Digital
Ameen Soleimani, Moloch Ventures, Spankchain
Anthony Lewis, Director at Temask, Author
Luca Prosperi, M^Zero Labs, Cherry Ventures
JP Koning, Moneyness
Manny Rincon-Cruz, Hoover Institution, Prometheus Research Labs
Austin Campbell, Zero Knowledge Consulting, Columbia Business School

Carter revealed the list on this morning’s episode of the Bankless podcast, which covered the bull case for stablecoins, comparing them to Eurodollars.

Despite the confusing name, Eurodollars are essentially just U.S. dollars deposited in foreign banks, whether in Europe or elsewhere. (Really, they should be called “Global” dollars.)

(And since they sit in foreign bank accounts, they might not actually be backed by U.S. dollars.)

Eurodollars emerged after World War II to facilitate international trade. Countries like Russia were worried that their dollars might be at risk of political retribution if they were deposited in the U.S. so instead deposited them in places like France.

Exchange controls implemented in the 1950s by the UK was another cited driver of Eurodollar development, according to the St. Louis Fed. (London became a key player in the Eurodollar market.)

All of this happened outside the purview of the Federal Reserve. Eventually, Eurodollars became systemically important to the global financial system, and the Fed did support its stability with swaps and liquidity.

Today, the market for U.S. dollars is exceeded many times by the market for Eurodollars and is one of the core backbones of international trade.

Based on Carter’s math, the size of today’s stablecoin market is basically Eurodollars of 1967.

Here’s Carter:

In ‘67, it wasn’t yet fully apparent that Euro dollars needed to be backstopped by the U.S. directly. So they were still kind of on the out and out. It was still the skepticism phase. So basically the cryptodollar (stablecoin) supply needs to grow, continue to grow, and then make the case to the U.S. that, hey, you should actually embrace this thing as opposed to harassing it.

As we mentioned last time, stablecoins now hold more U.S. Treasuries than Germany. Assuming that trend continues, the Fed will have to start thinking seriously about how to assimilate cryptodollars in a way that supports global U.S. dollar stability and access.

Relevant:

2. Nostr’s rise in China

It seems like a natural fit—a decentralized, censorship resistant social media protocol in one of the world’s most centralized, censorship heavy countries.

Here’s Matt Haldane, reporting on Nostr enthusiasts in mainland China:

“I think the most amazing thing about Nostr is you have one identity on all platforms,” said Sherry, a programmer and data analyst from the mainland who organises Hong Kong Nostr meet-ups. She asked to go only by her English first name, which is not associated with her day job.
“Basically you can transfer [between] all platforms with one identity. That actually blew my mind,” she added. “It’s like a decentralised app store. Just this app store is not controlled by Apple; it’s controlled by all developers.”

Of course, Damus, one of the more popular iOS Nostr clients was banned back in February.

That, however, didn’t stop mainland users from accessing the protocol:

The Damus ban in China also drove interest in the mainland, with the Damus relay, which was not blocked, being flooded with Chinese posts. Even if one relay is blocked, though, users can find another one that allows them to get through the country’s Great Firewall without a virtual private network.
“As long as you can post your note to one relay, there’s a great probability that they will help you rebroadcast to all relays,” Sherry said.

China was really the first country to nail the so-called superapp. WeChat has become the go-to operating system for all types of apps that power most Chinese people’s daily lives.

The promise of Nostr is that it can potentially deliver that functionality without the same issues of centralization and censorship.

Here’s Gareth Hayes, who introduced Sherry to Nostr, speaking with Haldane:

“Let’s say you build a Twitter kind of client. That interacts directly with the Instagram kind of client, and it can interact directly with a Spotify kind of client, where anyone can publish their music,” he said. “The networks combine together so there’s like a multiplier effect. It’s kind of like a super app.”
Perhaps the closest comparison today would be WeChat, the Chinese super app that Musk has suggested he wants X to emulate. While not concentrated in just one app, microblogging, long-form content, mobile payments (in bitcoin), classifieds, and live streaming are all capable over Nostr, with many of those features introduced just this year as usage spiked.
Unlike WeChat, however, it is very difficult for content to disappear from Nostr. Even when users want to delete their own posts, there is no guarantee those posts will be removed from all the Nostr relay servers to which they have been propagated. This is what drives much of the current support for Nostr, which is full of posts about seeking “freedom” from traditional social media, governments or anything else perceived to be violating the laissez-faire ethos.

Relevant:

3. FTX stuff

Also:

Ex-Celsius CEO Mashinsky’s Fraud Trial Set for September 2024

USBC

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