The recent article by professor of Economics at University of California, Barry Eichengreen titled The Stable Coin Myth, deserves a critical reader’s attention. The arguments he uses to dismiss the stable coin concept as nonviable present an opportunity to see X8Currency from yet another perspective.

Eichengreen warns the reader that the promises stable coins bring to us – store of value, means of payment, unit of account – are appealing to everyone aware of the wild fluctuations of cryptocurrencies: however, these promises are deceptive.

We have already published a rather comprehensive analysis and comparison of stable coins in our blog. Whereas we tried to devise a unique classification of stable coins, professor Eichengreen understandably opted for a more commonly used one, dividing coins into three groups based on the type of backing. The groups he uses are: fully collateralized coins, partly collateralized coins and coins with no collateral.



The first group of stable coins requires the full backing by a fiat currency or an asset. Examples are Tether, TrueUSD or more recently Gemini and Paxos. Eichengreen points out it is not certain whether a holder of USDT can really convert his coin to USD. He then asks a more relevant question: Why should someone want to exchange a most liquid and widely accepted fiat currency for something that claims to retain the value, is more difficult to handle and of uncertain future? His answer is, that the appeal lies in tax evasion and money laundering. In my opinion this point is strong. Do we really need a mirror of USD on blockchain? Especially if, as the trend is suggesting, it will become increasingly easier to execute a frictionless transaction between coins and fiat? What is the added value here? If you can exit from crypto to fiat as fast and easily as from crypto to stable crypto, which should you choose? Arbitrage comes to mind, which would ironically make stable cryptos that have a greater fluctuation more attractive than other, more stable cryptos.

While 100%-backed stable coins should have, at least in theory, no problem keeping their peg, this cannot be stated for the second group of partially collateralized coins. Banks relying on a fractional reserve system can, as recent history shows, count on support from central banks via bail outs. But these stable coins need their platform to purchase coins, using their reserves to maintain the peg. And this is, of course, a game of limited duration and usually won by speculators helped by panicked investors.

The third group of stable coins are those without collateral. Such a system offers bonds to buyers at a discount, and can potentially accrue interest. This growth is based on the assumption that more coins will be released in the future. This system is dependent on the belief of the participants that the price of the coin will eventually return to the desired range. It is not unlikely, as professor Eichengreen writes, that the situation arises where there is no value low enough to make investors buy the bonds. Loss of faith is thus the end of such systems.

Another aspect common to a lot of the above-mentioned coins is that they target parity with the USD, which in essence offers a user several ways to mimic the USD value on the blockchain. The simplest way is a 1:1 peg, but there are other, more roundabout ways trying to avoid centralization through an interplay of two or more coins.


X8Currency is a 100% backed coin whose funds are diversified between 8 major fiat currencies and gold coins. AI incrementally shifts value between these assets to preserve value and fight inflation. There is no peg involved and the coin provides a unique unit of value preservation to its holder. It targets greater stability than major currencies which themselves have volatile exchange rates and present unique incentive to exchange fiat for crypto in order to avoid loss of value and not vice versa.

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David Prezelj
David Prezelj

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