Stablecoins pegged to the US Dollar face issues around centralization and security. In response, interest is growing in alternative stablecoins backed by other currencies.
For a long time, the most popular stablecoins, like Tether (USDT) and USD Coin (USDC), have been tied to the US Dollar. But these dollar-pegged coins aren’t perfect. Many rely on a single company to hold the actual dollars that back the digital coins.
This can lead to questions about how trustworthy and open they truly are. For example, some companies can even freeze funds or ban certain digital addresses, which feels a bit too “centralized” for a world that aims to be “decentralized.” Even popular decentralized stablecoins, like DAI, often depend on outside information sources called “oracles.” The problem? These oracles can sometimes be tricked, leading to big losses, as seen in the $182 million hack on Beanstalk Farms in 2022.
Because of these challenges, there’s a growing buzz around a new kind of stablecoin: ones that are tied to currencies other than the US Dollar. These “non-USD” stablecoins are gaining importance, driven by local economic needs, new regulations, and a desire for stability that matches different countries’ own money. If you live in Europe, you might prefer a stablecoin pegged to the Euro; in the Middle East, perhaps one tied to the UAE Dirham. This shift is making the stablecoin market more diverse and globally relevant.
One good example of a leader in this new wave of innovation is Frankencoin (ZCHF). Built on the Ethereum blockchain and is designed to track the value of the famous and highly stable Swiss Franc (CHF), Frankencoin aims to solve the problems of older stablecoins by being truly decentralized and transparent, letting users create their own Swiss Francs backed by collateral.
But Frankencoin isn’t the only player in this evolving space. Several other non-USD stablecoins are making their mark:
These examples clearly show a global trend toward stablecoins that are not tied to the US Dollar, driven by regional needs and a desire for more localized digital money. The stablecoin market is projected to reach an enormous $400 billion by the end of 2025, with daily payment volumes potentially hitting $300 billion, highlighting the huge growth in this area.
So, why are these new stablecoins so appealing? And why is a currency like the Swiss Franc such a great choice for a stablecoin peg? The Swiss Franc (CHF) is famous worldwide for its rock-solid stability. This comes from several key factors:
These qualities make the Swiss Franc a perfect blueprint for digital stability, naturally appealing to both traditional investors and the fast-growing stablecoin market.
Building on the inherent stability of the Swiss Franc, Frankencoin introduces a blockchain-based approach to stablecoin creation. Its design incorporates several features that differentiate it from many existing models:
Independent of External Oracles: Unlike numerous decentralized stablecoins, such as MakerDAO’s DAI, which rely on external “oracles” for real-world price data, Frankencoin aims for self-sufficiency. It uses a unique internal auction system to determine the value of collateral during liquidation events. This mechanism is designed to reduce the system’s vulnerability to oracle manipulation attacks and potentially allows for a wider variety of collateral types, provided they can be effectively valued through these auctions.
User-Driven Collateralized Minting: Similar to other collateralized stablecoin systems like MakerDAO or Liquity, Frankencoin enables users to generate new ZCHF by depositing various digital assets as collateral. This process, often termed “minting,” allows users to create their own stablecoins against their assets, rather than receiving a loan from a central entity. The entire minting process is automated and transparent on the Ethereum blockchain, with a small fee contributing to the system’s internal reserves.
Veto-Based Governance: Frankencoin’s governance system deviates from the common proposal-and-vote models seen in many other DeFi protocols. It primarily operates on a “veto” mechanism. Holders of Frankencoin Pool Shares (FPS) can, individually or by pooling resources, gain the power to block proposals if they collectively hold at least 2% of the voting power. This voting power is tied to both the amount of FPS held and the duration they’ve been held, encouraging long-term engagement and aiming to allow collective influence over the system’s evolution.
Multi-Layered Stability Mechanisms: Maintaining a stable peg is paramount for any stablecoin. Frankencoin addresses this through a multi-layered reserve system, akin to how many other collateralized stablecoins manage risk. These reserves include funds from individual users minting ZCHF and capital contributed by FPS holders, which acts similarly to a bank’s equity. This structure is intended to absorb potential losses and support Frankencoin’s soft peg to the Swiss Franc, even if the value of backing collateral experiences significant fluctuations.
The shift towards non-USD stablecoins is a clear sign that the cryptocurrency world is maturing and becoming more global. With projects like Frankencoin leading the way, offering innovative solutions that prioritize decentralization, transparency, and real-world stability, the future of digital money looks more diverse and resilient than ever. These new stablecoins are not just about digital payments; they are about empowering individuals and building a more robust financial system that reflects global economic needs.
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