• Central banks controlling Stable coins
• Avalanche to mint stable coins
• Decentralized reserves
• Algorithmic stablecoins

Emin Gun Sirer got the community to respond to his question on how should stablecoins evolve so they can remain an integral part of this financial ecosystem?

Community response was mixed:  Stable coins are Ponzi Schemes; we want to move away from that Ponzi.  However, realistically there is a need for one stable coin to provide validity.

Some felt Central Banks should back stable Coins and that it would be better.  Others stated that Apple, Amazon, or Google could support it as they have huge balance sheets, but a central bank would be better.

Other community members stated that it would be tough to trust Central Banks.

The key is to implement AVAX as the blockchain digital currency of choice and not a replace FIAT. No point in creating a must-pick, rather complimentary to becoming the currency of Web 3.0.

Another solution pointed to how retail banks emit their stablecoin, which is similar to Gemini and Binance, and then further collaborate with DeFi protocols to create yield and stuff on it.

While there is a lot of appreciation and benefits to decentralization, the reality is that stable coins will eventually become regulated to become an integral part financial ecosystem at scale.

Someone pointed to how a typical stablecoin never achieved decentralization as their monetary policy was defined by a single entity, the Federal Reserve.

Some stated they liked to see some systemic risk due to the huge scale and that they would like to use the market price to establish trust and technical security for the stable coin.  Thus, providing for a basket of individual smaller stablecoins and more vibrant competition?

Others were talking about algorithmic stable coins and decentralized reserves.  For clarity, the stable algorithmic currency can keep its peg by using software and rules. If something like this would work, it will scale infinitely to whatever size the economy needs it. It also helps to balance the circulating supply of the asset. Dai is the commonly known decentralized stable coin.

Lisa Jy Tan, Founder of Economics Design, a crypto-economics research company, stated, “To create USDC, you need USD in the bank, and that works well if you’re just starting out.”

Decentralized reserves refer to the lack of centralized control over the funds.  Reserve is the flexible pool of stable coins designed to reduce risk through diversification and decentralized governance.

Users also appreciated what Terra did with their stablecoins to make them an integral part of their whole economy.

Some were wondering, is it really hard to have a 1:1 reserve with a currency or a basket of assets?

A novel idea expressed:  Create a stablecoin that isn’t pegged to fiat, but instead acts more like an ETF that follows the price of a basket of assets like bonds, stocks, real estate, and crypto. It would be a currency that is designed to be the perfect store of value.

Some good Samaritans stated, embrace and encourage regulation which requires publishing regular and complete audits of reserves. It isn’t that complicated.

We should be able to mint CBDCs directly on our preferred network (*Avalanche cough*) through Banks.

I think they should evolve towards complete decentralization; otherwise, their destiny is in the hands of Central Banks & regulators who probably do not want any competition or a new systemic risk factor.

Fehim Kaan, Avalanche Enthusiast:  It is my dream and Avalanche’s to use a decentralized world not only in finance but also in all areas it can reach. However, having to convert to fiat money somewhere in the business or using fiat money while buying reduces the excitement of the job.

I’m not a BTC maximalist, but I want the hegemony of fiat currencies to end. For stablecoins to be an integral part of this financial ecosystem, we first need to get more people to adopt crypto and create wallets that are easier to use by ordinary citizens.

In conclusion, evolution usually occurs by natural selection. A few mutations here and there.  It is for us to see which ones will survive in the changing (regulatory) environment. There are some distinct characteristics: pegged/un-pegged, centralized/decentralized, and linear combinations.