Cryptocurrencies are still in the early stages of real-world application in the US and other advanced economies. But the adoption of Bitcoin, Litecoin, Monero and the rest is in many ways further advanced in economies where the native fiat currencies are proving unreliable or unstable as a means of exchange. In Venezuela, for example, hyperinflation means the bolivar could see a 13,000% rate of inflation this year. The country’s minimum wage has recently tripled, but still residents are often unable to buy even the basics. The currency has all but completely broken down, driving real-world cryptocurrency adoption.
Such a scenario is just one of the motivations of a major new cryptocurrency. “Reserve”, in its early developmental stages, aims to “function like normal money”, and has an array of high-profile backers including Coinbase, Peter Thiel and others. The currency will function as a stable coin, but unlike the most widely adopted Tether, its price will be determined “by locking up other cryptoassets in a smart contract in order to provide backing and stabilize its price.” It is hoped that this unique business model will enable the currency to develop far wider reach than existing stable coins.
CEO Nevin Freeman argues that the current crypto-climate is missing many of the key components of a functional, usable currency, and that Reserve will grow to form a vital part of the ecosystem. Price stability, Freeman argues, is crucial for digital currencies to have true utility, and this is one of the central tenets of the business model. When prices are so volatile, the incentive is to trade or hold, not to use in real-world applications.
It remains to be be seen what impact Reserve’s novel business model can have on the crypto space. But as the price of all major digital currencies continues to tumble, and market cap drops towards the $250 billion mark, any contribution to stabilise the crypto markets is welcome.
