Deposit Accounts vs Deposit Tokens vs Stablecoins- Do we need blockchain-based money?

Embedded within the Bitcoin genesis block is the headline, “Chancellor on Brink of Second Bailout for Banks”. It is meant to indicate a failure of the traditional financial system.

When you get into Crypto, you’re told this story where Crypto is the protagonist of a David vs Goliath cause. While endless printing by Central Banks is debasing the currency, BTC issuance will stop at 21 million ensuring scarcity and hence helping it retain value. It is worth though to look back at history and understand why the payment system has evolved the way it has.

After such an analysis my conclusion is that a payment system like Bitcoin has some elements of “fairness” and “transparency”, however, it may not be well-suited for a global economic apparatus that requires elasticity. There could be an argument for Bitcoin where it is held as a reserve by Central Banks instead of gold, but I digress.

Bitcoin was the first of a wave of cryptocurrencies. These cryptocurrencies were very volatile and there was a need for a non-volatile cryptocurrency that would retain value against fiat currencies. This led to the innovation known as Stablecoins. A well-designed stablecoin, issued by a regulated entity, with the right risk controls can potentially solve for volatility, but that may not be a sufficient foundation on which to build a global payment system. A global payment system requires elasticity, which is provided by Bank Deposits.

Bank deposits are a key component in enabling the traditional financial infrastructure. We believe that they too can benefit from blockchain technology. Recording or representing bank deposits on blockchain, affords them multiple benefits otherwise attributed to cryptocurrencies. This can include 24/7/365 real-time transfers, the use of smart contracts, atomic settlements, and the ability to use fiat funds in public blockchain infrastructure, and Defi platforms.

I will not only give an introduction to traditional deposit accounts and what problems they solve, but also how they are evolving with the help of blockchain technology and why they may have a leg up versus stablecoins.