Home Coins Bytom (BTM) (Community Article) An improved innovative way to look at Stablecoins — MOV...

(Community Article) An improved innovative way to look at Stablecoins — MOV | by BYTOM BLOCKCHAIN | Sep, 2020


The popularity and utility of stablecoins is on the rise. They have evolved from being just price-stable store of value to becoming a key element for DeFi. DeFi, or Decentralised Finance, is in turn rapidly innovating to build powerful new use cases. The whole ecosystem is booming.

However, there is no stablecoin project currently that is built specifically for DeFi at an infrastructure level. Most stablecoin projects and DeFi projects are isolated stand alone applications. This is the key gap that MOV fills that could turn out to be a game-changer. This will significantly improve the user experience through a single interface to interact with multiple projects, integrated cross-chain use cases, almost zero transaction fees and reduced exposure to price instability risk.

Current stablecoin & DeFi projects lack an integrated ecosystem

Since the launch of tether (USDT) in 2014, stablecoins have come a long way. They are collectively worth over USD 11 billion currently. Moreover, several major leading global firms are getting on board such as Facebook with Libra and JPMorgan with JPM coin. They are now more than just an asset to avoid the notorious cryptocurrency price volatility. Stablecoins, along with decentralised finance protocols and products, are putting together the foundations of the future of global financial systems.

However, most current stablecoin projects are not designed for being the infrastructure of this global decentralised financial system. They are stand alone projects at application level, designed for currency issuance or participating in the lending market. They are also built for a single blockchain. They have their own token economic models designed to protect the interests of their own users. Moreover, the plethora of DeFi projects mushrooming these days are also separately designed for their own use case and single chain applications. These projects are created by separate parties with a lack of standard consistent frameworks and incentive models.

This isolation of communities, contrasting economic models, and different blockchain infrastructure means that they can only gather participants and liquidity facilities within their own sphere of influence. This makes it impossible to build a comprehensive multi-asset value exchange market. DeFi will have to switch to “off-chain expansion” sooner or later. Thus, there is a dire need for an integrated stablecoin and DeFi ecosystem built at the infrastructure level.

MOV is a stablecoin infrastructure built for DeFi

MOV isn’t just a stablecoin. It isn’t just an application built with a stability mechanism to attract lending use cases. It was built and designed from scratch for the complete DeFi ecological architecture and development blueprint. MOV is more about building a liquidity infrastructure than a single application scenario. MOV is designed to standardize the three key DeFi protocols of trading, lending, and synthetic assets to avoid conflicts between projects and inconsistent standards. It offers a cross-chain value exchange protocol that brings together multiple chains, projects, assets, and protocols. The vision is to become a bridge and messenger for cooperation and interaction between ecosystems on different blockchains.

By building an integrated cross-chain infrastructure, MOV will enable the different stablecoins, crypto assets, protocols and products to seamlessly interact with one another. This multilateral trade essentially eliminates barriers between these parties, reduces friction costs, creates standardized common rules, constructs a common multilateral clearing system, and allows a unified response to common crisis. MOV isn’t a competitor to existing DeFi and stablecoin projects, but a unifier for the whole ecosystem.

Thus, the MOV ecosystem will allow multiple system roles to participants such as Loaner, Lender, Third Party Clearing Arbitrage, Third-party oracle to connect on-chain & off-chain, Creditors, Market maker, Dapp developers, Lending Pools, and entrepreneurs to actively and conveniently participate in the entire MOV financial system. The economic model and design philosophy of MOV stablecoin takes into account the roles and incentives of all these direct and indirect participants.

Integrated stablecoin ecosystem vs isolated stablecoin application

The integrated collaborative economic models of MOV provide multiple advantages for a better user experience. Three key benefits that MOV provides are:

Single place to leverage multiple DeFi use cases

Currently, there are multiple exciting DeFi projects on ethereum. Some are built on other chains. But a user needs to interact with each of them separately. Buying stablecoins is a separate task, while utilising these stablecoins for each DeFi project has its own set of complicated steps. As the DeFi gains popularity among the non-DeFi savvy crowd, they would need a simpler experience. They don’t want to spend hours understanding how to use every single product. Thus, one place from where they can interact with multiple projects on different chains will be a major factor to push DeFi adoption.

Lower gas fees

It is no longer a secret that exorbitantly high gas fees on Ethereum are crippling DeFi’s growth. Almost no one will want to use DeFi projects apart from speculative trades if this carries on. Paying $20–30 transaction fee and then waiting 30 seconds for a single transaction is just bad UX for any financial product, decentralised or not.

The GAS fee on MOV is almost zero. The Layer 2 consensus incentive on MOV is designed such that the Bytom foundation pays all the consensus nodes, which is equivalent to the foundation paying the gas fee. So the transaction cost is almost zero. Thus, lower costs on interacting with DeFi projects is a major competitive advantage for MOV.

Reduced risk exposure

All stablecoin mechanisms have to find ways to mitigate risks. Their price is stable in theory, but in reality can be destabilised in multiple cases. For example, the digital asset that is used as collateral can fluctuate rapidly. There can be hacks and blackswan events. Thus, depending on a single digital asset as collateral puts too much dependency on that asset’s stability. The risk of the stablecoin is directly correlated to the risk of that asset such as ETH.

MOV’s system of multiple digital assets as collateral diversifies this risk. The collateral framework reduces MOV’s risk by reducing the dependency on a single asset. Currently, the system is backed by four major high-value assets — BTC, ETH, USDT and BTM. These are mostly uncorrelated assets with different liquidity risks and market risks. Thus, the overall risk of the MOV system is significantly reduced. Moreover, other stablecoin projects rely on their application level mechanisms to mitigate risk whereas MOV has the protection of the entire Bytom infrastructure.

MOV will push stablecoin & DeFi adoption

MOV is a next-generation decentralized cross-chain Layer 2 value exchange protocol based on Bytom’s mainchain-sidechain architecture. It provides an open ecosystem to empower multiple projects across different chains to collaborate. This will help create a new global financial system that will rapidly push the adoption of DeFi and stablecoins.

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