Equilibrium team on the EOS Podcast: Discussing the future of stablecoins

May 15, 2019
Equilibrium team on the EOS Podcast: Discussing the future of stablecoins

We were excited to join Brandon Parker on this week's episode of the EOS Podcast. On air was our CEO Alex Melikhov alongside our Chief Counsel Josh Goodbody and Tomas Berthani, founder of Oraclize (now called Provable), Equilibrium’s partner and oracle service provider.

The hour-long and exciting discussion revolved around stablecoins, their use cases, current and future events that affect them. A lot of attention was paid to the Equilibrium framework, a topic our team elaborated on in detail, touching upon the topics of its USD pegging, supply and demand mechanism, transparency, legal implications and its governance system in the context of the crypto market overall and EOS ecosystem in particular.

Lessons learned from other stablecoins

Alex started by describing the current situation with the EOS DApps ecosystem to provide some context for the discussion. As he pointed out, the market has recently seen an influx of new and exciting decentralized applications and tools being developed for EOS blockchain, mostly, but not exclusively, focusing on the financial sector. One of the factors impeding the adoption of decentralized finance applications is the lack of transparency, which many of stablecoins so far fail to overcome.

Alex Melikhov underlined the transparency as one of the key advantages of the Equilibrium framework:

“EOSDT is a decentralized stablecoin, so you can always inspect how many assets are backing the whole supply of stablecoins. Compared to other stablecoin models which are criticized for their non-transparency, where stablecoins are backed by physical assets sitting in some secret accounts, decentralized stablecoins are a really exciting asset class coming to the market. You can be sure that at every moment every single stablecoin is backed by an asset settled in the smart contract“.

Transparency and compliance

Transparency, one of the factors that has contributed immensely to the early success of Equilibrium framework that has seen over 3 million EOSDT generated to date, is a double-edged sword. On the one hand, it makes the platform easily auditable, with all balances and positions clearly visible on the blockchain, while on the other hand reducing the very need for regulatory involvement and scrutiny.

Josh Goodbody, our Legal Counsel, pointed out that Equilibrium is uniquely positioned to be a fully-compliant platform in today’s times of evolving regulations:

“Entering the market at this moment of time we have been quite fortunate to learn a lot of the hard lessons that other similar projects have had to learn. Those lessons can be structural, transparency being right up there at the top of the list, they can be regulatory i.e. what not to do in terms of creating a stablecoin that may or may not have regulatory triggers attached to it. We have been able to take the best that we’ve seen on the market in terms of various approaches, different strategies, and learn from the difficult lessons that other stablecoin issuers and frameworks have suffered from.”

Stability ensured by technology

Digging deeper into the technical aspects of the Equilibrium platform, Alex described the principles of USD pegging mechanisms governed by smart contracts, the role of arbitrators in maintaining the supply-demand balance and liquidation of undercollateralized positions.

Alex described in detail the USD peg maintaining mechanism and introduced the incentives for arbitrators, who will be able to liquidate positions below critical level of collateralization. At this point Tomas Berthani stepped in and explained how Oraclize (Provable) service helps the Equilibrium smart contracts work properly by feeding them accurate and timely market data. Blockchain applications by their nature can’t receive real-world data, and so it’s critical that correct, authentic data is pushed to blockchain without being tampered with.

Alex Melikhov has recapped the progress of Equilibrium since the mainnet launch, highlighting such achievements as EOS Lynx wallet integration, HitBTC and decentralized exchanges’ listing of EOSDT and NUT tokens.

Token distribution plans

Unveiling the plans for the near future, Alex announced a major smart contracts update that will introduce the voting functionality for NUT token owners, who will govern the platform as a community, affecting its key decisions (e.g. voting for the block producers to stake a portion of overcollateralized EOS with).

NUT tokens will play an important role in the Equilibrium framework and will also be required to pay accrued fees and liquidated collateral partial buyout. As mentioned by Josh, the NUT tokens are already available on the secondary market, which are the primary means of public token distribution at this time. The company is selective about potential large stakeholders interested in the long-term future of the ecosystem, and so private sale allocations will be subject to a lockup and exclusion from voting for its period. Unsold tokens remaining for the time being with Equilibrium are, naturally, also excluded from the voting.

Wrapping up the podcast, the participants shared their insights about the future of the blockchain and decentralized finance markets and noticed certain positive tendencies. The public perception of the word “decentralized” is evolving from “untested, unsafe” to “secure and transparent”, and thus the DeFi applications such as Equilibrium are gaining more traction and are incrementally getting closer to mass adoption.

Watch the full video here:https://www.youtube.com/watch?v=FWJsv8exuwk&t=3s