A new project for a stabilized cryptocurrency that would function ‘like normal money,’ has received backing from Peter Thiel, Coinbase, and 40 others.
A new project for a stabilized cryptocurrency that would function “like normal money,” has received backing from Peter Thiel, Coinbase, Distributed Global, GSR.IO and 40 others, according to a press release shared with Cointelegraph June 20.
The developmental-stage stable-value crypto project is dubbed “Reserve,” and closed a collective $5 mln seed round to develop a fully decentralized cryptocurrency that works “by locking up other cryptoassets in a smart contract in order to provide backing to the Reserve token and stabilize its price.”
According to Reserve co-founder Nevin Freeman, the seed funding was intentionally kept “small,” with the round focusing on partnership-building rather than amassing capital.
In response to a question from Cointelegraph, Freeman clarified what distinguishes the Reserve protocol from other stablecoin crypto projects, saying that:
"The key piece of the Reserve approach is to use cryptoassets from outside of our own ecosystem to maintain a peg, especially at the start. The problem with supporting a peg via cryptoassets that are all within a stablecoin's smart contracts is that loss in confidence in that particular stablecoin can spiral out of control. We've worked hard to make that as unlikely as we can."
Reserve considers that a price-stable cryptocurrency would offer a solution for countries where failing fiat currencies and high inflation rates jeopardize citizens’ savings.
While unpegged existing cryptocurrencies can already protect citizens from governments by being decentralized, their price volatility nonetheless limits them from serving most retail uses. In Freeman’s words:
“Put simply: nobody wants to spend a token that may be worth twice as much next month to buy a carton of milk, and nobody wants to store their savings in a token that may be worth nothing in a year.”
The project has notably sought an advising relationship with a financial services consultancy headed by a former Securities and Exchange Commission (SEC) Commissioner, that also includes former officials from the CFTC, Federal Reserve, OCC, and Treasury Department.
Earlier this month at MoneyConf Dublin, Circle CEO Jeremy Allaire made a strong case for stablecoins in a “tokenized global economy,” giving the example of debt obligations as a key use case that would require denomination in an asset with a less volatile price baseline.
Unlike Reserve, Circle’s focus is on fiat-stabilized coins - of which Tether (USDT) is the most famous, if controversial, example. Circle recently closed a $110 million fundraising round to partner with mining hardware manufacturer Bitmain on the development of its own US dollar-backed stable coin, reportedly to be released in summer.