The discovery of blockchain technology and the resultant cryptocurrencies ushered in new payment and investment systems. Also, the inception of cryptocurrencies resulted in new business models. However, blockchain and crypto experts should solve cryptocurrency volatility to create a sustainable virtual economy.
The challenge of the volatility of cryptocurrency is inherent in the protocols of many dApps. Most existing dApps lack a crucial requirement for the successful creation of stable digital assets that interconnect the virtual world of cryptocurrencies and fiat money’s physical world. Usually, the high exchange rate volatility between cryptocurrencies and fiat money hinders people from using cryptocurrencies every day. Because of this volatility, users cannot use cryptocurrencies to pay for goods and services such as coffee, bread, and soft drinks as they do with fiat money.
The volatility of cryptocurrencies makes it impossible for people to perform the core functions of money, such as being a unit of account, a store of value, and a medium of exchange. Because of cryptocurrency volatility, people mostly use them for speculative purposes. This means that people buy and sell cryptocurrencies to make a profit. Therefore, a fully-fledged blockchain economy will exist when dApps can create stable cryptocurrencies which perform the same core functions as fiat currency. As noted earlier on, fiat currency’s core functions are; being unit of account, medium of exchange, and store of value.
With their ability to function across geographical boundaries, if cryptocurrencies achieve similar core functions as fiat money, a real blockchain economy will exist. Meter aims to create a stateless financial system that ushers in an actual cryptocurrency economy, being the vision of Satoshi Nakamoto when he invented the bitcoin. Therefore, the protocol of Meter has the inherent capacity to develop stable cryptocurrencies that maintain the core functions of fiat money.
Why Meter is Better Money
Meter has created its cryptocurrency called Meter (MTR), which is stable and can perform the core functions of fiat currencies. However, the protocol of Meter does more than create its stable cryptocurrency, as other dApp developers can use this protocol to come up with their stable cryptocurrencies.
To understand the value which Meter brings to the blockchain ecosystem, we need to analyze the weaknesses of the current stable coins, such as Tether, MakerDao, and mStable, among others. The existing stable coins have several weaknesses, which deter them from functioning in the same way as fiat money. First, collaterals such as the United States dollar, Ethereum, or bitcoin back most stable coins. This means that without these underlying assets, their exchange rate becomes volatile. More so, if the underlying collateral cryptocurrency becomes volatile, the stable coins lose their stability.
Some developers use bonds to create stability for their coins. To maintain such stability, stakeholders trade these bonds. However, it is tough to remove the excess coins from the market at times, resulting in volatility. Above that, this system inhibits the free flow of capital in the economy.
Meter has created its stable coin (mtr), which connects the virtual world economy and the real-world economy. It is the different fiat currency transactions that represent the real-world economy. It is encouraging that the stable coins that Meter’s protocol creates perform the same core functions as fiat money. Also, other developers can use the protocol of Meter to create cryptocurrencies that relate the value of the physical world to that of the virtual world, enabling them to store value, act as a medium of exchange and unit of account.
How Meter Works
First, Meter has a hybrid protocol of proof-of-work and Proof-of-Stake, called Proof-of-Value. With it, the physical world’s computing power feeds into the virtual world, creating a stable value of cryptocurrencies. Meter uses the production cost and the arbitraging behaviors of miners to establish stable coins’ market price.
The data which the proof-of-work produces determines the market price of the cryptocurrency (Meter). The protocol of Meter gathers this data from the physical world or transactions in fiat currencies that take place. Therefore, the connection between fiat currency transactions and digital assets’ value creates stability for stable coins.
Thus, the value of stable coin expands or contracts in response to changes in crypto economy regarding the number of dApps and changes in their operations. Meter also uses a reserve that absorbs any shocks leading to the stability of the cryptocurrency. When the need arises, this reserve attracts currency holders to mine Meter’s liquidity (MTR).
As we have discussed, the mission of Meter is to create a stateless financial infrastructure that enhances the development of a blockchain-based economy. It aims to implement the original vision of Satoshi Nakamoto, that of a completely decentralized financial system.
To achieve this vision, the protocol of Meter creates a stable coin that performs the key functions of money- being a unit of account, a store of value, and a medium of exchange.