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All about stablecoins and Lugh, the first French digital asset

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What are stablecoins?

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Literally, stablecoins are digital assets that are stable in value, and often of the same value as a national currency, primarily the dollar.
When the first Bitcoin exchange platforms appeared a decade ago, their users quickly appreciated the freedom that peer-to-peer transactions offer: no trusted third party between sender and receiver, near-instantaneous transactions, no permission required on a free network: the Bitcoin blockchain.
The ease with which it was possible to move one’s digital assets between two platforms to take advantage of arbitrage opportunities immediately highlighted the limitations of bank transfers, whether national or international: 2 days to 1 week waiting time, lack of transparency in costs, not to mention the recurrent blocking of funds for often illegitimate reasons.
The question to solve: how to create dollars on a blockchain with the same properties as other crypto-currencies? And how to give them value?
So the simplest answer was to create tokens with underlying dollar reserves.
For each dollar held in a bank account, the issuer could create a “Crypto dollar” and therefore a token on its Blockchain. Provided that the issuer is trusted, this solution is relatively easy to implement.
Stablecoins were first founded on the Bitcoin Blockchain back in 2012, but the emergence of the Ethereum Blockchain really popularized them. Within a few years, 90% of crypto-currency trading is done against dollar stablecoins, the largest of which are USDT (Tether: $50 billion in capitalization and over $90 billion in daily trading) and USDC.
So the dollar now represents only a tiny fraction of the trade on the crypto markets.
In addition to the advantages of speed and security of Stablecoin exchanges for users, there is also the advantage of account maintenance for platforms. Many platforms no longer accept dollars and no longer require bank accounts for their operations.
A profound trend is beginning to emerge: by developing solutions based on Stablecoins, companies and users are building increasingly decentralized services, attempting to break free from banking dependencies.
The major international payment networks are not mistaken: the most visionary are multiplying agreements and strategic acquisitions in this universe, while some historical players are still very reluctant.
So-called “centralized” stablecoins such as USDT or Lugh (Stablecoin Euro) dominate their market, but decentralized initiatives have emerged to address the thorny issue of the underlying banking component differently. In the case of decentralized Stablecoins, the underlying component, often composed of other crypto-currencies, is subject to sophisticated automatic mechanisms to guarantee the value of the collateral.

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What applications?

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As we have just seen, the first application of Stablecoins is intimately related to crypto-currencies and its benefits touch on account keeping and transferability, as well as some advantages of tax simplicity.
Beyond this exchange market, several payment areas will be strongly impacted by Stablecoins.
Let’s start with all the activities related to “tokenization”: to put it simply, on a blockchain, we can tokenize an asset, and program its management rules through smart contracts. This can be the case for financial products, but also for digital assets such as NFT (Non Fungible Token).
In both cases, these digital assets are exchanged on the blockchain on which they are issued. But the counterpart of this exchange, the payment, must take place in a blockchain currency to be publicly and irrevocably recorded in the distributed ledger. And this currency would be advantageously denominated in Euro or dollar rather than in a volatile crypto-currency.
This is how stablecoins will enable the processing of the “cash leg” and thus automate and finalize the whole process on the Blockchain.
In line with this internal payment application for decentralized applications, stablecoins are massively used in decentralized finance (DeFi) applications. Without going into the details of DeFi’s technically sophisticated systems, its primary concept is to create stablecoin or crypto-currency lending and borrowing services, automatically managing collateral and margin call or liquidation mechanisms to ensure system stability and liquidity. DeFi thus allows borrowing or lending money without a banking organization, trusting algorithms.
We could also talk about Diem (Facebook’s Ex-Libra), Amazon’s emerging initiatives, the integration of USDC into VISA’s clearing mechanisms, but I invite you to take a closer look at Casino’s great initiative that is paving the way for the development of the first trusted Euro Stablecoin, whose use will extend from the crypto-currency market to retail uses.
It is in this context of monetary and payment innovation that governments have mobilized to try to provide a public response to all these private initiatives. Two main trends are emerging: “interbank” Central Bank Digital Currencies and retail CBDCs. On the one hand, interbank CBDCs are entering Swift’s field, while retail MNBCs are competing directly with the “bank” Euros that everyone has in their bank account, with a thorny question with systemic stakes: should we have more confidence in a digital Euro issued by a Central Bank or in a traditional bank Euro?

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What are the benefits of electronic payment?

[/et_pb_text][et_pb_text _builder_version=”4.6.6″ _module_preset=”default”]The biggest difference of a blockchain/crypto/stablecoin payment compared to legacy systems is the direction of the flows. All legacy payment systems are based on direct debit, or an authorization to debit. A Blockchain payment is a direct shipment from the payer to the payee, similar to a cash payment. There is no third party involved in the transaction. In fact, the integration is much simpler and many data can be added to the payment flow. As the electronic signature is the key to a blockchain payment, the same key will allow to certify information related to identity, loyalty or any other attribute of the payment. Thanks to the evolution of blockchains, in particular with the rise of “layer 2″ of most of them, micro-payment applications will be able to become widespread by benefiting from painless transaction costs, opening the way to streaming payments, for example. For a user of a service, the payment of this service can be opened and closed at any time without the risk of abusive debit. The pace of development in the world of blockchains and crypto-currencies is particularly fast: the customer experience, innovations in usage, but also security and consumer protection will be challenged by these new decentralized technical infrastructures: the upheavals seem inevitable![/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row _builder_version=”4.6.6″ _module_preset=”default”][et_pb_column type=”4_4″ _builder_version=”4.6.6″ _module_preset=”default”][et_pb_text _builder_version=”4.6.6″ _module_preset=”default”]

Sceme in all this?

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Sceme was founded in mid-2020 with the belief that these new digital assets would quickly make their way into many payment-related applications.
Sceme is therefore developing an infrastructure dedicated to the issuance and management of digital assets. The company is the technical partner of Lugh/Casino for the issuance of Lugh. We are developing our offer to allow our customers to launch their own stablecoins, and also to build innovative payment solutions.
Sceme’s SaaS platform now enables the launch and management of tokenization and payment projects, as well as NFT exchanges.

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Want to know more about Sceme?

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