Stablecoins and Digital Payments

Original slide files are available in the local preview. Public distribution is pending source-material review.

What we covered

Introduced USDC, USDT, and DAI as examples of digital currencies designed to track a target value.
Compared ways stablecoins are backed and why they can lose their price peg.
Discussed how stablecoins could be used for payments across borders.
Practiced receiving USDC in Coinbase Wallet, with an optional exercise exchanging it for cbBTC.

Optional review questions

Choose an answer to review the meeting material. This quiz checks the presentation’s answer key, not current market knowledge. Historical or ambiguous answers carry notes. Responses are not saved.

1. What is the primary purpose of a stablecoin?To generate high returns through price volatilityTo maintain a stable value pegged to an assetTo function as a proof-of-stake cryptocurrencyTo replace central bank digital currencies (CBDCs)

Source: Question: slide 6; answer: slide 7

2. Which of the following is an example of a fiat-backed stablecoin?BitcoinEthereumTether (USDT)Polkadot

Source: Question: slide 8; answer: slide 9

3. How do algorithmic stablecoins maintain their value?By holding physical assets in reserveThrough supply and demand mechanisms managed by smart contractsBy being pegged to commodities like goldThrough manual intervention by developers

Source: Question: slide 10; answer: slide 11

4. What asset is commonly used as a peg for stablecoins?OilFiat currency like USD or EURCompany stockCryptocurrency mining rewards

Source: Question: slide 12; answer: slide 13

5. What is the key difference between fiat-backed and crypto-collateralized stablecoins?Fiat-backed stablecoins use government-issued currency as reserves, while crypto-collateralized stablecoins use other cryptocurrencies as collateral.Fiat-backed stablecoins are decentralized, while crypto-collateralized ones are centralized.Fiat-backed stablecoins are not regulated, while crypto-collateralized ones are.Fiat-backed stablecoins are backed by gold, while crypto-collateralized ones are backed by fiat currency.

Source: Question: slide 14; answer: slide 15

6. Which of the following is a risk associated with stablecoins?Lack of blockchain technologyVolatility in valueInsufficient reserves to maintain the pegHigh transaction fees

Source: Question: slide 16; answer: slide 17

7. What is the role of a reserve in fiat-backed stablecoins?To ensure profitability for the issuerTo maintain the stablecoin's value by backing it with equivalent assetsTo eliminate the need for external auditsTo reduce transaction times

Source: Question: slide 18; answer: slide 19

8. Which stablecoin uses a decentralized governance model and is backed by crypto assets?USD Coin (USDC)Tether (USDT)DAIBinance USD (BUSD)

Source: Question: slide 20; answer: slide 21

9. What is the primary benefit of using stablecoins for cross-border payments?Enhanced privacy compared to traditional cryptocurrenciesReduced transaction fees and faster settlement times compared to traditional methodsGreater price volatility for higher profitsIncreased government oversight and regulation

Source: Question: slide 22; answer: slide 23

10. Which type of stablecoin is most likely to experience a "death spiral" during market instability?Fiat-backed stablecoinsCrypto-collateralized stablecoinsAlgorithmic stablecoinsCommodity-backed stablecoins

Source: Question: slide 24; answer: slide 25