A Comparison Between Stablecoins On RSK And Their Use Cases

Updated on: November 4th, 2021
This content has been Fact-Checked.

Cryptocurrencies, also known as crypto, are digital currencies that are utilized as a medium of exchange. However, with growing use cases and utility, they have seen a surge in popularity, with mainstream financial institutions, businesses, and individuals increasingly exploring cryptocurrencies. Although there are hundreds of cryptocurrencies, some major ones are Bitcoin, Litecoin, Ethereum, and several others. These cryptocurrencies have driven the growth of Decentralized Finance (DeFi), NFTs, and other digital assets.

We have also seen the rise of stablecoins, seeing increased usage and popularity due to their ability to protect investments from volatility in the crypto space. Stablecoins have also enabled the growth of CBDCs or Central Bank Digital Currencies, which governments are using to promote their digital currencies.

Introducing Stablecoins

Cryptocurrencies are notoriously volatile, which acts as a significant hindrance to their mainstream adoption. Stablecoins help individuals and businesses to benefit from digital currencies without being subject to their wild price swings. This is possible because stablecoins are pegged to fiat currency or a particular cryptocurrency. Stablecoins solve the problem of volatility, promoting quicker mainstream adoption.

Stablecoins are classified into two groups: Fiat-collateralized stablecoins and collateralized stablecoins.

Fiat-Collateralized Stablecoins – These stablecoins are pegged to traditional currencies such as USD, GBP, JPY, EUR. Some prominent FIAT Collateralized Stablecoins are USDT, GUSD and BUSD.

Cryptocurrency-Collateralized Stablecoins – These stablecoins are pegged to a particular cryptocurrency or a bunch of cryptocurrencies. An example of a cryptocurrency-collateralized stablecoin is RSK’s RDOC by RIF on Chain. This stablecoin uses the RIF token as collateral.

Advantages Of Stablecoins

Stablecoins have several advantages over highly volatile cryptocurrencies, apart from allowing individuals and businesses to take advantage of the low volatility generally associated with stablecoins. Let us look at some of them.

  • Stablecoins are economically viable – Stablecoins, when compared to the traditional method of payments such as credit cards, have significantly lower transaction costs. This is because traditional payment methods have several feels attached to them. These fees are often passed off as “transaction charges” or “processing fees.” These excess fees are often detrimental to small businesses that have to transfer these costs to the customer while also being expensive for individuals.
  • Fast transactions – Since stablecoins are essentially cryptocurrencies and are digital, all transactions conducted using stablecoins are generally completed almost instantly. This is made possible through the use of smart contracts.
  • No restrictions – Stablecoins can be used to transfer funds to any part of the world at any point in time. This is exceptionally useful for people who live in underbanked areas or those who do not have access to banking facilities or live in countries undergoing hyperinflation.

Stablecoins On RSK And Their Uses

RSK already has several stablecoins on its ecosystem apart from the RIF Dollar. Current stablecoins on the RSK ecosystem include DOC, Babelfish, RDAI stablecoin and the BRZ stablecoin.

Money on Chain (MOC), a bitcoin-collateralized DeFi protocol powered by RSK is one of the first major solutions to tap the premier cryptocurrency for DeFi. MOC is aimed toward investors looking for stability as well as profit-making potential associated with volatile currencies.

Having launched its mainnet in December 2019, the MOC protocol has been dishing out a wide array of decentralized financial products based on RSK’s blockchain. MOC aims to disrupt the fiat-dominated financial system which is unable to keep up with the dynamics of today’s business environment. To overcome the volatility problem, MOC offers a BTC-pegged stablecoin using a three-party system.

Dollar On Chain (DOC)

1) Dollar on Chain (DOC)

DOC is a USD-pegged token that also happens to be the first stablecoin backed by BTC. DOC is pegged to the USD 1:1 via a smart contract. The peg to the USD makes DOC ideal for risk-averse individuals who are not too keen on holding volatile currencies.

2) BPRO

BPRO is a token that would be more up the alley for risk-seeking holders. BPRO is a multi-utility token that offers a wide array of uses to its users, including absorbing the volatility from the DOC. BPRO essentially functions as a bridge that passes on the volatility risk associated with BTC on to the leveraged bitcoin operations exchange, thereby generating passive income for its holders. The multiple utilities of BPRO can be pointed as follows:

Volatility Absorber: BPRO absorbs DOC’s volatility and as compensation generates passive income for its holders.

Additional Leverage: BPRO receives free leverage from the DOC token holdersReceives Extra Fee: As an added incentive, BPRO holders receive fees paid by users of the MOC platform

3) The MOC Token

The MOC token is the MOC protocol governance token. This token serves the following purposes:

Governance Token: MOC token gives platform users the power to vote and veto the protocol updates

Discount Token: MOC token holders can get exclusive discounts while paying fees for using the platform services

Staking Token: MOC token holders can choose to stake MOC’s to generate platform fees and staking rewards

Incentive Token: MOC token holders can use the token to run MOC nodes and as an incentive to BPRO token holders

The RIF Dollar (RDOC)

The RDOC stablecoin is a stablecoin pegged 1:1 to the US Dollar. It is guaranteed by a smart contract that is powered by the RSK blockchain. The stablecoin is fully collateralized by RIF tokens, allowing users to access them directly without providing any collateral. This enables users to redeem their position on the RDOC stablecoin upon the expiry of the smart contract. Users can also partially redeem their position while the smart contract is still ongoing, depending on the liquidity of the RDOC tokens. The RDOC token has a unique issuance mechanism, as the stablecoins are minted only when there is one specific amount of RIFpro tokens staked on the platform. Users need not stake the RIFpro tokens themselves to mint RDOC, but RIFpro must be staked on the platform before any RDOC stablecoins are available.

Use Cases

RDOC can be classified as a crypto-collateralized stablecoin as it utilizes the RIF token as collateral. As such, the RIF Dollar has several use cases on the platform, as it allows token holders to access decentralized infrastructure services on RSK. Users can also transfer RDOC between each other and utilize it to purchase different products and services. RDOC’s most significant utility is that it allows users to use or purchase decentralized applications available on the RIF marketplace.

Features Of The RDOC Token

The RDOC token has several unique features, some of which are as follows

  • The RDOC token can be stored in any compatible hardware wallet.
  • When minting RDOC, users are not required to provide any collateral.
  • The RDOC token can be redeemed by users every 30 days in exchange for RIF tokens.
  • Users can use the RDOC stablecoin to purchase services or dApps from the RIF marketplace.

Babelfish

Babelfish is a cross-chain stablecoin protocol that has been launched on the RSK network. Babelfish has been lauded as one of the key factors that are behind the explosive growth of DeFi. Babelfish’s parent company has deployed several stablecoins, significantly improving the use of crypto dollars on different decentralized applications. The deployment of Babelfish on RSK will help attract greater liquidity to the network while also facilitating a 1:1 exchange between stablecoins.

Keeping in mind the unprecedented growth of DeFi, Babelfish has a critical role as a stablecoin gateway on RSK. Babelfish’s primary objective is to stay true to the ethos behind blockchain technology while improving upon multi-chain flow and aggregate stablecoins to offer deeper liquidity. Babelfish combines scalability, a stablecoin filter, a DAO and cross-chain navigation. The protocol’s native token is the $FISH token, which allows users to participate in the governance of the Babelfish DAO.

Babelfish Use Cases

Babelfish acts as a translator between different USD-backed stablecoins, with its primary function being that of an enabler that allows stablecoin exchange at a fixed 1:1 ratio across different chains. It acts as a decentralized aggregator and distributor of different stablecoins. The stablecoins also allow Babelfish to earn yields and then re-invest those yields in a community-owned Bitcoin pool. Users in Babelfish can vote on the direction of the project by utilizing $FISH tokens. The $FISH token allows users to vote on DAO proposals based on how long the tokens have been staked for.

Babelfish combines liquidity from several issuers and has become the largest stablecoin on RSK, with XUSD getting over $10 million in deposits within just two months of going live. The stablecoin’s growth is linked with Sovryn, one of the most popular projects on RSK and the first project to integrate XUSD into its bridge.

RDAI

The DAI stablecoin’s integration on RSK enables developers to improve the current DeFi services on the network. It enables decentralized applications on RSK to connect with the Ethereum blockchain, allowing developers to leverage RSK, MakerDAO, the Bitcoin ecosystem, and the RIF token, increasing the demand for applications without depending on the prevailing fees.

On RSK, DAI tokens are known as rDAI. Users can access these tokens through the Token Bridge dApp and Defiant wallet..

The BRZ Stablecoin

The BRZ is the first stablecoin from Brazil currently in circulation and is backed by the Brazilian Real. Among global fiat currencies, the Brazilian real is one of the largest, and it is the largest fiat currency in South America. BRZ is also the world’s first stablecoin pegged to a fiat currency outside of the US Dollar or the Euro. It is available on several platforms, functioning as a bridge between investors, the blockchain space, and DeFi. The BRZ stablecoin allows investors in Brazil to not rely on stablecoins backed by a foreign currency. It will also enable citizens of Brazil to directly invest in foreign exchanges and trade using a stablecoin pegged to the Brazilian Real.

Key Features Of The BRZ Stablecoin

  • Stability – The BRZ stablecoin offers high stability, which market agents pursue based on the BRZ reserves held by market managers.
  • Fully backed – BRZ is always fully backed, with reserve managers ensuring full reserves.
  • BRZ is multi-chain – The BRZ stablecoin supports multiple blockchains, as it is built on Algorand, Ethereum, and Solana
  • High security – Parsiq verifies all crypto transactions done using BRZ.
  • Transparency – All new tokens issued, and a reputable third-party audit firm verifies underlying reserves.
  • Global – The BRZ token has global acceptance, allowing the stablecoin to be traded on multiple platforms across the globe.

BRZ Stablecoin Use Cases

The BRZ stablecoin has several use cases, some of which are mentioned below.

  • Users can access international platforms – Brazilian citizens using the BRZ Stablecoin can access global crypto markets without being exposed to Bitcoin or other highly volatile cryptocurrencies.
  • Access to the Brazilian market – Platforms and international crypto exchanges wanting access to the Brazilian market can now do so, thanks to a frictionless solution that allows them to build a customer base seamlessly.
  • Trade – Users of the stablecoin will be able to trade at any time they wish.
  • Hedge – International investors can now hedge their holdings directly in Brazilian Real.

BRZ is also part of the Stablecoin Alliance, an alliance of BRZ and four other stablecoins looking to accelerate the adoption of stablecoins across the globe. BRZ’s integration on RSK will give BRZ stablecoin holders access to lower gas fees, along with better security. The RSK integration will also enable the deployment of the BRZ token on other DeFi projects.

Conclusion

The stablecoins on RSK will allow users to access one of the most efficient DeFi solutions the market offers. RSK is the first Bitcoin sidechain that offers Turing-complete smart contracts, further secured through Bitcoin mining.

RSK is at the forefront of the effort to push stablecoins on bitcoin into mainstream offering an impressive array of options.

Andrew Zapotochny
CEO at BlockGeeks

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