Earlier this month, the Universal Protocol Alliance announced a new dollar-backed stablecoin in an increasingly crowded – and, at times, controversial – space. But the companies that make up the alliance, including digital payments platform Uphold, crypto lender Cred, browser developer Brave, and Blockchain at Berkeley say its universal dollar (UPUSD) will be different.
The universal dollar will pay holders annual interest of between 2 percent and 5 percent. Holders will also be able to seek flexible loans with single-digit interest rates. The backers say they plan to follow their dollar stablecoin with a bitcoin (BTC)-pegged coin that will be interoperable with tokens on the Ethereum platform, as well as a euro stablecoin.
ThirtyK spoke with Dan Schatt, chairman of the alliance and co-founder and president of Cred, about the importance of stablecoins in attracting “the next 100 million crypto users.” Before joining Cred, Schatt was general manager of financial innovations and mobile at PayPal and the author of “Virtual Banking: A Guide to Innovation and Partnering“.
ThirtyK: Stablecoins have become the subject of considerable interest and scrutiny. Why are they so important to the blockchain space?
Schatt: The biggest thing that’s holding back the crypto economy and preventing it from entering the mainstream is confidence. When you start breaking that down, there are a few things preventing the next 100 million people from entering crypto.
“Everyone has been wondering what is the powerful use case that makes people realize how crypto can affect their day-to-day life. That’s here.”
The first is interoperability. You can’t develop a robust economy, liquidity and innovation when blockchains and exchanges aren’t operating with each other. The other thing is that there’s been a lack of consumer safeguards that keep people uncomfortable with crypto from getting in [like], “What if I lose my private key?” You expect to deposit value and get a return, and you expect to borrow against it. That’s what we set out to change in creating this alliance and stablecoin.
Why Another Dollar Stablecoin?
ThirtyK: In an increasingly crowded field of stablecoins, what sets the universal dollar apart?
Schatt: We’re going back to the standard of the gold-backed dollar. We’ve put forth a piece of technology that basically acts like a decentralized reserve. Whenever a dollar comes in, a universal dollar is minted on chain and is immutable. Whenever someone wants to reverse that transaction, it’s burned off. It’s completely transparent for anyone to see. That’s really the power of a decentralized ledger: being able to see [all transactions] in an immutable fashion. That’s something this currency has that others don’t.
One of the things we’re excited about is that this isn’t something that’s just out there in theory in a white paper. The technology has been leveraged by [alliance member] Uphold. We’ve had $4 billion go through this structure, with the ability to see in real time all the obligations and liabilities.
This new universal dollar also has properties the dollar can’t compete with. It’s a better version of itself. You can recover the private key, trace it back to a custodian, and it can travel to any exchange that has KYC [know your customer safeguards]. We’re allowing people to earn interest and borrow at low interest rates, regardless of where you live in the world and what credit you have.
But it’s not just one stablecoin. What we’ve created is a digital foundry which will put other tokens into existence.
ThirtyK: What other tokens are in the works?
Schatt: We’re starting with a dollar coin because it’s understandable, following with a universal bitcoin that can resolve with ERC-20 tokens [on Ethereum], and then a universal euro.
The beauty of the foundry is that as it continues to mint new things, the reserve technology means that you’ll always be able to see how much is backed by the underlying asset, whether it’s gold, or Apple stock or dollars.
ThirtyK: How does this approach help the overall blockchain ecosystem?
Schatt: There are hundreds if not thousands of tokens trying to get listed [on exchanges]. If they are not an ERC-20 token or on another major platform, chances are they’re going to have to wait a long time or pay significant listing fees.
We’re changing that with a reserve whose job it is to substantiate the value so it can travel freely as an ERC-20 token. That solves a lot of time and bandwidth issues for central exchanges, but it’s even more powerful for decentralized exchanges. They haven’t had an opportunity to take off because there’s no way for tokens to reason with each other. And it frees up developers to create anything they want and have a token with ERC-20 [compatibility], and not just focus on a blockchain system or programming language because it’s popular right now.
Borrowing Against Your Crypto
ThirtyK: For individual consumers, how will the lending and interest mechanisms work?
Schatt: We’re basically offering up a line of credit capability. If you think about the friendliest loans you can get, you’d probably think of a HELOC [home equity line of credit]. What we’ve done is taken the HELOC and replaced the home with crypto and turned it into a CELOC. You can use the line of credit against your crypto collateral.
This is where the rubber meets the road. Everyone has been wondering what is the powerful use case that makes people realize how crypto can affect their day-to-day life. That’s here. You can get single-digit interest rate loans, no matter where you are in the world. And if you think about the average [interest] yield you get at any traditional bank, it’s probably around 1 percent. You can get the same returns as wealthy people do.
It’s not always western countries that have the biggest use cases. In places like Turkey, Venezuela and Argentina, you need to get into something that’s stable, and what people know and understand are other sovereign currencies. Telling an Argentinian to buy bitcoin may be difficult, but you could say you could buy something that’s pegged to the U.S. dollar and is also interoperable to other tokens.
ThirtyK: How do you see the space evolving?
Schatt: I think we’re not too far off from the first sovereign countries coming out with stablecoins – countries saying they could never inspire this level of trust with fiscal and monetary policy. It gives them the ability to make a much bigger impact beyond their borders with something that’s just a better tool to save and invest and borrow against.
That’s basically what we’ve been working to build. This alliance is meant to support individuals, investors, savers, companies and governments. We have a lot more opportunities to work within the ecosystem.