Crypto-Dollarization

About the miniseries

Crypto-Dollarization is the idea that an early and unambiguous ‘killer app’ of public blockchains is their ability to settle dollar-denominated liabilities. Whether these are liabilities for digital dollars held in banks, or liabilities of an over-collateralized system like Maker, there is obvious and demonstrated demand for this product. While there are still obvious points of failure and trusted third parties present, this virtualization of bank reserves is a way to distribute dollars on a direct-to-customer basis to individuals around the world, in a permission-less manner.

We believe that this phenomenon has the ability to cross the chasm from a handful of traders who use the IOUs as an inter-exchange settlement mechanism, to a more mainstream product used by individuals around the world who seek non-bank, dollar-denominated savings and settlement tools. This could quite possibly accelerate informal dollarization movements like the one happening in Venezuela today.

For more on this topic see Nic’s op-ed in Coindesk. For a longer treatment see Max Bronstein and Avi Feldman's piece Crypto Dollars and the Evolution of Eurodollar Banking.