# ETHWarsaw 2023: Oleksiy Novykov, Mento Labs - Unpegged: The Next Wave of Stablecoin Innovation

- Channel: [ETH Warsaw](https://streameth.org/eth-warsaw)
- Date: 2024-10-07
- Duration: 21:44
- Watch: https://streameth.org/watch/yt-H1I4fXgTMuE
- YouTube: https://www.youtube.com/watch?v=H1I4fXgTMuE

## Description

Presentation - a brief talk by Oleksiy Novykov from Mento Labs. This presentation focuses on usecases of stablecoins.

Follow us for more updates: https://twitter.com/ETHWarsaw

## Transcript

hi everyone uh can you hear me well yeah so yeah I'm Alexi I'm head of product at mental abs and at mental laabs our mission is to bring the adoption of digital assets to mass market and uh we are doing so by developing Mento which is a platform to launch and operate stable coins on sell of blockchain we at the moment have three assets life which is sell a Dollar sell a Euro and sell a real and in today talks I wouldn't talk that much about like technical details about of implementation or how do we solve stable coin tremma but instead I want to talk about use cases of next stable coins and how we can see new products launched in the market um despite us being in the woods of bare Market market for a while I would say that stable coins actually still show considerable traction with users on this chart in a blue line you can see total value locked in defi which we probably all know went down significantly since the teral Luna collapsed and it decreased by around like 75% and while and the green line is stable coin Market capup which also went down but it didn't go down as much as the whole defi space and decreased by roughly 35% and if we look closer at just stable coins there is actually at least one stable coin that uh has the same market cap now as before the crash anyone wants to guess which stable coin is that yeah that's correct the green line on the top is tether and now it has the same 82 billion Market cup as it did uh one year ago uh and if we look at at teer specifically on thron we can see that it's actually it's market cap now 10 billion more than it was uh before um and I think part of the answer uh for to this question lies in this picture anyone wants to guess what these numbers mean yeah that's correct this is inflation rate in countries around the globe and as you can see it's like there is no country where the inflation rate is zero but in some countries this like goes like to 40% 50 70 200 and what inflation actually means that with the same amount of money you can now buy less Goods that you can do one year ago or two years ago and uh if you live in a country where inflation rate is 20 or 40% naturally people try to preserve their savings or their earnings by moving them to more stable currency which and US dollar happen to be exactly such currency and people in those countries seek to buy dollar but go and this puts even further downwards pressure on already suffering currency so the government imposes limitation on uh how much dollars uh citizens can buy but people access them anyway through crypto rails which happen to be used D Tron because it's the cheapest uh way to buy it because of low transaction fees and but the currency depreciates in value anyway um and this graph on the left we can see that 95% of wallets holding usdt uh have balance between zero and $1,000 which I think proves the point that people from the countries with underdeveloped economies try to preserve the Savings in this um stable coin now why am I talking about tether so much in my presentation I'm by no means not advocating for usdt or Tron or tether uh but I think the point that I'm trying to make is that uh usdt is successful because it has very solid use case for users around the globe and and people try want to buy us specifically because it's the facto world's Reserve currency with 59% of exchange reserves held in this currency and it is considered to be the most stable which is available uh in traditional economy um on this map in uh black we see the numbers of people who do not have access to traditional banking accounts and while this number is significantly low in North America and Europe in regions like Latin America in Caribbean Africa you can see that there is 40% and more people who don't have access to traditional banking system and this is also I think happened to be the region where uh people try to access usdt um and now again like to to the importance of solid use case we also aside from usdt we actually have a lot of uh Euro St coins we also have one on the platform but there are multiple of them there are also stable coins tracking Canadian dollar or Singaporean dollar but none of them uh get any significant attaction with users because in those countries people already have pretty efficient uh banking system with I would say considerably better uix than what crypto industry can provide uh so the point that I'm trying to make is that uh more likely we will see emerging emergence of local Fiat stable currencies in regions like Latin America or Africa and now I want to give couple of examples of projects from Cello ecosystem who actually have such use cases with their core businesses uh the first project that I want to talk about is called impact Market they use web3 technology to provide accessible Financial Solutions to people in empow regions around the world their core product is unconditional basic income that they distribute to beneficiaries in regions around the world but recently they also started doing uncollateralized microl loans um and they use sell a dollar for their operation and while while for Universal basic income it makes a lot of sense because it's more stable than local currency when we talk about micro credit it's actually completely the opposite because people are getting micro credit basically in dollars but they earn in local currency which depreciates against dollars H which makes it much harder for them to repay those loans and this is why we are now exploring together with impact Market an opportunity to launch local fiat currency in regions where they where they are active to make these microl loans accessible to even more people who will be able to successfully repay them uh another example of uh product with the use case is from our partner Duna dunia provides payment services in frankophone countries in Western Africa they have a network of 25,000 Merchants who use their services for regional settle settlement in local currency which is called uh central western African Frank uh and they use it to transact between different businesses across 12 countries in the region but they also provide services to un ramp to usdt for those businesses to pay their overseas uh suppliers and yeah apparently companies in China accept usdt as a payment method even though the currency is officially banned there so dun is now launching exf which is will be a digital version of West African Fran on cell uh and it actually will go live I think in two weeks from now depends on how govern's proposal will go uh and the idea that with offering uh XF to their customers they still will be using the dun API for payments but they can now affiliate cost associated with third parties like Bank Banks and mobile money providers making the transactions cheaper and also faster if it's close to instant settlement but what I think even cooler than that is that now when XF is adopted by local businesses those businesses also will start accepting this currency from their end users and in cell EOS system there is also mobile app called valora which is a mobile wallet built specifically for Regions like South America and Africa and it already has a big user base in those countries and now when we have exf as a local payment method we can enable people to access digital economy who didn't have access to it before uh yeah and I want to go back to this uh graph so like uh the fact that uh dollar is so dominant as a reserve currency uh opens up for us couple of opportunities so first of all it's actually pretty good currency to be used as a collateral to issue other local stable coins that are weaker against the dollar um but second of all in like real economy dollar takes uh actually just 59% share market share while in crypto economy takes around like 99.5% share which means there's a huge discrepancy between onchain economy and real economy and there is a lot of opportunity for crypto to catch up uh to have like quite similar distribution to these numbers um and once we have this network of multiple stable coins that are interoperable and liquid against each other very interesting opportunities become available for example uh something that didn't really happen before but could happen uh the onchain Forex Exchange Market can emerge the traditional Forex exchange is clocking in staggering 7 .5 trillion in volume per day imagine if we could bring at least fraction of that on chain and they think there are obvious benefits of onchain a fixed market like uh first of all it will be significantly cheaper the transaction uh a fixed transaction will cost around like 5% of current cost because you don't have Banks and Brokers as intermediaries in the process the market will be open 24/7 which is not the case at the moment and also it will enable instant settlement at the moment in a fixed Market settlement tomorrow is actually pretty standard thing and also it will be directly accessible for without intermediaries and no barriers and you can access it like if you need to exchange five dollar you can also do it on Unis swap which is and but you really can't really do that in traditional FX Market um maybe I push it through and we the question end is okay uh another uh interesting use case is something that I call crossborder settlement currencies and um to give an example what it can be I want to look at the traditional finances again and there is an asset that called SDR which is special driving rice it's an asset developed by International monetary fund to supplement the official reserve of its country members and SDR is uh backed by basket of currencies like US dollar euro Chinese Yuan Yen and British pound but uh if you go to IMF website it actually says that this the SDR is also available only to their member countries and central banks but not to the private sector which uh kind of makes sense but they created like like for their certain use case whatever but uh blockchain actually allows us to provide tool like this to broader uh audience and uh businesses can use it to hedge against current fluctuation so instead of like holding just US dollar you can hold this asset which represents a basket of currencies um and actually but it doesn't have to be like specifically SDR like it can be com any combination of any stable coins with different weights and it can be like very customizable and uh yeah even like if there are two companies they can agree and one is let's say in Thailand and other in Malaysia they can agree on certain percentage of like currencies that they want have in the basket to agree on which a fixed risk each of the parties will take uh but to enable those use cases of course it wouldn't be enough just to launch stable coin we need more than that we need efficient trading pairs between these assets hopefully they also all will exist on the same blockchain we need to provide tooling that enables cheap and efficient on and off ramp to uh Fiat currencies and we need better account management reporting tooling that has much better uix user friendly to broader audience because honestly I can't imagine many businesses outside of crypto using something like gnosis save for example and um when we talk to our partners who provide services in men to stable coins the current user journey to get to uh stable coins on our platform is quite clunky you start with money in your fat bank account then you use some exchange usually it's binance to get some uh stable coin like usdc or usdt then you UNR to blockchain usually it's B binance blockchain then through Bridge you go to sell a blockchain and only then you can meant sell a reality currency that you actually want to access and this obviously takes a lot of steps and people don't really want to do it and this is why we are developing something that we call Mate or M depends who you ask which is a SDK that wraps all all these steps and provides like very smooth experience and now our partners can integrate it in their workflow and automate movement of to our stable coins and back to Fiat and uh this tool actually will be open source and it doesn't have to work like specifically for Mento assets it will be available for any token on any chain so if you think that you can benefit from using it follow us on social media to know when it will become available um but going back to this uh picture representing inflation and bringing value over time if you want to turn this into this and to help people to preserve their purchasing power maybe there is something better than fat stable coins and if you go back to this map uh as I said there is no single country where inflation rate is 0% and it and it never will be because in is actually by Design it's a feature of Fiat currencies not in back so we want to preserve value over time we need something different and um this is like still very experimental stage but something that I'm pretty excited about it's a concept of stable coin also called Flat coin which instead of being packed to some fiat currency will be packed to Consumer Price Index in certain country or certain group of commodity for example it can be P to the price PR of energy if some business is interested in this particular Cate category but I don't think that we are at the moment that this is ready for the mass market and there are at least two big problems that we need to solve before we can offer this product to Consumers and uh number one that we need to have reliable price Feit for such data on chain and which will be challenging as especially in the regions where such currency is needed the most because it's quite difficult to get reliable data about consumer products index in some African countries and the second is that we need to find the right collateral to back such assets since like any fiat currency is a losing value against this asset not even dollar is a good collateral because you will always be at risk of under collateralization so so I think once uh tokenizing real world asset gains more traction this is where we can think about building products in this category um so to summarize uh I think going forward we will see innovation in the stable coin space going in incremental steps rather the huge evolutionary lipse uh we need more operators from different countries launching local stable coins with some like very solid use case in mind and we need much better tooling both for on and off ramping and for General user experience like better wallets both for end users and corporates and we at Mento are doing our part in this direction this is why we are developing Mento platform which is a set of tools like oracles infrastructure and we are now integrating with redstone to provide even more price fits to potential operators of stable coins we have different issuance and Redemption mechanis mechanisms available there is a governance framework and supporting tooling and using all of these operators will be able to launch stable coins without need to know how to develop smart contracts in solidity but instead they can focus on experimentation and economical design and user adoption of those stable coins um and that's it and yeah if you think that you have idea of stable coin that will benefit your business please reach out to us and let's brainstorm together thank [Applause] you okay any questions so um the question is about these new stable coins uh that are delta neutral right so during the ECC mainly this ethena new stable coin was doing rounds on Twitter uh which kind of like was created as as a result of I think one of Arthur H's articles where basically you have like a bunch of uh fully fully crypto there is like no no like no actual so the idea is to like break the tie between the the trfi and defi so create a stable coin that is fully fully onchain um and I think the way they're trying to do it is basically have a basket of crypto assets and then they're hedging those assets on different um D protocols while creating some sort of uh a very small yield um yeah and I was just wondering if you have a a take on this new new stable coin design cuz it's it's it's a apparently like something something new I don't know if you're aware of of Etha maybe maybe not then yeah no to be H question really I'm not aware of it but uh for example like in our platform you can say the stable coins also completely on chain we have a reserve that is completely on chain and so like if usdc for example they have Assets in bank account like Fiat dollars banking their stable coin our reserves are fully on chain uh and it's also like a distributed basket of like five different assets okay cool yeah I guess yeah no no really question then thank you thank