13 Oct, 2023

NewPay's Stablecoin Payment Transformation on the Horizon

In cryptocurrency trading, the term “stablecoin” is frequently encountered, raising questions about its use in an environment where cryptocurrencies are known for their price fluctuations.The primary characteristic of stablecoins is their backing by real-world assets, except for algorithmic stablecoins. This backing results in reduced price volatility compared to other cryptocurrencies, justifying the name “stablecoin.” Consequently, a notable portion of cryptocurrency investors views them as a dependable asset in times of market instability.Consider a US dollar stablecoin as an example. When a company intends to issue 1 million USD stablecoins, it is required to deposit assets equivalent to 1 million US dollars within a custodian institution. This deposit is crucial to maintaining a 1:1 value ratio with the US dollar. Without this equivalence, the market may not acknowledge it, potentially leading to a decline in the coin’s value.Generally, stablecoins are often pegged to specific fiat currencies or commodities like gold. This pegging is an attempt to bring stability to the highly fluctuating cryptocurrency landscape. It’s worth noting that not all stablecoins follow the same principles to achieve this goal. Based on the mechanisms they employ, stablecoins can be broadly categorized into 3 main types.Fiat-backed stablecoinsThe first category of stablecoins is fiat-backed stablecoins, such as USDT and USDC, and is by far the most popular. The daily trading volumes reached an astonishing $18.3 billion and $2.7 billion, respectively. These stablecoins are backed by reserves of traditional fiat currencies, such as the US dollar or the Euro.To maintain their one-to-one peg to a currency, the stablecoin issuer ideally holds the currency in cash, or cash equivalents such as treasuries, which should match or exceed the circulating supply of the stablecoin.Crypto-backed stablecoinsNext, we have crypto-backed stablecoins. As their name suggests, crypto-backed stablecoins originate from DeFi applications, and are backed by cryptocurrencies held as collateral.However, due to the volatile nature of cryptocurrencies, crypto-backed stables typically require over-collateralization to a specific ratio to ensure stability.For instance, a collateralization ratio requirement of 150% means that a user needs to deposit $150 worth of crypto to mint $100 of a stablecoin.Examples of crypto-collateralized stablecoins include DAI, which is currently the largest crypto-backed stablecoin by market capitalization, or LUSD, which is 100% backed by ETH.It’s worth mentioning that even though DAI was designed to be a decentralized stablecoin, its collateral includes a large percentage of USDC, USDP, and GUSD, which are centralized fiat-backed stablecoins, and even US treasuries.Algorithmic stablecoinsThe third category is algorithmic stablecoins, which are also meant to be decentralized in nature.But unlike over-collateralized stablecoins, they may or may not actually be backed by anything.Instead, they rely on algorithmic and incentive mechanisms to maintain their price stability.However, historically, this mechanism has not been sustainable, since it’s dependent on consistent demand being there for the stablecoin, and once that disappears, they go into a so-called death spiral, where the mechanism collapses the stablecoin.Basis Cash, Empty Set Dollar, Titan, and most infamously, Terra’s UST are some of the examples of failed algorithmic stablecoins.These are the three main categories, but there are also other stablecoins that don’t fit neatly into them, like FRAX, which launched as the first partially algorithmic stablecoin, though a recent community vote has decided to shift the stablecoin to a fully crypto-collateralized model over time.Meanwhile, some stablecoins peg their value to physical assets, like precious metals or other commodities, such as Paxos Gold and Tether Gold, which claim to hold physical gold in reserves.Non-peg stablecoinsFinally, there are even non-peg stablecoins, like Rai, which are crypto-backed but do not have their value tied to any specific asset, and have their value fluctuate based on supply and demand.If you’re wondering why all the different designs, it’s worth noting that, like the blockchain trilemma of security, decentralization, and scalability, stablecoins also face their own trilemma of stability, decentralization, and capital efficiency, whereby any stablecoin design typically has to sacrifice one aspect to achieve the other two.To date, the pursuit of a stablecoin that successfully balances all three aspects is ongoing. There is considerable anticipation within the cryptocurrency community for the introduction of a stablecoin that can cater to a wider array of use cases.LADT and NewPay Team Up to Provide Stablecoin Payment SolutionsNewPay, the sole payment platform in Laos with a third-party payment license, has formally entered into a strategic partnership and product development collaboration with the Lao National Digital Technology Group (LADT) to facilitate the use of the ASEAN USD (USDA) stablecoin, endorsed by the Association of Southeast Asian Nations (ASEAN).In the foreseeable future, NewPay’s objective is to introduce more user-friendly blockchain-based cross-border payment solutions tailored for the ASEAN region. This initiative aligns with the ongoing trend of digital transformation within the ASEAN economy.

07 Oct, 2023

Laos, Cambodia, Vietnam to Enhance Cooperation in Digital Economy

As ASEAN strives to achieve further integration of digital economies, Laos is trying to foster better cooperation with neighboring countries Vietnam and Cambodia on this front.This move came as over 100 digitalization experts from Laos, Vietnam, and Cambodia met during an international conference on digitalization and investment conference in Ho Chi Minh City.Speaking at the event was the Lao Academy of Social and Economic Sciences (LASES) President, Dr. Sonethano Thammavong who said, “Laos’ digital transformation, which encompasses various sectors including commerce and investment, is currently at a basic and initial stage. Therefore, Laos hopes to exchange and share experiences with experts from Vietnam and Cambodia and to learn from their experiences.”Dr. Sonethano also said that both Vietnam and Cambodia offer great inspiration to Laos in its digital transformation journey, stating that, “In these three countries, there is a readiness to build their digital-transformation-oriented socio-economic infrastructure.”The Royal Academy of Cambodia’s (RAC) President also spoke at the event, emphasizing the long-standing relationship between the three nations, and Vietnam’s blueprint for digitalization success.He said, “Vietnam has been progressing faster than Cambodia and Laos, especially in the fields of tourism, commerce, and investment. The nations’ teamwork, particularly in the digital economy sector, plays a significant role in promoting the development of other areas.”Experts at the event also recommended that the bloc’s nations should establish and improve institutional and legal environments, to meet the requirements of the international integration era in the context of the digital economy.In another move to strengthen the digital economy and deepen ties, Laos and Cambodia introduced the Lao-Cambodia cross-border payment system (KHQR scan LAOQR) this year, which allows users to pay for goods and services in Laos and Cambodia using the local currencies, Lao kip and Khmer riel, via QR code.