IBM explores “cornerstone” Stellar-based Stronghold stablecoin
Any mature distributed ledger payment network is going to need a stablecoin, and IBM is eyeing this one.
Stronghold is a US-dollar stablecoin. Unlike other cryptocurrencies, stablecoins are designed to remain steady and pegged at a certain price.
There are different stablecoin systems out there, but one of the most popular and straightforward ones is a collateralised stablecoin, such as Tether, Stronghold, TrueUSD and others.
These are essentially digital tokens that are each worth exactly US$1. The reason they're worth that amount is because all tokens in circulation are theoretically backed by assets and can be traded for US$1 at any time.
But being a digital token, they can be instantly and freely sent anywhere in the world at the speed of information on a distributed ledger.
IBM, which is developing a distributed ledger-based universal payment system, is understandably interested in what it can offer and is collaborating with Stronghold on its launch to see what it can do.
"The digitization of real-world assets using blockchain can dramatically transform many forms of financial transactions conducted around the world," explains Jesse Lund, global vice president of IBM Blockchain. "New types of fiat-backed instruments, like Stronghold's USD token, have the potential to improve the backbone of international banking operations and payments, giving banks an easier way to integrate with public blockchain networks without significant changes to their core banking and compliance infrastructure."
Powered by Stellar
Stronghold is built on top of a separate platform, Stellar Lumens. It essentially runs its tokens over the Stellar protocol to enjoy its benefits without all the troubles of building an entire protocol from the ground up, or needing to delve into the tokenomics of network security and other headaches.
In addition to being a token on Stellar, it serves as one of the anchors of the Stellar network. These anchors are like bridges between the Stellar network and other currencies and help the network fulfil its core purpose of letting anyone instantly and as freely as possible send, receive or exchange any kind of money or token for any other kind.
As a USD anchor, Stronghold serves as one of the on- and off-ramps for US dollars in Stellar's systems, and "a cornerstone piece of bringing the Stellar network to mass market adoption" in the words of Stellar co-founder Jed McCaleb.
"The process for seamlessly managing and trading assets of any form from digital to traditional currencies, needs to evolve as financial institutions are seeking ways to break into new asset classes like cryptocurrencies," said Stronghold co-founder and CTO Sean Bennett. "Asset-backed tokens can provide seamless access to all currencies, improving the global movement of money. We’re honored to work with IBM to explore new ways to use Stronghold USD within."
IBM is closely tied to Stellar and has already oriented its blockchain strategy around the network, and any mature payment protocol will need a reliable stablecoin on it. In this case, Stronghold might be the one.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and NANO.