Bitcoin-based ‘rival’ to modern stablecoins to emerge soon: CoinShares


A Bitcoin-based stablecoin may emerge in 2024 that could even “rival” the speed and cost of other stablecoins in the industry, according to cryptocurrency investment firm CoinShares.

“We anticipate 2024 as a pivotal year for Bitcoin in the stablecoin arena,” explained analysts from CoinShares in their latest outlook report published on Jan. 22.

“Altogether our prediction is that a Bitcoin project focused on competing in the modern stablecoin sector will be made easily accessible to users this year.”

The prediction came from CoinShares’ head of Bitcoin research, Christopher Bendiksen, and analyst Matthew Kimmel.

“We predict viable, at least in theory, development projects finally emerging as accessible tools.”

The pair said a successful Bitcoin stablecoin project could even “rival the speed and cost” of alternatives — all while inheriting the fundamental stability of Bitcoin infrastructure.

“The Bitcoin blockchain boasts the longest history, greatest stability, least technical debt, and strongest assurances,” Bendiksen and Kimmel said in making Bitcoin’s case as a platform for stablecoins.

While Bitcoin-based stablecoins have been created before, Bendiksen and Kimmel predict that a Bitcoin-based stablecoin project will become easily accessible to users this year.

“We suspect that businesses and Bitcoin plugins will then steadily integrate stablecoin spending, paving the way for continued usage growth.” 

This could further strengthen Bitcoin’s monetary properties and ability to resist censorship, they argued.

But technical barriers still exist, and history shows that stablecoin users prefer to use faster and lower-cost networks, Bendiksen and Kimmel conceded.

“Not only is Bitcoin architecturally designed without the flexibility to natively support external assets like dollar-pegged tokens, but history has shown that stablecoin adoption tends to flock towards the platform offering the cheapest transaction costs and highest speed.”

Related: Bitcoin to surge to $80K as stablecoins overtake Visa in 2024 — Bitwise

Several Bitcoin infrastructure firms such as Stacks, RSK and Liquid Network have created stablecoins on top of Bitcoin’s base layer, according to Trust Machines.

USDA, Dollar on Chain (DoC), rDAI and Liquid-based Tether (L-USDt) are among the United States dollar-denominated stablecoins launched on a Bitcoin layer 2 network.

While these stablecoins exist on Bitcoin’s second layer, Trust Machines says stablecoins could eventually come to Bitcoin’s base layer, though it’s not “currently possible” to do so.

One firm claiming to soon release a stablecoin on the Bitcoin blockchain in “bitRC20 format” is bitSmiley Labs, backed by the venture capital arm of cryptocurrency exchange OKX.

According to its latest white paper for “bitUSD,” all bitUSD in circulation will be backed by excess collateral, and all bitUSD transactions will be publicly visible on the Bitcoin blockchain.

However, bitUSD will only be “softly pegged” to the U.S. dollar, the white paper states.

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