# The Problem

Bitcoin represents over half of the cryptocurrency market, valued at \~$2 Trillion. It is the most pristine, decentralized, and battle-tested digital asset. However, so far 99% of the Bitcoin sits idle. In the meantime, financial activities have thrived on other smart contract blockchain ecosystems like Ethereum and Solana due to the expressivity of smart contracts. Even though the original intent of Bitcoin was designed as “peer-to-peer electronic cash,” its high volatility, slow transaction speeds, and lack of programmability make it challenging to function as daily-use money.

Meanwhile, stablecoins on smart contract blockchains have emerged as a reliable form of digital currency, providing a stable & familiar unit of exchange needed to bridge traditional real-world transactions with crypto. However, out of the >$200B stablecoin market value, over 95% of it is fiat-backed (like USDC and Tether), and is therefore dependent on the traditional banking system, and relies on large centralized entities or nation states to remain operational, which has the risk of being censored by these entities. As the stablecoin market gets bigger, there is legitimate risk of blockchain fundamental properties like being permissionless, censorship resistant, and decentralization being undermined. While DeFi has embodied attempts to create a parallel financial system, the dominance of fiat-backed stablecoins means crypto will continue to be tethered to the traditional banking infrastructure without creating an actual alternative.

One of the reasons fiat-backed stablecoins have proliferated, is that tethering to the traditional banking system is the easiest way to scale the onramp of large market value to the crypto ecosystem. Ethereum or Solana, while useful for providing the financialization infrastructure, with just a few hundred billion in total market capitalization is not yet at the scale to back the potential valuation of new crypto participants. Current popular implementations of crypto-backed "Overcollateralized stablecoins" have experienced scaling limitations as growth is tied to the market cap of Ethereum. As a result, most of these stablecoins include fiat-backed assets in an effort to improve scalability, at the cost of censorship resistance.

We think there’s a better way forward.
