Introduction
The blockchain industry is constantly evolving, with various models emerging to bridge the gap between traditional banking and cryptocurrencies. On one side, we have stablecoins and our prominent approach, Onchain Money, offers something unique. This brief article provides a comparison of these two models, highlighting their unique features and implications for users.
Onchain Money
Onchain Money is a new concept that offers a different approach to digital currencies. Unlike traditional stablecoins like USDT, Onchain Money isn’t backed by fiat but mirrors fiat currencies on-chain. Here’s what sets it apart:
- Issuer and Control: Issued by financial institutions with nodes on the ReDeFi blockchain, Onchain Money gives control to the account holder, unlike stablecoins controlled by their issuers.
- Mint and Burn Mechanism: There’s no minting or burning of Onchain Money during transactions. It simply mirrors the fiat in a segregated bank account.
- Regulation and Protection: Onchain Money implies strong KYC/AML measures to prevent security breaches and adhere to current regulations.
- Integration with Traditional Fiat Banking: It integrates with APIs with the current monetary system, banks, and financial institutions, allowing transactions with third-party banks and ensuring immediate settlement in central bank money.
Stablecoins
Stablecoins provide an approach we already know, but its limitations raise concerns. But let’s see their differences, compared to the Onchain Money model:
- Issuer and Control: There is an issuer behind every stablecoin, controlling the token and the underlying assets.
- Backing and Fluctuation: They are supposedly backed by fiat, but this claim often lacks transparency, leading to fluctuations in trust and stablecoin value.
- Mint and Burn Mechanism: Stablecoins involve a mint and burn process, creating tokens in exchange for fiat deposits.
- Regulatory Compliance: While stablecoins can be regulated to a certain degree, they often face challenges in AML and KYC compliance.
- Cross-Border Compatibility: Stablecoins facilitate international transactions but lack the integration with traditional banking systems that Onchain Money offers.
- Future is unknown: Stablecoins potentially won’t be accepted by the financial system as they break the singleness of the money principle. Unlike the Onchain money.
User Interfaces: Simplifying Transactions
The user interface for Onchain Money is designed for simplicity and ease of use, offering clear options for transactions with our infrastructure and integration with the BABB app. This dual-interface system ensures users can manage their portfolios much more easily.
Example 1:
Onchain Money: Alice lives in the UK and wants to send money to her brother Bob in Spain. Using the BABB app, she can enter Bob’s bank account details. When Alice confirms the transaction, Bob receives the funds almost instantly in his bank account. The transaction is more secure, and fast, while costs are significantly less than the current bank transfers. It’s worth noting, that it doesn’t matter if Bob is a ReDeFi or Onchain Money user, as long as he has an account with a bank, removing the hassle of creating multiple accounts
Stablecoins: If Alice & Bob decide to use a stablecoin like USDT, things change a bit. Alice has to top-up her account on a centralised exchange, acquire stablecoins and then send Bob USDT to his crypto self-custody wallet. Bob has to send that USDT to his preferred centralised exchange. Then, he has to convert the USDT to EUR, incurring conversion fees and potentially dealing with exchange rate fluctuations. Once converted, only then Bob can withdraw his EUR to their bank account, which may involve additional fees and processing times.
Conclusion: Bridging Two Worlds
In the following articles, we’ll present more real use cases for Onchain Money, how it stands out from its competitors, how efficient the system is and much more. In contrast, stablecoins offer an alternative for those seeking a more crypto-centric approach but with less integration in everyday scenarios.
Disclaimer: Don’t invest in crypto unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.
