There exists a vast array of assets in the world which people freely choose as a storeofvalue, a transactional medium, or an investment. We believe the Bitcoin blockchain is a better technology for transacting, storing, and accounting for these assets. Most estimates measure global wealth around 250 trillion dollars with much of that being held by banks or similar financial institutions. The migration of these assets onto the Bitcoin blockchain represents a proportionally large opportunity.
Bitcoin was created as “an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Bitcoin created a new class of digital currency, a decentralized digital currency or cryptocurrency.
Some of the primary advantages of cryptocurrencies are low transaction costs, international borderless transferability and convertibility, trustless ownership and exchange, pseudoanonymity, realtime transparency, and immunity from legacy banking system problems. Common explanations for the current limited mainstream use of cryptocurrencies include volatile price swings, inadequate massmarket understanding of the technology, and insufficient easeofuse for nontechnical users.
The idea for assetpegged cryptocurrencies was initially popularized2 in the Bitcoin community by the Mastercoin white paper authored by J.R. Willett in January 2012. Today, we’re starting to see these ideas built with the likes of BitAssets, Ripple, Omni, Nxt, NuShares/Bits, and others. One should note that all Bitcoin exchanges and wallets (like Coinbase, Bitfinex, and Coinapult) which allow you to hold value as a fiat currency already provide a similar service in that users can avoid the volatility (or other traits) of a particular cryptocurrency by selling them for fiat currency, gold, or another asset. Further, almost all types of existing financial institutions, payment providers, etc, which allow you to hold fiat value (or other assets) subsequently provide a similar service. In this white paper, we focus on applications wherein the fiat value is stored and transmitted with software that is opensource, cryptographically secure, and uses distributed ledger technology, i.e. a true cryptocurrency.
While the goal of any successful cryptocurrency is to completely eliminate the requirement of trust, each of the aforementioned implementations either rely on a trusted third party or have other technical, marketbased, or processbased drawbacks and limitations.