e-Money is a fast, frictionless form of digital cash that can be used for payments, remittances, and as a safe store of value cryptocurrency, especially during periods when crypto market volatility is high. Its greatest characteristic, though, lies in its ability to generate yield for its holders. Understanding how this works calls for a quick dive into the history of stablecoins, to learn their attributes and limitations which spawned the creation of e-Money.
From Stable Money to e-Money
Since their introduction in 2017, stablecoins have helped solve some of the most pressing problems within the cryptocurrency space. From collateralized stablecoins (such as crypto-backed and currency-backed stablecoins) to algorithmic stablecoins that mimic fiat currency, stablecoins have helped provide liquidity, stability, and growth to key cryptocurrency markets. Their evolution has also helped to counter the long-standing perception of crypto as a volatile space, and given traders a safe haven when the macro outlook turns bearish.
However, to this day, there are two critical problems with the three current stablecoin options. Firstly, concerning crypto-collateralized stablecoins, tokens do not hold collateral in the same form as the financial instrument they are pegged to. This means that over-collateralization is required, which translates to an inherently inefficient system.
Currency-backed stablecoins, meanwhile, are intended to maintain a one-to-one peg with a fiat currency such as the USD. However, their issuance and implementation raises concerns due to crypto’s strained relationship with the traditional banking sector. Covering operational expenditure from interest held on the reserve also gives rise to friction and instability within the system, and some stablecoin projects have had to bow out due to regulatory fears, especially in the U.S. during the height of ICO hype in 2018.
In a negative interest environment such as the Eurozone and Japan, the long-term viability of the fiat-backed model may come under strain, given how issuers are driven to endure additional risks, tap into the reserve, or charge issuance redemption fees to cover the shortfall incurred.
What Makes e-Money Different
Enter e-Money, a fast, frictionless, interest-bearing stablecoin designed to usher in an era of low-cost trading and instant settlement. Engineered as a layer-2 solution for fiat, e-Money is the brainchild of e-Money A/S, a Danish Fintech firm specializing in cutting-edge technologies that bridge traditional financial services and distributed ledger technology. Built using Tendermint and Cosmos SDK, and with code audited by Certik, e-Money is a regulator-friendly stablecoin whose model supports any currency and interest rate environment – even negative. The e-Money network is secured by a staking token (NGM), with inflated tokens distributed pro-rata as staking rewards.
e-Money currently has five currency-backed stablecoins with more to follow in 2021. At present, stablecoins comprise the Euro, Swiss Franc, Swedish Krona, Norwegian Krone, and Danish Krone. Although the ubiquity of stablecoins is undeniable, e-Money’s commitment to building bridges between networks, not to mention its quarterly reserve audits and interest-bearing attributes, marks it out as a different proposition entirely.
Lastly, e-Money recently released its Ethereum bridge that will allow for seamless transfers between e-Money and Ethereum. The implications of this bridge include access to one of the most liquid and vast blockchain networks on the market and all of the benefits that come with that. Keep an eye out for e-Money in upcoming months as the company scales with upcoming strategic partnerships and a new brand identity.
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