A Review of the Dollar on Chain (DOC) Stablecoin with Everyday Use Cases for Africans.

What Are Stablecoins?

Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for common transactions

TYPES OF STABLECOINS

Some would argue that stablecoins are a solution in search of a problem given the wide availability and acceptance of the U.S. dollar. Many cryptocurrency adherents, on the other hand, believe the future belongs to digital tender not controlled by Central banks. There are three types of stablecoins, based on the mechanism used to stabilize their value:

• Fiat-Collateralized Stablecoins :

Fiat-collateralized stablecoins maintain a reserve of a fiat currency (or currencies) such as the U.S. dollar, as collateral assuring the stablecoin's value. Other forms of collateral can include precious metals like gold as well as commodities like crude oil, but most fiat-collateralized stablecoins have reserves of U.S. dollars. Such reserves are maintained by independent custodians and are regularly audited. Tether(USDT) and TrueUSD (TUSD) are popular stablecoins backed by U.S. dollar reserves and denominated at parity to the dollar.

• Algorithmic Stablecoins:

Algorithmic stablecoins may or may not hold reserve assets. Their primary distinction is the strategy of keeping the stablecoin's value stable by controlling its supply through an algorithm , essentially a computer program running a preset formula. In some ways that's not so different from central banks, which also don't rely on a reserve asset to keep the value of the currency they issue stable. The difference is that a central bank like the Central bank of Nigeria (CBN) sets monetary policy publicly based on well-understood parameters, and its status as the issuer of legal tender does wonders for the credibility of that policy. Algorithmic stablecoin issuers can't fall back on such advantages in a crisis. The price of the TerraUSD (UST) algorithmic stablecoin plunged more than 60% on May 11, 2022, vaporizing its peg to the U.S. dollar, as the price of the related Luna token used to peg terra slumped more than 80% overnight.

• Crypto-Collateralized Stablecoins:

Crypto-collateralized stablecoins are backed by other cryptocurrencies because the reserve cryptocurrency may also be prone to high volatility, such stablecoins are overcollateralized—that is, the value of cryptocurrency held in reserves exceeds the value of the stablecoins issued. A cryptocurrency worth $2 million might be held as reserve to issue $1 million in a crypto-backed stablecoin, insuring against a 50% decline in the price of the reserve cryptocurrency. For example, MakerDAO's Dai (DAI) stablecoin is pegged to the U.S. dollar but backed by Ethereum (ETH) and other cryptocurrencies worth 150% of the DAI stablecoin in circulation. Another example of crypto collateralized stable coin and the possibly the best stable coin available at the moment is the THE DOLLAR ON CHAIN stable coin backed by bitcoin and pegged 1:1 to the US dollar.

THE DOLLAR ON CHAIN STABLE COIN (DOC)

The Dollar on Chain (DOC), is a RRC20 token pegged to the US Dollar for risk-averse individuals a product of the Money on chain Protocol on RSK. Those who need a stable currency use the DOC, a token that maintains a peg with the US dollar. DOC as Bitcoin-collateralized stablecoin minimizes counterparty risk through a set of smart contracts. The stable token, DOC, is pegged to RSK network’s native token, RBTC, which acts as collateral – though other collateral may be used to maintain pegs. RBTC is linked 1 : 1 to Bitcoin (1 RBTC = 1 BTC) and is convertible to and from BTC.

WHY A BITCOIN BACKED STABLE COIN IS THE BEST OPTION

Bitcoin is the existing cryptocurrency with the highest liquidity, largest number of users, the highest level of security and decentralization and, as rare as it may sound, the least volatile among all other cryptocurrencies. So, if you think that bitcoin is the best store of value, you will agree that it is the best collateral for a decentralized stablecoin. Hence, having a stablecoin that inherits bitcoin’s attributes of censorship resistance, decentralization, impossibility of expropriation, neutrality and trust minimization is what brings those that use stablecoins closer to good money. This vision was what drove the creation of the Money On Chain stablecoin protocol. Money On Chain (MOC) is the stablecoin protocol that issues the Dollar on Chain, a crypto stable currency 100% backed with bitcoin, whose collateral is provided for other participants.

THE NEED FOR DOLLAR ON CHAIN STABLE COIN IN AFRICA

• Tackling Cryptocurrency Volatility:

Cryptocurrencies use decentralized networks via blockchain technology, making duplication or counterfeiting almost impossible. However, cryptocurrency is not a regulated asset and even illegal in some countries. As a result, it is a highly volatile asset class. The price movement of cryptocurrencies can be very volatile. For example, the value of Bitcoin peaked in November of 2021 at around $68,000 from the roughly $5,000 per Bitcoin price a year before and down to only $18,000 a Bitcoin a year later in 2022. The uncertainty surrounding price movements also means that the direction of trades can vary even within short periods of time. Such short-term volatility renders cryptocurrencies unsuitable for everyday use by retail investors or non-experts, since a currency must be a store of value, which implies that their value must be stable over a long period. An investor needs to be sure that the purchasing power of a currency will appreciate or remain stable in the future. A stablecoin like DOC offers assurance of price stability to investors and users.

• Tackling Inflation and currency devaluation:

African countries especially Nigeria with high levels of inflation, and a consistently devalued currency represent a prime market to DOLLAR ON CHAIN adoption because of the safety and security it offers. It preserves the value of wealth in the face of a constantly devalued Naira and is therefore a do without for anyone who is serious about creating and maintaining wealth. To control the inflationary tendency of cryptocurrencies and fiat currencies, users must be convinced to spend the tokens instead of saving them. Stable coins enable us to bridge this gap between the stability of fiat currency versus cryptocurrency.

• Offers Faster transactions Speed:

Stablecoins like DOC make various financial processes faster. Escrow is streamlined by smart contracts utilizing stablecoins. Settlement and banking with stablecoins allow for transactions at all hours because the blockchain operates independently of a central institution with set hours. Especially in African countries faced with bad banking services coupled with financial corruption. DOC provides freedom form the shackles of traditional financial institutions.

• Offers better Transparency :

Transactions on the blockchain can be viewed from a blockchain explorer by anyone with internet access. Also, stablecoins can offer full transparency into the process by which they are backed through regular audits.

WHY USE DOLLAR ON CHAIN INSTEAD OF OTHER STABLECOINS

Stablecoins have become a means of payment and saving for millions of people, so it is important that users especially African users understand how the protocols that issue them work. The MOC model works with 4 tokens: a 100% backed with bitcoin stablecoin (DOC), a liquidity token that enables the minting of the stablecoin while receiving a small free leverage (BPRO), a leveraged long position on bitcoin that absorbs the volatility (BTCX) and a governance token, (MOC token). The Main reasons why MOC model is different from other stablecoin protocols is “Collateral separated from issuance”. In the Money On Chain model, the one who issues Dollar on Chain is not the one who brings the collateral as it usually happens in centralized models with fiat collateral. This enables anyone to mint their own DOC. It is important to note that this model allows the decentralization of the collateral but limits the creation of new DOC. This means that the maximum amount of DOC issued depends on the collateral brought by the other participants of the system, the liquidity providers known as BPRO holders. BPRO is a token that brings a series of incentives to bitcoin holders that decide to enable the creation of DOC by providing smart bitcoin (RBTC) to the Money On Chain protocol without giving up control of their private keys. In other words, the BPRO token is the liquidity token in the MOC stablecoin protocol, and it is often acquired by bitcoiners that believe that in the long term bitcoin will have a higher price than the dollar. Money On Chain has proven its robustness even at the most averse market situations such as the bitcoin crash of March 2020. This is due to its overcollateralization expressed in its global and target coverage. The Protocol’s health, that is to say, its global coverage, is public information available at all times in the platform metrics section. There you will also be able to see the amount of DOC available for minting and redeeming. Minting is the equivalent of issuing new DOC units using the collateral available in the protocol, which is provided by those executing the DOC minting operation and by those providing the liquidity, BPRO hodlers.
Redeem means that you can convert DOC back into its collateral, a very rare feature in stablecoin protocols. You should note that Minting and redeeming are not synonyms of buying and selling.

USE CASES OF DOLLAR ON CHAIN(DOC)

1. Safe Haven Asset:
   DOC have a value that is designed to be stable over any period. This feature makes DOC an ideal safe haven asset because, unlike cryptocurrencies like Bitcoin that can fluctuate dramatically in price every day, an individual using DOC to store value see no risk of loss, especially because they have full custody of their assets. The importance of both the price stability and self-custodial nature of DOC has recently been illustrated with the politico-economic crisis in Venezuela, where many citizens fleeing the country have stored their savings in Bitcoin to avoid confiscation of their fiat money.

2. Trading: Fiat onramps and offramps cost fees, making DOC a prime solution for exchanges and institutional traders who want the ability to reduce crypto exposure without fully cashing out.

3. Payments: Payments are looking to be one of the primary use cases of stablecoins in coming years. Businesses would benefit from accepting stablecoins like DOC as payment because, in doing so, they circumvent the 2-3% transactions fee that accompany the intermediary processing fees by financial institutions.

4. Remittance: Cross-border payments and remittance are very real problems that overseas workers face when trying to send money home . Sending money internationally comes with high fees. For example, most African migrant workers in Europe and Asia send home approximately $200 monthly, but they must pay $12 in international transfer fees–(half a day’s wages gone). However, DOC use could lower fees even further because of their inherent price stability.

5. Payroll: In November 2018, Japanese shipping company Nippon Yusen Kaisha introduced plans to pay its workers using USD-pegged stablecoins, marking a first in using stablecoins to deliver payroll. Since then there has been an increase in the use of stablecoins like DOC for payroll. RSK(IOV LABS) uses the DOC for payroll of their workers.This measure would make it easier for workers to manage their finances, as well as making, sending and converting money back into their local currencies a more streamlined, low-fee process. Workers come from different nations and transact from one country to another frequently. By using DOC for payroll, these high international fees are dramatically reduced.

Conclusion

All these amazing applications and use cases of DOC is made possible by the RSK blockchain, which is a revolutionary Bitcoin sidechain as it brings the full power of smart contracts to the Bitcoin ecosystem. When Satoshi Nakamoto developed the Bitcoin blockchain, his goal was to create the ultimate store of value. However, as cryptocurrencies and blockchains evolved, smart contract capabilities are becoming a primary requirement. RSK combines the security and robustness of the Bitcoin token, with the flexibility and usability of a dapp-ready blockchain, based on smart contracts.