ZSA Shielded Stablecoins

General
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Throwing out a firebomb.

Has @LeCryptoMath and the Qedit team building ZSAs thought about shielded stablecoins?

The stablecoin tradeoff in DeFi is well known to this community. Algo stables meet our goal of uncensorable but have always failed. Centralized fiat backed stables, that have been the essential link in crypto asset growth via crypto exchanges, are imminently censorable.

We hate fiat backed stablecoins but we need them and will continue to need them.

Fiat backed stablecoins are the only way most retail users will onboard and store wealth over the next ten years. Gen Z loves crypto and is willing to accept the price variability of BTC, ZEC, etc in their crypto “checking accounts” but they have no wealth.

Over the next ten years, the only way any wealth goes into crypto comes with convincing…boomers and Gen X. That requires some link to fiat, via some kind of fiat stablecoin link for as long as most crypto users and investors mostly live in a fiat economy, which is likely at least a decade ahead.

So, how do we develop an interface between the Zcash blockchain and USDC? That’s what we need to be thinking about more than anything.

Coinbase’s new Base project is, I fully believe, ultimately a payments system play to challenge Visa.

We know that will fail, because everything they are building and have built through partnership with Circle is just another surveillance coin.

Can we utilize the stability of USDC, but avoid its drawbacks, via a series of transactions away from their chain?

USDC already gets put into Maker Vaults with other tokens to create DAI. Then if we create an opportunity for DAI to be shielded in a Zcash note, it becomes hard for Circle to decide to freeze all USDC that goes into Maker vaults much less their inability to police DAI that goes into ZSAs.

Does lengthening the chain of that transformation limit the risk of centralized censorship of the shielded stable while still preserving the tether to fiat that remains essential in the transition to a crypto native economy that will take decades to achieve?

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I have been thinking about this topic and am wondering about a potential collaboration between QEDIT and Membrane Finance, which is part of the Equilibrium Group who is working on Ziggurat & the UniFFI RFP currently.

“We design and build core stablecoin infrastructure, applications and services” Although they are focused on & the principal architect of the EUROe maybe there is an opportunity for QEDIT & Membrane to work on Shielded Stablecoins together in some way…

Other resources on the Shielded Stablecoin topic below:

ECC research:

@aiyadt Twitter thread on the topic:

@MeerKatDev & @vivek would your teams be interested in brainstorming on this topic at some point potentially?

I also think this would be a good topic for a presentation/discussion at Zcon4, so I will be keeping an eye on how this thread evolves.

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Brilliant, thank you! Great resources. Would love to join a panel discussion on this at Zcon4.

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Definitely stable coins would be a prominent use of ZSA capabilities. If we look at ERC20 for inspiration, stablecoins are the longest-lasting use-case, they provided the ability for users to remain on-chain while “resting” from crypto volatility. Combining this with privacy is a killer-app, but like you said, (the “firebomb” comment) it should be approached carefully :slight_smile:

Regarding collabs on stablecoins, ofcourse open to chat about it, and see how it would reflect in the ZSA roadmap. Great topics to discuss for Zcon4, so we can sync on where the community stands on this!

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Hi everyone, Daren from Eiger. Nice to meet you all.

We have discussed this internally and we’d be interested to explore this further. Eiger has the implementation capabilities and works very closely with Membrane (EUROe issuer). We’ll need to do some research on the status of ZSA and have some discussions to understand exactly what needs to be done technically to figure out next steps.

From the Membrane side some work will need to be put on regulatory research before going live but that’s something to be discussed later.

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Hey @zydeco1 did this move forward somewhere privately?

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what is the status of this?

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We need a USDz, EURz, CDNz, YENz…ZEC for gas or local currency for gas which is used to buy ZEC pay a staking dividend to holders.

ZSA also structured so private companies could then create a shareholder register to show ownership. This could eliminate the need for assignments, and offer a much better system for private share ownership.

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AFAIK no, last I heard there was a talk that involve Membrane, but it didn’t move forward from that.

My understanding of the whole situation is that:

Centralized Stablecoins - Wont happen unless there is a severe change in how the community and the largest stakeholders see the benefit of allowing some level of centralization. Stablecoins that have a centralized issuer, centralized freezing capabilities, centralized viewing capabilities seem to be something most community members are fully against, no matter how useful to the ecosystem they seem.

Decentralized Stablecoin - More community support exists around this, but the path towards making one is quite difficult as programmability does not yet exist on Zcash. I recently chatted about this topic briefly with multiple people at Zcon, and there is clear interest in somehow still making it possible.

The most classic decentralized stablecoin that exists on-chain is the CDP mode, with Liquity being the clearest example. As an example with ZEC, here is what it would “simplified” consist of:

Smart Contract that:

  • locks ZEC and issues debt tokens (a decentralized stablecoin Z) pegged to a currency like USD
  • gets input from the oracle to liquidate the debt position if it hits a certain % treshold

Smart Contract Oracle that tracks the price of ETH in regards to USD.

Liquidator Bot that monitors the smart contract to see if it can liquidate.
If it can, it pays the debt of the position by buying the ETH and paying with Z.

Now the issue still unfortunately remains that liquidators dont want to hold ZEC, they want dollars.

Now, I also had a small brainstorm with a QEDIT team member of possibly using the Atomic Swaps orderbook for this, but not sure if it actually would work.

It would require some kind of off-chain keeper/bot to constantly push liquidity for some ZSA token to trade within an oracle price of ZEC/USD or something.

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i’m thinking something that is collateral backed by US treasury bonds. I don’t see what the problem is with centralization for the vast majority of people. The reason being most people live paycheck to paycheck. So they need the stability and ultra low risk of a stablecoin and the privacy of zcash. Then if it can generate yield by somehow having a flow-thru mechanism on the interest, it seems like a huge benefit to people. A 2% transaction fee (cap an floor so cost is lower than a wire fee) to pay a) dev fund b) miners/stakers c) ZEC holders for gas/

For people that save and care about a non decentralized coin, they can just buy something else. Ideally zcash can offer a menu of options that can helps everyone. I believe offering people choice is the key. I just don’t see any way around it, if zcash wants to reach people, they have to offer stability and a store of value. And to have value as money, they need at least one option for people that is 100% collateral backed in a non volitile asset which just happens to be a persons local currency. Both can coexist at the same time.

Isn’t it a “centralized” decision to tell people they can’t have a stable coin? Seems like the decision makers are playing “big brother” themselves. Do they believe in freedom and choice? Why would they offer apps on iOS or Android for that matter aren’t they centralized also? i’m sure there is a long list for centralized things we accept: the utility, local education, etc etc….

Im not a fan of decentralized stsblecoins as described. I don’t think they help people as much as centralized stsblecoins. This is where ideology starts to hurt the privacy aspect of the mission. The Liquiidy protocol seems to complicated to me for most people and if ZEC is the underlying collateral,‘it’s just too volitile. Just as important it needs to be over collateralzed which is a non starter if this is supposed to be money. I don’t think it helps people as much as a clean and simple centralized zcash based stablecoin.

If privacy based money is the mission, it should work for both decentralized and centralized money.

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Absolutely agreed. However, I have understood that most of the largest stakeholders of zcash currently do not agree with this view. Maybe it will change over time.

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What do you define as large? This is why we need value based voting. Its not very obvious what we are buying into when on an ad hoc basis they/you can claim this.

per Messari

1 > $10m
61 > $1m

But if its private a) how can this be true and b) people might hold ZEC in more than one wallet and c) people lie if this is based on just a “verbal” this is how many coins I own.

For voting, the US bankruptcy code is one of the best and most fair in the world. They use 2/3rd dollar value and 50% in number to in effect “change the constitution”. Now, this is after a company has defaulted. So I think there is at least some elements of ZEC that should be untouchable. And if someone wants more ZEC supply or to fork. That is very strong evidence that ZEC needs to implement Stablecoins/ ZSAs.

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We don’t need to create our own decentralized stablecoin on Zcash. We can bridge decentralized stablecoins from other chains.

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With a plan to provide Zcash privacy capabilities to these bridged decentralized stablecoins, I would agree.

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This is what I understood based on attending Zcon.

@Milton you are absolutely correct. Although they will have a peg deviation that will be peg deviation on their base chain + some kind of additional deviation based on bridging fee / difficulty.

Do you know of any projects that are close to providing bridging for Zcash?

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The closest project I know of is the Avalanche bridge, but they won’t be finished until sometime next year. I don’t know if their architecture will support bridging assets from Avalanche to Zcash though.

Namada devs are also supposed to create a bridge, but I don’t know whether they have started yet.

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Yeah, had those two in mind as well. I wonder what it would take to have a ZSA - AVAX bridge. Any idea @mrkit2u ?

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The possible issue I see with bridging and existing stablecoin is that the existing issuers dont appear to share the interest income earned on the collateral. (I could be wrong on this). For example, 1 billion USD stablecoin could be sharing 5% income earned on the underlying collateral with the stablecoin owner via a staking mechanism. And it could be more if less than 100% of the people stake.

A Zcash stablecoin could be designed to share a much higher share of the underlying collateral interest income with the stablecoin owner. If existing stablecoins share the interest income. Then this would just be a moot point. Bridging is a nice first step in any case.

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That is not an issue of stablecoins, the point of stablecoins is to be stable - not to generate yield for its holders. You are talking about a money market fund in this case.

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digital money can change the existing way it works. and they would still be stable. does a money market make a dollar worth more? the answer is no, you just end up with more dollars. what do you thinking companies like tether or now paypal are going to do with all the money they get from people buying the stable coin? they will buy fixed income…who keeps the money earned on the collateral and who should ?