ZSA Shielded Stablecoins

Yes, but it comes with regulations and audits. Something that zsa will prevent unless I am missing something.

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The payouts (and perhaps deposits) would almost surely come with KYC and tax documents in almost any jurisdiction, but the users should be able to circulate the stable coins in their own wallets p2p between the choke points. This could probably work fine for many legitimate cases and be legal and compliant.

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Regulators also want the power to freeze assets when they deem them coming from illegal sources.

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And certainly that power already exists in all centralized exchanges (in the US at least). But, I can still withdraw to a wallet I control and send you some coins (since me and the central exchange have already complied with all of the KYC/AML).

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Yes, they start really caring when the amount is high. In a system where amounts are hidden, everything becomes suspect.

Hahn already replied to you with the two first issues:

  • Without regulation you are just trusting some entity to keep the dollars / liquidity
  • With regulation, the stablecoin requires a bunch of features:
    – Global Freezing Capabilites
    – Global Viewing Capabilities etc.

And even if we just ended up in an early 2018 Tether-style situation, even then it would be scary setup: If issuance of ZSAs is private, we will never know how much of ZECTether is minted.

You can also read the discussion here, most of the topic has already been discussed: RFC - Exploring Centralised Stablecoins w/ ZSAs - #6 by JoakimEQ

This ZIP only enables transparent issuance.

We want to add more features to ZSAs and the stablecoins provided with the first version of ZSAs won’t be perfect. But I’m still hopeful some stablecoins will exist and provide some valuable real world feedback :blush:.

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Even if issuance is transparent, there is no “burn”-mechanism or any way to prove a ZSA is inaccessible. So it could only ever work 1 way.

Buty yes agreed - I am on board on any features added to ZSAs that would enable stablecoins. Actually, I am going even further here and putting up myself and Equilibrium as an organization that would gladly research, design and build this. Actually, in collaboration with membrane we already have the groundwork of the research in place.

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I thought ZSAs did have burn? The ZIP I mentioned above mentions it.

The issuance and burn mechanisms can be used in conjunction to determine the supply of Assets on the Zcash ecosystem. This allows for the bridging of Assets defined on other chains.

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Okay thats great, so we can track total supply. Thats a good starting point.

Now we just need the ability to track individual addresses and freeze individual addresses.

The banking providers of a stablecoin won’t stay as providers if there is no way to prove source of funds when redeeming this stablecoin.

What about bridged stablecoins? ZUSDT, ZUSDC, and ZDAI? Can they exist without tracking/freezing? Assuming the stablecoin issuers don’t control the bridges it seems hard to enforce that requirement.

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See The Last Swing of The Stick - #45 by JoakimEQ

DAI can work, USDT and USDC might get frozen on the bridge contract if it becomes popular.

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The point of Zcash itself and ZSAs as consequent that it’s permissionless and trustless.

If you want to freeze funds, the emitter will be far better if he goes with one node (or few but controlled by the same entity) for the entire network or even if he stays on Postgres lol.

The same dollar bill can be used for buying drugs and then reused for buying a slice of pizza. This is the whole point of cash and Zcash reproduces it.
2 hops and your funds are clean.

In the end of the day it’s up to holder to prove their funds are clean.
With a right accounting software you can easily provide the legitimacy of your funds in case of audit.

But, as I have already said, with a certain level of tokenization and zkAMM développement, we don’t even need stables.
Stuck to (digital)gold to accumulate wealth and check see how many tokenized apples you can buy for your tokenized service.

A bit futuristic but to me this is the whole point of crypto and DeFi.

Hey Tim, appreciate your response and candid reply about what Zcash should be in your opinion. What I am trying to point out that before we have our own smart contract -esque infrastructure, there is only a limited amount of ways we can get a stable currency on Zcash.

FYI 92% of the 124 billion USD worth of stablecoins in existance are freezable by a centralized entity.

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I believe stablecoins can generate interest income, for example after listening to runekek of MakerDAO on Unchained podcast.

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progress. you left out “massive amounts of” :wink: and if reallocated to zec holders it can provide fundamental value and yield to zec holders via staking the POS blockchain

This should be owned by ZEC. not a third party

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The shielded stablecoin must be:

Sovereign, Private, and Stable

We should look at DAI

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I see what you mean.

I believe the most of freezable stablecoins exist only to evade from taxes in case you want to fix the profit in stable currency without actually exiting in fiat and buy back later.

If we need a stablecoin in Zcash, it should be cash like, not freezable.

So yes, DAI makes perfect sense.
Zcash want to be uncontrollable by third parties so why let controllable stablecoins to it ?

I agree with @gottabeJay.
I’ll just add IST from Agoric to it.

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Hey Tim, in most jurisdictions even swaps to stablecoins are taxable - so there is not much tax evasion possible with the stablecoin itself. Maybe you might be referring to pseudonymity of the blockchain itself?

You do bring up a good point that usually a lot of ETH maximalists don’t have an answer to "If ETH would hardfork, do Tether and Circle in essence decide which fork is “correct”?

However this is of course only a problem is a the stablecoin is successful. If its not - then it doesn’t really hold power.


So seems like the conslusion here is this:

We should look into bridging decentralized stablecoins from other chains to Zcash. IST seems like an interesting idea as there are already talks of Cosmos bridging to Zcash :). However, IST has like 100kish liquidity, which is pretty tiny :frowning: .

My gut says avalanche might hold the answer for us. If we end being able to bridge ZEC to AVAX, then the other way around should also be possible.

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It’s typically a bad idea to make decisions based on saving on taxes. Make decisions to help people make money. It’s better to help someone make $1 than to risk forgoing earning 1 to save 20 cents on taxes.

The interest income from our own stablecoin is where the upside is. i would rather make 1 in interest income on an ZEC stablecoin and pay the tax than the alternative which is make 0 and not have to pay taxes because i make no money.