ISS-Ordinals-based Inscription Stablecoin System
Created: March 26, 2023 12:20 AM Created by: qx2u21 Tags: Project
ISS-Ordinals-based Inscription Stablecoin System
Ordinals-based Inscription Stablecoin System (ISS) If you have more ideas, welcome to communicate with me on Twitter @ohxiyu.Twitter@ohxiyu
< https://github.com/ohxiyu/iss>
1 Introduction
Stablecoins have always been an important demand point for digital currencies. Stablecoins anchored to fiat currencies, due to the risk of underlying collateral, such as the recent instability of USDC and Silicon Valley Bank's bankruptcy, directly led to USDC being unanchored. Existing stablecoins are not ideal digital stablecoins.
With the emergence of the Ordinals protocol, it has greatly improved the activity on the Bitcoin chain and also made new breakthroughs in design and application of inscriptions.
Among them, BRC20 token design based on Ordinals protocol has been introduced in detail in my previous article (https://mirror.xyz/0x421d67Be08E9B0B656763354b273f422E1527CdC/5VcND-gyMppsQQ0vAx5Gw-8iybPZnvGKvZGRnK0jv0w).
There are some limitations in technology and application for BRC20 tokens, such as over-reliance on centralization and indivisibility. However, these limitations can be ignored in a centralized application scenario.
Based on this premise, this article will introduce Inscription Stablecoin designed based on Ordinals concept.
2 Feasibility
2.1 Technical feasibility:
The design of Inscription Stablecoin needs to be built on a reliable technical foundation to ensure the security and stability of digital stablecoins. Based on the design concept of Ordinals protocol, Inscription Stablecoin can be completely minted in the inscriptions on the Bitcoin chain, which is equivalent to undamaged paper money that Ordinals system can guarantee and cannot be modified.
2.2 For Inscription Stablecoin, it can be issued by the government, and complete decentralization is not necessary. The disadvantages of over-reliance on centralized services can also be forgiven. Based on Inscription Stablecoin on the Bitcoin chain, a traditional paper currency issuance method can be adopted for issuance and management by governments or relevant agencies to ensure the legitimacy and stability of stablecoins.
2.3 Legal aspects:
The issuance and use of Inscription Stablecoin need to comply with local laws and regulations; otherwise, legal risks will arise. However, governments have a strong demand for digital currencies' issuance, and more countries are exploring digital currencies' digitization methods of payment providing legal protection for Inscription Stablecoin's issuance.
2.4 Economic feasibility:
The issuance of Inscription Stablecoin requires certain economic foundations and market demands; otherwise, there will be a risk of market failure. However, digital currencies' popularity has been increasing day by day; issuing digital banknotes gradually becomes a trend in society as well as provides more monetary policy space & tools for governments that are significant for economic development & management.
3 System composition
The system includes two types of inscriptions: one is fixed-amount digital banknote inscription while another one is an account book system inscription similar to BRC20 tokens design concept based on Ordinals protocol along with centralised indexer.
3.1 Minting stable coin inscriptions
Minting inscriptions using Ordinals protocol onto Bitcoin blockchain where custom formats could also embed anti-counterfeiting information into them while setting fixed amounts like paper money used in different payments scenarios.
3.2 Minting accounting inscriptions
Accounting inscriptions generated by indexers published every block recording total information after changes made from previous blocks. For example, total issuance amount and number of holding addresses.
3.3 Indexer
This is an important tool in the system that must be published and operated by government authorities. It verifies the authenticity of digital stablecoin inscriptions, records transfer information, and generates accounting inscription information.
4 System operation
Minting & issuing are done by official authorities while setting fixed amounts for each inscription along with recording them.
Transfer: Similar to paper money, all inscriptions can be freely transferred directly on Bitcoin addresses.
Destruction: Since there is no damage to Inscription Stablecoins, a non-destructive mechanism can be set up within the system.
5 Discussion
5.1 Application Scenarios
Cross-border fiat currency trading. Unlike Bitcoin, Inscription Stablecoin can anchor fiat currencies and achieve more accurate currency exchange and borderless transactions. This is of great significance for cross-border trade and international payments.
Inscription Stablecoin can serve as a stablecoin for digital currency exchanges. Unlike traditional stablecoins, Inscription Stablecoin does not need to worry about the system security of algorithmic stablecoins, while also achieving seamless conversion and trading with other digital assets.
Inscription Stablecoin can also be applied in multiple fields such as online payments and insurance. Inscription Stablecoin can provide these fields with more convenient and efficient payment methods, and promote the concept and use of digital currencies on a wider scale.
Based on ordinals' digital stablecoins, if there are better solutions to solve the problem of collateral in the future, it can also serve as a supplement to third-party issued stablecoins. This is a feasible idea that deserves our continued attention and research.
5.2 Limitations
One major limitation is that the Inscription Stablecoin system needs to confirm authenticity before it can be used, making it unable to combat counterfeiting directly. Although counterfeits may become invalid, this may still affect the credibility and usability of the stablecoin system.
Another limitation is cost issues associated with using it. Casting or transferring digital paper money requires paying certain fees which may make small transactions uneconomical especially in scenarios like online payments etc., which could limit its application scenarios or promotion.
In addition, uncertainty regarding confirmation time on-chain should be noted as another limitation since transfer & transaction involving Inscription's stability coin require some time for confirmation; thus requiring waiting times that might impact its usage in small-scale online payment scenarios etc..
This article did not discuss differences between ordinal-based stable coin systems versus those based on other chains nor their practical advantages/disadvantages - this point can be left for future analysis.
6 Conclusion
Overall, Inscription Stablecoin is an important branch of fiat currency with broad application scenarios and market demand. The design of Inscription Stablecoin needs to consider multiple factors such as technology, law, and economics in order to achieve system security, legality and sustainable development. Although there are some limitations to the stablecoin system like not being as good as Lightning Network in small payments etc., the development of digital stablecoins still requires continuous exploration and innovation.
The promotion and application of Inscription Stablecoin require cooperation among governments, financial institutions, and technology companies to continuously innovate & improve the infrastructure & ecosystem of digital currencies. Only then can we better meet people's needs, promote the development of digital economy & monetary systems while laying a more solid foundation for future digital economies.
This is just a concept with many limitations; I have put it on GitHub for discussion purposes. This solution will continue to be improved over time.