Can cryptocurrencies help people in Hong Kong?

It's easy to think cryptocurrencies are useless if you live in an economy where you don't have to worry about the access and control to your own money.

However, that's not always the case. We're used to thinking that the money we hold on our bank accounts are ours and no-one can touch it. Unfortunately, this statement is false.

We had an example from 2013 when the government of Cyprus announced that depositors at Cyprus' largest bank would lose 47.5% of their savings exceeding 100,000 euros.

Although it's a different situation, we can also look at the current situation in Hong Kong, where we're seeing people facing difficulties accessing their money.

Can cryptocurrencies solve a problem here?

If we look at data from LocalBitcoins (over-the-counter trading of local currency for bitcoins), we can see that demand for bitcoin has spiked over 200% during the protests:

Digital assets, such as bitcoin and ether (Ethereum) are:

  • Permissionless - anyone can use it, you don’t have to ask permission

  • Decentralized - the network can’t be controlled by anyone (including the governments)

  • Portable - you can carry billions of dollars of value in one USB stick or a small piece of paper

  • Censorship resistant - There is no practical way for a government to ban or limit it

This means, that if you hold your value in either bitcoin or ethers, you can be sure that it’s only you that controls your money; nobody can take it away from you or tell you what you can’t do with it. The only thing you need is the internet.

However

Bitcoin might not be the best solution for this due to its price volatility.

While bitcoin is the current brand name of digital assets, I believe it’s Ethereum which solves a problem here. Why? Because people need to store their value in USD value

Since Ethereum is more programmable than bitcoin, it has a permissionless native stablecoin pegged to USD, called DAI.

DAI is pegged to USD, and Ethereum’s native currency ETH overcollateralizes it. As of today, the protocol has:

  • $82M worth of DAI in circulation

  • 1.5M ETH as collateral (USD value of $271M)

  • Making it a USD-pegged stablecoin that’s 332% overcollateralized

Just like bitcoin and ether itself, DAI is permissionless, decentralized, portable, and censorship-resistant.

DAI is being developed by engineers from MakerDAO as an open-sourced protocol.

So, if you need a shelter for your assets, you can use both bitcoin and Ethereum. However, if you want to protect yourself from volatility at the same time, then Ethereum is your go-to-platform since it has a native stablecoin built into its protocol, which bitcoin does not. 

I hope that we never need this solution. However, I can rest assured knowing that in case we do need it, the blockchain-powered technology will be there to serve us.

- Edgar