Why are we talking about CBDCs? Central Banks across the globe are studying, piloting, and distributing these digital currencies for the citizens to use as an upgrade to the current financial system. The current system is a mix of physical cash and assets like gold with highly centralized “digital representations” of money on Central Bank ledgers. The fear with CBDCs is the amount of control we could be giving up to those who are in power to determine how we make, save, spend, and invest our money. This is a very real concern and should not be thrown to the wayside, if we do nothing there is an incentive for certain groups to try and control the new system of digital money.

How do we prevent a CBDC in the US? First off public education is of the upmost importance. People of all ages should understand more about the current financial system and how we got here. For instance, most people don’t know how the US dollar doesn’t operate under the hood the same way it did 100 years ago. Second, is competition from companies in America. The more competition to build a genuinely stable and robust digital dollar, the better chance American’s have at getting the best product in 5-10 years. Third is smart legislation that not only promotes competition and creation of digital dollars but also creates frameworks and think tanks for those who are trying to do so in a “safe” yet experimental way.

Where do we deploy these digital dollars? On the most decentralized and secure blockchain networks. Notice how I said network(s)! Americans should have a choice of which blockchain ledgers represent the claim to their digital dollars.

When should we see these digital dollars proliferate? In my opinion it is already happening and crypto has been a unique testing ground. With different types of “stablecoins” like fully backed versions such as Circle’s USDC or Tether’s USDT and over-collateralized versions like MakerDAO’s DAI, blockchain networks have given millions of Americans and millions more people around the globe the opportunity to test and use digital dollars in various different ways.

What should American’s think about when assessing a “digital dollar”/stablecoin?

-Who is the issuer of the stablecoin and what do their reserves look like?

-Whether the issuer has unilateral control to freeze a wallet’s balance? What kind of process is required to freeze a wallet balance?

-Where are the instruments (cash, USTs) for digital dollars issued onchain located? Banks, trusts, something else?

-Are there fees associated with using a given stablecoin?

-How much do issuers make by creating and issuing stablecoins? Are they trading against their onchain holders somehow?

At the end of the day, our government keeps spending more and more money it doesn’t have and it doesn’t look like that is going to change anytime soon. While other countries such as China, who used to be the biggest buyers of US debt, go elsewhere, the US needs to find new net buyers of government debt. This seems to be stablecoin issuers. At the moment they already hold $100B of government debt which is not much to our current $34T of debt but it is a start.

References:

https://www.federalreserve.gov/faqs/what-is-a-central-bank-digital-currency.htm

Ethereum Sinks:

-0x00000000219ab540356cBB839Cbe05303d7705Fa (ETH2 Staking)

-DeFi smart contracts (MakerDAO, Compound, Aave, Uniswap, Curve, etc…)

-Layer 2 Bridges (Optimism, Arbitrum, Polygon, ZkSync, etc…)

-Grayscale Ethereum Trust (Currently Locked)

Ethereum Faucets:

-Block/Slot (Validator) Rewards

-Ethereum Foundation Allotment 

-Early Founder Allotments

Ethereum Blackholes:

-EIP1559 (Burned Ether)

-0x000000000000000000000000000000000000dEaD (Burn Address)

I am still developing this thesis but figured I would put the basics out there to see if anyone has any thoughts or feedback.

Trader Joe is an AMM style decentralized exchange on Avalanche. Trader Joe combines DEX services with DeFi lending to offer leveraged trading. Trader Joe’s products are community driven which allows them to allocate fees collected from liquidation and swaps back to the users via the JOE/xJOE staking mechanism. JOE is a governance token that also rewards its holders with a share of exchange revenues.

What is Avalanche?

Avalanche is a layer one blockchain created to host all kind of distributed applications. As another blockchain with similar utility to Ethereum, Avalanche has made small changes to how the blockchain works to optimize for speed and scalability. Avalanche aims to not only be a short term compliment to Ethereum but possibly even a substitute. Avalanche has a unique architecture. It consists of three unique chains: X-Chain, C-Chain and P-Chain. With each chain having its own purpose. Something interesting about Avalanche is that each chain uses a different consensus mechanism.

What is an AMM/CFMM?

Constant Function Market Makers (CFMMs) are a classification of Automated Market Makers (AMMs) which have been applied to crypto DeFi markets. CFMMs were pioneered by several projects in the crypto community to create decentralized exchanges (DEXs) for digital asset trading and based on a mathematical function establishing a pre-defined set of prices based on the assets held in a liquidity pool. Whereas a traditional order book-based exchanges (OBs/CLOBs), traders trade against a specific counter-party.

Why Deposit Liquidity in Trader Joe?

Some investors/traders may want to Provide Liquidity (LP) in an AMM style DEX for various reasons. One popular reason is the ability to earn rewards in the native governance token of the platform. This reward structure can be used to offset a concept known as impermanent loss (IL) which is when someone’s assets in a pool lose relative value when the price of one asset changes dramatically against the other asset. The concept of earning tokens for staking LP tokens is referred to as yield farming and can be done under the “Farm” tab on Trader Joe.

A step-by-step guide on how to lend assets on Trader Joe:

• Visit https://traderjoexyz.com and connect your wallet.

Trader Joe Connect Wallet Pop Up

Trader Joe Connect Wallet Pop Up

• If your wallet is not on the Avalanche Network, a window will prompt you to switch to the network. Click on “Switch to Avalanche” and sign it with your wallet.

• Verify the chain data is correct and click approve.

Avalanche C-Chain Details

Avalanche C-Chain Details

Switch Network to Avalanche C-Chain

Switch Network to Avalanche C-Chain

• Once you’ve switched to the Avalanche Network, you will see your wallet address up in the top right corner of the page.

• Now you will head over to the “Pool” tab where you can pick a pool to deposit to.

• In this example I selected the “AVAX-USDT.e” pool as seen in the picture below.

• Depending on the amount of each token in the wallet, manually choose an amount of one token and the website will fill in the matching amount for the other token. Tip: You can use the “MAX” button for the coin with the smaller dollar value.

• When you have decided the amount of each asset you would like to deposit as liquidity, you will click on the button underneath to deposit.

• The transaction will take a few seconds to go through and once you get a confirmation screen, you can be assured your assets are now deposited into the pool of your choice!

  Resources:

  Avalanche C-Chain Block Explorer:

  https://cchain.explorer.avax.network/

  Ethereum -→ Avalanche Bridge:

  https://bridge.avax.network/login

Trader Joe is an AMM style decentralized exchange on Avalanche. Trader Joe combines DEX services with DeFi lending to offer leveraged trading. Trader Joe’s products are community driven which allows them to allocate fees collected from liquidation and swaps back to the users via the JOE/xJOE staking mechanism. JOE is a governance token that also rewards its holders with a share of exchange revenues.

What is Avalanche?

Avalanche is a layer one blockchain created to host all kind of distributed applications. As another blockchain with similar utility to Ethereum, Avalanche has made small changes to how the blockchain works to optimize for speed and scalability. Avalanche aims to not only be a short term compliment to Ethereum but possibly even a substitute. Avalanche has a unique architecture. It consists of three unique chains: X-Chain, C-Chain and P-Chain. With each chain having its own purpose. Something interesting about Avalanche is that each chain uses a different consensus mechanism.

What is an AMM/CFMM?

Constant Function Market Makers (CFMMs) are a classification of Automated Market Makers (AMMs) which have been applied to crypto DeFi markets. CFMMs were pioneered by several projects in the crypto community to create decentralized exchanges (DEXs) for digital asset trading and based on a mathematical function establishing a pre-defined set of prices based on the assets held in a liquidity pool. Whereas a traditional order book-based exchanges (OBs/CLOBs), traders trade against a specific counter-party.

Why Deposit Liquidity in Trader Joe?

Some investors/traders may want to Provide Liquidity (LP) in an AMM style DEX for various reasons. One popular reason is the ability to earn rewards in the native governance token of the platform. This reward structure can be used to offset a concept known as impermanent loss (IL) which is when someone’s assets in a pool lose relative value when the price of one asset changes dramatically against the other asset. The concept of earning tokens for staking LP tokens is referred to as yield farming and can be done under the “Farm” tab on Trader Joe.

A step-by-step guide on how to lend assets on Trader Joe:

• Visit https://traderjoexyz.com and connect your wallet.

• If your wallet is not on the Avalanche Network, a window will prompt you to switch to the network. Click on “Switch to Avalanche” and sign it with your wallet.

• Verify the chain data is correct and click approve.

• Once you’ve switched to the Avalanche Network, you will see your wallet address up in the top right corner of the page.

• Now you will head over to the “Pool” tab where you can pick a pool to deposit to.

• In this example I selected the “AVAX-USDT.e” pool as seen in the picture below.

• Depending on the amount of each token in the wallet, manually choose an amount of one token and the website will fill in the matching amount for the other token. Tip: You can use the “MAX” button for the coin with the smaller dollar value.

• When you have decided the amount of each asset you would like to deposit as liquidity, you will click on the button underneath to deposit.

• The transaction will take a few seconds to go through and once you get a confirmation screen, you can be assured your assets are now deposited into the pool of your choice!

  Resources:

  Avalanche C-Chain Block Explorer:

  https://cchain.explorer.avax.network/

  Ethereum -→ Avalanche Bridge:

  https://bridge.avax.network/login

Trader Joe is an AMM style decentralized exchange on Avalanche. Trader Joe combines DEX services with DeFi lending to offer leveraged trading. Trader Joe’s products are community driven which allows them to allocate fees collected from liquidation and swaps back to the users via the JOE/xJOE staking mechanism. JOE is a governance token that also rewards its holders with a share of exchange revenues.

What is Avalanche?

Avalanche is a layer one blockchain created to host all kind of distributed applications. As another blockchain with similar utility to Ethereum, Avalanche has made small changes to how the blockchain works to optimize for speed and scalability. Avalanche aims to not only be a short term compliment to Ethereum but possibly even a substitute. Avalanche has a unique architecture. It consists of three unique chains: X-Chain, C-Chain and P-Chain. With each chain having its own purpose. Something interesting about Avalanche is that each chain uses a different consensus mechanism.

What is an AMM/CFMM?

Constant Function Market Makers (CFMMs) are a classification of Automated Market Makers (AMMs) which have been applied to crypto DeFi markets. CFMMs were pioneered by several projects in the crypto community to create decentralized exchanges (DEXs) for digital asset trading and based on a mathematical function establishing a pre-defined set of prices based on the assets held in a liquidity pool. Whereas a traditional order book-based exchanges (OBs/CLOBs), traders trade against a specific counter-party.

Why Deposit Liquidity in Trader Joe?

Some investors/traders may want to Provide Liquidity (LP) in an AMM style DEX for various reasons. One popular reason is the ability to earn rewards in the native governance token of the platform. This reward structure can be used to offset a concept known as impermanent loss (IL) which is when someone’s assets in a pool lose relative value when the price of one asset changes dramatically against the other asset. The concept of earning tokens for staking LP tokens is referred to as yield farming and can be done under the “Farm” tab on Trader Joe.

A step-by-step guide on how to lend assets on Trader Joe:

• Visit https://traderjoexyz.com and connect your wallet.

• If your wallet is not on the Avalanche Network, a window will prompt you to switch to the network. Click on “Switch to Avalanche” and sign it with your wallet.

• Verify the chain data is correct and click approve.

• Once you’ve switched to the Avalanche Network, you will see your wallet address up in the top right corner of the page.

• Now you will head over to the “Pool” tab where you can pick a pool to deposit to.

• In this example I selected the “AVAX-USDT.e” pool as seen in the picture below.

• Depending on the amount of each token in the wallet, manually choose an amount of one token and the website will fill in the matching amount for the other token. Tip: You can use the “MAX” button for the coin with the smaller dollar value.

• When you have decided the amount of each asset you would like to deposit as liquidity, you will click on the button underneath to deposit.

• The transaction will take a few seconds to go through and once you get a confirmation screen, you can be assured your assets are now deposited into the pool of your choice!

  Resources:

  Avalanche C-Chain Block Explorer:

  https://cchain.explorer.avax.network/

  Ethereum -→ Avalanche Bridge:

  https://bridge.avax.network/login