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Chains like Ethereum use Eth for gas, and then a stablecoin is delivered as a contract.

I'm thinking that it might be nice to actually use a stablecoin as the BASE token for a new blockchain. That way, the value never changes, gas value is stable, etc.

Assume the stablecoin really is stable and 1-to-1 backed correctly.

Is there any reason not to do this?

Why hasn't anyone done this?

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  • In the early history of crypto, a major goal was decentralisation of control. If you have an asset-backed stablecoin, you are handing the ultimate reigns to whoever is in physical possession of the assets. For an algorithmic stablecoin, as recent history has shown, an algorithmic stablecoin is not very likely to actually be stable.
    – Chuu
    Feb 7 at 15:50

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Look into the Gnosis Chain, they use DAI as the native token. Though the transactions are cheap in that chain, it doesn't due to using the stablecoins, while fees are based on the throughput of the blockchain and the busyness. So no matter which native token you have, the question is what is the gas price.

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Is there any reason not to do this?

Although it is possible technically, the social outcome might not be what you desire.

"Assume the stablecoin really is stable and 1-to-1 backed correctly." Because this assumption is unlikely to hold true for any stablecoin for a long duration of time (> 10 years).

Also using an asset backed stablecoin as a currency means that the chain is not politically neutral and thus unlikely to see global adoption.

Furhermore it is hard to get early investors excited, because the short-term upside in the case of the chain is successful is lower.

Why hasn't anyone done this?

Probably for the reasons above.

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In order for a coin to be 1-to-1 backed, some organisation needs to do that backing. At that point, a blockchain is superfluous, since that organisation in any case needs to be trusted.

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Actually there was one, but unfortunately that project collapsed. Does anybody still remember Terra and Luna?

Basically, there are two types of stablecoins, asset-collateralized stablecoins, and algorithmic stablecoins.

For asset base stablecoins, a third-party oracle(or your own foundation) needs to be present to make sure your native token can be exchanged 1 for 1 with other currencies(like USD or a cryptocurrency) and there are a few challenges you need to overcome.

  1. You need to have a Defi system before your blockchain
  2. A large amount of real money needed to be locked from the start of your blockchain. Which is a huge commitment. This amount increases with your blockchain inflation.
  3. Your blockchain can't re-use the majority of existing blockchain's game rules. For example, gas fees, inflation, chain re-org, and gas burning.

The algorithmic stablecoin, on the other hand, is much more flexible. Terra was a really good try.

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    I think it can be argued, perhaps with some controversy, that the problem with Terra and Luna was not that they were poorly implemented or had some flaw, but that the entire idea of an algorithmic stablecoin is inherently impossible. Such a coin must have a fixed exchange rate with USD (or whatever fiat you want), must not have capital controls (or else what's the point of using a cryptocurrency?), and should not go to zero whenever investors lose confidence in it. Satisfying all three of those criteria is known to be impossible.
    – Kevin
    Feb 6 at 18:31
  • Very good point! Thanks for your comments.
    – Wuzhong - Chainstack DevEx
    Feb 6 at 21:09
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    @Kevin they try to create self-imposed capital controls by rewarding people for holding onto their coins when the exchange rate is too low and punishing them for holding when the exchange rate is too high. So long as the amount of speculation greatly exceeds the amount of actual exchange, it does sound like this has a hope of working. It failed anyway, as we saw. Note there is more to the Terra collapse than just algorithmic collapse - there is also plain old corruption as the dev team tried to make off with all of the remaining money by retroactively changing the consensus rules.
    – user253751
    Feb 7 at 9:11
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    @Kevin also the base currency of the Terra blockchain is Luna which is not stable.
    – user253751
    Feb 7 at 11:10
  • @user253751 You seem very familiar with the Terra. Do you mind sharing what was TerraUSD and Luna good for? In this case, is TerraUSD a native token too? Or is it just a smart contract on TerraChain? I personally have not developed on Terra so I will appreciate if you can share more insights into that. Thanks in advance!
    – Wuzhong - Chainstack DevEx
    Feb 8 at 4:11
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I see a few issues.

  1. The secure operation of most blockchains is funded, at least initially, through the issuance of new coins, but if you want your coin's value to remain stable then you are limited in your ability to issue new coins.
  2. In the case of asset-backed stablecoins, the holder of the assets is a prime target for legal attacks. If the holder of the assets also had a hand in the operation of the blockchain, that would seem to make a stronger case for declaring them an illegal money transfer provider.
  3. In the case of algorithmic stablecoins, the algorithm can only work if it has another asset to work with on the same blockchain.
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