When is FIRE Superior to Stablecoins?

Among cryptocurrencies, stablecoins have gained popularity for their promise of stability amidst market volatility. However, a new contender, the Fire Token, has emerged with a unique approach. It has a stable price but is not a stablecoin, so why use it when you have coins like USDC? We’ll explore the limitations of stablecoins compared to the Fire Token and how this fresh perspective provides unique value, including it in your ecosystem. Stablecoins have the following benefits: - **Stable purchasing power**. An asset such as USDC pegged to a stable currency like the US dollar provides buyers and sellers with the security of knowing the value of each token won’t rise or crash unpredictably. - **Fast, cheap, and secure to transfer**. Stablecoins can be sent easily around the globe, including to places where the local currency may be unstable. - **Ease of accounting**. Due to 1:1 peg with an external currency (usually USD), stablecoins offer holders a streamlined valuation in a reference frame comfortable to users. While stablecoins offer benefits for accounting and financial stability, it is essential to acknowledge that they, as everything does, have tradeoffs. Despite their consistency and ease of valuation, stablecoins face challenges that can impact their long-term viability and widespread adoption. - [**Stablecoins do not have a community.**](https://hackmd.io/GPBxcmmUT4i-cc5gzUIbCw?both#Stablecoins-do-not-have-a-community) - [**Inflexible and externally-dependent monetary policy.**](https://hackmd.io/GPBxcmmUT4i-cc5gzUIbCw?both#Independent-Monetary-Policy) - [**You never make money holding a stablecoin.**](https://hackmd.io/GPBxcmmUT4i-cc5gzUIbCw?both#Profitability) ## Stablecoins do not have a community. Community is an emergent property of any group with a unified interest. This interest can arise from a range of things, including; physically living near each other to owning similar property. Having a community of token holders with a vested interest in the success of a token brings numerous benefits and plays a crucial role in a project’s growth and sustainability. In this way, there is no USDC community. When a project integrates USDC, USDC holders don’t benefit from sharing this with other USDC Holders. There is no upside, and there is no downside. On the other hand, Fire has a robust community, enabled by the fundamental incentive to come together in pursuit of a common goal. FIRE chooses not to be a stablecoin which allows token holders to make real money from the growth of the FIRE ecosystem. Again, USDC holders do not make money from more people adopting USDC; therefore, they do not have a community when considering holders. Stablecoins make this tradeoff when they choose a fixed exchange rate over an independent monetary policy. ## Independent Monetary Policy The policy trilemma, also known as the Mundell-Fleming trilemma, refers to the concept in economics that an entity cannot simultaneously maintain three key objectives: a fixed exchange rate, free capital mobility, and an independent monetary policy. This trilemma has significant implications for the cryptocurrency space. Cryptocurrencies are borderless and decentralized, meaning an open ecosystem or capital mobility is baked in. Thus, in structuring a cryptocurrency, there’s a choice between an independent monetary policy and a fixed exchange rate. <img src="https://docs.google.com/drawings/d/e/2PACX-1vTH3O_JMLvlwUT_ENhThLnZ3w7SPUSoZYtUIDpkEhq9SUXJaX8AjNncto_HsArlN7bExHIq4LBgh8uB/pub?w=624&h=482"> https://www.investopedia.com/terms/t/trilemma.asp USDC opts for a fixed exchange rate in lieu of independent monetary policy, resulting in a lack of community and investment potential; stablecoins are tied to the US system, so the token value can’t grow independently from USD. Fire chooses an independent monetary policy, meaning the ecosystem can grow, and the community members’ holding value can grow with it. ## Profitability For stablecoins such as USDC, the appeal lies in their ability to hold consistent purchasing power over time. As mentioned above, this makes it an ideal candidate to transfer money or retain the value of US dollars (*cough* *cough* minus inflation). However, there’s no way to make any money off of stablecoins. They can’t, in essence, have it both ways. No downside also equals no upside for holders. > If you have more, you have more; if you have less, you have less. Fire allows token-holders to share in community profits by linking [community growth](https://hackmd.io/GPBxcmmUT4i-cc5gzUIbCw?both#Stablecoins-do-not-have-a-community) to increasing supply for all token-holders. These aligned incentives also guarantee game developers, marketplace owners, and other community adopters a pre-existing coalition to support their products. ## Summary In the [previous article](https://hackmd.io/iCtGaIfPTJSUbHL4BBkVRA), we discussed why using your token for everything can be a mistake. So why should I, as a developer or otherwise, where I am not using my token, use FIRE instead of USDC? When you add USDC, you get some benefits, but you don’t get a community of cyber hornets who want to use and share your product. With Fire, you do. ## Next: What about using non-stable tokens with existing communities? There are other tokens with communities that have similarly chosen independent monetary policy over a fixed exchange rate. Bitcoin, Ethereum, and others would only have grown to where they are today with a community driving their adoption. So why not choose them? What benefits does Fire have over other digital commodities? In our next article, we’ll go over this specifically.