Crypto VC Thoughts: New Type of Stablecoin

Due to the recent crash of Luna, people wonder what we can do to make a better stablecoin? How about finding something that is very stable? Like AriZona Iced Tea ☕? Check out USDTea!

AriZona Iced Tea has been stabilized at 99 cents since 1992. So does the tea will continue stabilizing at 99 cents in the future?

Let's see how they stabilize the product at 99 cents since 1992.

🫖 Succesful of AriZona Iced Tea

Image credit: https://www.latimes.com/business/story/2022-04-12/az-iced-tea-inflation-99-cents

The company sells about 1 billion 99-cent cans each year. The company is second to PepsiCo's Lipton, Pure Leaf, and Brisk. Lossing customers are not more detrimental than the rising price of their business. And they do not spend a load of money on commercials.

🥳 Previous champion

Not to mention that Coke Cola was the record holder to stabilize their product price for more than 70 years of their 6.5-ounce bottle at 5-cent from 1886 to 1959.

🍔 Big Mac Index

Image credit: https://medium.datadriveninvestor.com/what-do-big-mac-prices-tell-us-about-true-inflation-27f44912500f

You probably heard that Big Mac from MacDonald is an indicator of the actual inflation rate. 

It is a Burgernomics.

Why not use Big Mac as a stablecoin asset backing then?

I think it is a safer bet on Big Mac than AriZona Iced Tea because Big Mac is almost everywhere globally compared to AriZona Iced Tea which is relatively stable in the very short term.

⚖️ Bad Idea of Asset-backed Currency

Image credit: https://www.moneyandbanking.com/commentary/2016/12/14/why-a-gold-standard-is-a-very-bad-idea

Anything that is backed by assets is such a bad idea! It has so many downfalls that make the market very unstable.

1️⃣ Volatile 

Since there is no way to determine the true valuation of the asset, the market will be volatile for missed pricing.

2️⃣ Open to error

There will always have room for the exchange rate to missed calculated due to human errors.

3️⃣ Over supplies

Physical assets always have limited supply, but the demand can always exceed. The market was due into correction until people realized there weren't that many supplies available.

4️⃣ Illiquidity

When the market goes down, not everyone wants to redeem the backed asset. Think about USDTea. If the USDTea de-pegged, would you want to redeem 100 bottles of AriZona Iced Tea?

You may argue that it is better than nothing but the point of having a stablecoin is to stabilize the price. Right 🤣?

🧠 My thoughts

I think Big Mac makes more sense if a stablecoin wants to peg with. But it is still very unstable to use the asset-backed method.