The Bitcoin-Backed Stablecoin That Ditches US Treasuries w/ David Seroy

**David Seroy** (0:00)
We know that stable coins have product market fit. It's unequivocal, it's clear. The most popular stable coins are backed by US Treasuries. So one, that has a censorship risk where those funds can be stolen or rugged or frozen. But then for us, as Bitcoiners, that are concerned about this global sovereign debt crisis, quite literally, the way that it stays alive is more people that are willing to fund the government debt by buying US Treasuries. And so the more that demand there is for those centralized stable coins, the more that we're keeping the fiat debt monster alive, which really is the number one enemy of Bitcoin.

**Shinobi** (0:37)
Hello, everybody, I'm Shinobi from Bitcoin Magazine, joined today by David Seroy from Alpen Labs. And we are going to talk a little bit about stable coins.
So one of the big projects you guys are focusing on launching on the roll up is a stable coin that does not depend on US treasuries.

**David Seroy** (0:59)
That's right.

**Shinobi** (1:00)
This is a very divisive issue in this space, in the sense of there are a large class of people in the world who could benefit very greatly from using Bitcoin. Like they don't have access to payment rails, they don't have access to financial tools. But the volatility that it presents just makes it a completely non-viable option, which is why people use things like Tether or USDC, which ultimately rely on treasuries or other completely centralized assets to back them and give them that stability. So, what you guys want to do is offer another alternative. My question here is to start, how do we revisit the idea of collateralizing a stablecoin with something other than a dollar instrument in a sustainable way?

**David Seroy** (1:50)
Yeah. So, I mean, I think you laid the foundation there. We're not saying anything groundbreaking. We know that stablecoins have product market fit. It's unequivocal, it's clear.
As you alluded to, the most popular stablecoins are backed by US. Treasuries. So one, that has a censorship risk where those funds can be stolen or rugged or frozen. In reality, it's a very light touch from someone like Tether or Circle.
But then for us as Bitcoiners that are concerned about this, the global sovereign debt crisis, quite literally, the way that it stays alive is more people that are willing to fund the government debt by buying US. Treasuries. And so the more the demand there is for those centralized stablecoins, the more that we're keeping the fiat debt monster alive, which really is the number one enemy of Bitcoin. So we're delaying the inevitable there.
There have been for many years these ideas of creating these crypto collateralized stablecoins. And the most popular one was the die stablecoin from Maker. You put in Ethereum as collateral, you borrow against it and it mints these new die tokens. Die ended up failing, in my opinion, because it ended up being not backed exclusively by ETH as collateral, but also by USDC. And so in that situation, it's like, what the heck's the point? And then people like Do Kwon came in with Terra Luna and said, we have this algorithmic stablecoin. It's not really backed by anything. There's just like an algorithm that keeps it pegged at $1 that exploded as well.
But since then, there have been, in my opinion, like genuine innovations. One in particular that I'm a fan of is like the Liquidy team, which kind of took the idea of Maker and Die and said, you can put in something that's collateral and borrow against it. But they built it in a way where it was totally immutable from day one. In most of these DeFi protocols, pretty much all of them, there's what's called like an upgrade ability, there's a multi-sig. They say it's decentralized, but it's theater. It's decentralized in name only. There's some entity that controls a multi-sig that could change the rules of the protocol or rugged. What Liquidy really showed with their V1 is that they could create one of these crypto collateralized stable coins, and they could do it in a totally immutable way. And so it truly is actually censorship resistant. And it's been running for several years now. It's maintained its $1 peg. And again, there's no upgradability to it. And so to me, that kind of set the stage for a while. Like, could we actually have these credible, you know, censorship resistant stable coins? Now, from our perspective at Alpen, you know, we're building Bitcoin ZK roll up. So you can have this collateral Bitcoin go from the layer one into a more expressive layer two, without the traditional trust assumptions of a multisig. And so if you can have that Bitcoin in a more expressive EVM compatible layer two, and you can combine it with something like Liquidy, then you can create a credibly censorship resistant Bitcoin backed stable coin that is totally immutable, that inherits its security and double spend protection from Bitcoin itself. And that gets us to, in my opinion, the most credible way to have some sort of Bitcoin backed stable asset that can compete with what's happening with this kind of explosion of stable coins.