Basis Cash

Basis Cash is an open-source, permissionless algorithmic stablecoin.

Today, very few people use cryptocurrencies for normal, day-to-day transactions. But why? Some would say it’s because cryptocurrencies are slow and expensive to use. While that’s true of Bitcoin and many older cryptocurrencies, it’s certainly not true of some newer protocols. For example, Dash claims it can confirm transactions in under a second and handle thousands of transactions per second at fees of less than $0.15 per  transaction, with fees expected to decrease further over time. Others would say it’s because cryptocurrencies aren’t reliable or trusted. But that’s also not true, as there are many protocols with firm backing from respected investors and strong development teams. Furthermore, Bitcoin itself has shown that the blockchain model is extremely robust from a fault-tolerance perspective.
Some would say cryptocurrencies aren’t widely used because there is an inherent chicken and egg problem: Because everyone uses local currency, merchants don’t have an incentive to accept anything else. But we actually think the opposite is true. As long as some customers want to pay in cryptocurrency, it costs merchants almost no overhead to accept it, and it costs them sales if they don’t. In fact, because
cryptocurrencies are immune to fraudulent chargebacks, and transaction fees can be much lower than fees for credit and even debit cards, merchants should actually prefer cryptocurrency payments.
 We can find two clues to the real problem by examining the perspectives of the merchant and the customer in turn. First, consider the merchants that do accept cryptocurrency payments today. Microsoft, Quickbooks, and Spotify, for example, allow customers to pay in Bitcoin using a service called BitPay. However, none of these merchants keep their money in Bitcoin—instead, they immediately convert any
Bitcoin they receive into USD. Why? Well, these merchants are not in the business of speculating on Bitcoin. They don’t want exposure to Bitcoin market risk any more than they want to hold their money in barrels of oil. What if Bitcoin dropped 90% one day? If you ask people who love cryptocurrencies, they might mention many of the attributes they love—for example, the convenience, the control, and the
semi-anonymity. But we bet they still can’t stomach the idea of keeping their life savings or quarterly revenue invested in such a volatile asset. In other words, in order for cryptocurrencies to become more than just a playground for speculation, there is a severe need for them to be a stable store of value.
 Second, imagine trying to make a purchase using Bitcoin. Because merchants want to collect a fixed amount of USD for their services, you’re faced with a constantly adjusting BTC price for your potential purchase. This is a terrible user experience. Even worse, imagine receiving a job offer that pays 1 BTC per month. If the price of BTC happened to drop one month, you can’t pay your bills. Alternatively, if you borrowed money via a loan that demands a monthly payment of 1 BTC, a price swing in the other direction could leave you in default. We’ll discuss this more later, but the fundamental problem is that today’s price-volatile cryptocurrencies subject any contract promising or taking future payments to extreme price risk. From this, we can see that in order for cryptocurrencies to become a viable medium of exchange or unit of account, there is again a severe need for price stability.