Stablecoins and Digitally Backed Tokens

Noah B7
2 min readApr 29, 2019

The premise of Crypto currencies have intrigued many for the past decade. The idea of a fully decentralized and distributed digital asset is refreshing as it is ingenious, laying wide open the possibilities in ways it can disrupt the way we interact as human beings. In addition to opening new opportunities, blockchains and crypto assets also address existing challages in ways previously thought impossible or expensive.

Take for example the popular (In Africa) mobile money. Since it’s inception, mobile money transactions are tracked by ‘tokens’ that are exchanged and shared via SMS — which is a 30 year old technology. So the innovation here isn’t the technology but the level of trust we have learnt to have in it. The basic idea here is that you deposit cash at an agent and they give you the equivalent amount in ‘float’ which is then deposited on your phone (via an SMS). If we venture to define what float is, it’s simply a digital equivalent of cash you have. This exchange value is carefully controlled by the telecom running the service under the watchful eye of the regulators.

Stablecoins or Stable tokens act in a very similar way, they derive their values from an underlying asset and this balance/exchange is maintained by a smart-contract that keeps the economics in check. So if you think about it critically, Safaricom, MTN, UMEME, Supermarkets have been using stable tokens for ages…What has changed is simply the technology!

However, unlike the Yaka (Ugandan electricity token) where we are forced to trust UMEME (Power distribution operator), unlike Mobile Money where we are forced to trust that MTN has the most up-to-date systems to keep the float vs cash balancing…given we have no transparency into these companies…we have no option but to trust.

Blockchain allows us to have organic confidence in these systems; that are now an integral part of our lives.

Rather than trust the mobile operator MTN, i can trust that a distributed, cryptocraphically secured, immutable ledger is keeping all transactional balances. It makes sure, automatically, that the exact amount in cash is the actually amount of “float” or “coin” or “token” in circulation. The network acts as both the accounting and audit trail.

This then shows us two things;

  • We cannot argue against the technology, because compared to SMS, Blockchain is far more superior. It has its implementation teething problems, yes, but we can’t argue with the science.
  • We cannot argue against the premise of a peggeed token or asset, we have beeen trusting these models for years now.

My challage to the industry players, regulators, Innovators and the public is to explore how we can work together going forward, asking how DLTs can help us improve efficiency, transparency and security, rather than holding on to what we know at the expense of progress.



Noah B7

Blockchain Enthusiast, Cryptographer, Cyber Security Expert, Forensics Expert, Business Leader, Thinker, Husband, Father and son to the God of Creation.