Peg In to FIO: Other Blockchain Tokens on FIO

Owned by Luke Stokes
Last updated: Jan 06, 2021
3 min read

(Note: this is currently just a draft of my thoughts in a pros and cons format)

“Making crypto products easier so anyone can use them.”

This is the current driving force behind FIO, and we do not currently control whether or not we will succeed. The reason for this is there are many usability challenges involved with using cryptocurrency that are caused by the chains the tokens exist on. High gas fees on Ethereum, high transaction fees on Bitcoin, long delays in the mempool, needing ETH to send a stable coin like USDT/USDC, etc. These limitations may be overcome with second layer solutions like the Lightning Network or Loop Ring. Until they are, what are we to do to achieve our goal?

If the experience of sending and receiving cryptocurrency using FIO is not joyful because of these native chain limitations, should we consider wrapping these tokens on the FIO chain? Should we possibly consider providing a derivative mechanism to represent these tokens (via locking up FIO as collateral in order to mint the derived tokens)? Derivatives could be priced via an oracle system with incentivized real time conversions to keep the peg or just through open market price discovery (requiring some kind of onchain DEX). We could review Pegnet for inspiration and on the token wrapping side we could explore pBTC which is already live on the EOS network.

Concerns:

  • This strays away from the current core functionality of FIO as a wallet layer solution that doesn’t interact directly with other chains.

  • Wrapping (and possibly derivatives) may require solutions (oracles, gateways, etc) which could lead to centralization and increased risk, including regulatory risk (wrapped tokens, for example, may not be looked at favorably by entities like the SEC).

  • At scale, chain throughput may not be able to support existing FIO functionality and token transfers from multiple networks. We’ll have to model this out.

  • Wrapped and derived tokens are only useful when they have sufficient liquidity in and out of the token or via enough arbitrage to maintain the peg. We might build this system only to find out not enough people will use it for it to have any real value.

  • FIO tokens may create even more confusion for users who already struggle with understanding how tokens like USDT exist on different networks.

  • Focus on this effort will take energy and effort away from other critically important improvements and roadmap items already planned for the FIO Protocol.

Possible Benefits:

  • The billions of unbanked in the world looking for exposure to crypto and dealing with capital controls and (in extreme cases) _monthly_ inflation of 20% which destroys their ability to save need a solution that is easy to use and gives them access to the major cryptocurrencies, not just more risky, less used altcoins. FIO could be a complete solution for them.

  • With FIO tokens (low fees, high speed confirmations, etc), we could then work on every other layer of the cryptocurrency usability problem including fiat on ramps and off ramps vis partnering with existing API-based solution providers. We’d have more control over our goal.

  • We could focus on a joyful crypto experience from start to finish for converted no-coiners. Similar to the experience they’ve come to expect with centralized solutions like PayPal or Venmo, we could give them something similar but decentralized for the major tokens they hear about in the news and want exposure to.

  • The extra on chain activity will generate more fees which can be used to pay block producers and incentivize other activities such as voting and staking.

  • Demand for the FIO token might increase as users lock them up in derivative contracts to mint new tokens.