A lot of my recent research has been around cryptocurrency as money - and how stable assets are the core to scaling the industry and building reputation and trust. I believe that creating price stability often through collateralization, whether that’s with fiat currencies like the dollar or pound, cryptocurrencies like ethereum or bitcoin, or commodities like gold and oil, will be essential to many web3 innovations in the coming decade.
The same applies to building blockchain applications - they require some kind of stable priced coupon or credit that can be used to build on and across multiple blockchain networks. Otherwise token interoperability is a big problem as well as volatility.
Most developers don’t like using volatile assets, let alone big businesses or enterprise.
Until now, there was no universal credit that could be used across multiple blockchains or ledgers. If you wanted to build an application on Ethereum for example, you’d have to hold ethereum to pay fees (gas) for transactions and deployments.
If you wanted to build on, or be interoperable with multiple blockchain networks, you’d have to hold multiple volatile tokens. Adoption indicators are down since 2019, and we need smart solutions to move the space forward and to encourage a new wave of builders.
The team at Outlier Ventures set out to solve this problem, and they came up with ZIP - a standardised credit for use on multiple blockchain networks, which is surprisingly simple.
Aptly named, ZIP is multi-network gas station with a minted, stable value credit, collateralized by a managed basket of tokens that correspond to the networks you can build dApps on.
For example, you could build on Ethereum today and Fetch tomorrow, or both simultaneously - with the same credit, as long as the basket contained both Ethereum and Fetch.
This opens huge opportunities for previously siloed development efforts, it also makes choosing a layer 1 a much easier and less important task, knowing you can move flexibly and build across many networks at the same time, or even later on. Last but not least, of course, this makes deploying blockchain SaaS solutions considerably easier.
In some respects, ZIP is similar to MakerDAO’s DAI, or Amazon Web Service (AWS) Credits.
You collateralise assets (like Ethereum) in return for a stable credit (Like DAI, or in this case, ZIP). but ZIP is not a traditional stablecoin in that sense, its more for builders than buyers.
View it as more of a credit for building on multiple blockchains, ideal for developers building SaaS tools, rather than a DeFi tool for lending, or borrowing dollars.
Like Maker, ZIP is also supported by a DAO (Decentralised Autonomous Organisation). In this case on Aragon - and it already has a little activity, but I am looking forward to seeing more contributors join. The DAO Is at the heart of how ZIP runs; It’s how the collateral token basket is managed, project finances are handled, and proposals are made to the DAO members and the system is governed.
DAO’s present big opportunities but also challenges, particularly around the collateral asset management and ensuring that there is enough collateral at all times, particularly when holding volatile tokens. If ZIP scales quickly, it’ll need the collateral to back it. I’ll cover more on this later.
ZIP credits could also be compared to AWS Credits. They’re used to pay for ellegible services on Amazon Web Services, which is ideal for building SaaS solutions because its a very flexible environment with dynamic, standardised, and fair value pricing (through credits).
For people to take blockchain and web3 networks seriously for deploying SaaS solutions, they’ll also need some stable priced credit to pay their development and deployment costs. This is where ZIP comes in to support all of the networks in its collateral basket. Clearly the long term goal is to offer this kind of scale.
See the below visual on collateralisation and redemption of ZIP.
ZIP will support the following networks out of the gate:
- Ocean
- Oasis Labs
- Fetch
- Qtum
- Arweave
- Enigma
- Conflux
- Foam
- Chainlink
- Aragon
- Cosmos
- Golem
I am confident that there will be very few protocol teams who aren’t interested in ZIP, as it is a very concise approach to solving developer friction and standardised pricing models in blockchain. It’ll also have great network effects to be a part of.
On a longer time frame, we’ll hope to see mounting interest from traditional firms who can leverage ZIP to build frictionlessly across multiple networks.
Unique Problems Require Unique Solutions
The difficulty around ZIP is the collateralization basket. With tokens being highly volatile, the basket must be actively managed.
To mint DAI (MakerDAO stable dollars) you have to collateralise a huge 1.5x the amount of ETH that you get back in DAI (dollars) - to account for big sell offs and price moves. That’s a lot of collateral that’s required, and that’s for Ethereum, which is considerably more liquid than most tokens.
This is acknowledged effectively in the whitepaper, but it will certainly require some fluid thinking and asset management through the DAO and wider team to ensure that the collateral remains valuable enough to support all minted ZIP.
To summarise, ZIP feels like a great convergence point for distributed ledger technology in the public eye if it can scale quickly enough and get the right people on board.
More information on ZIP will become available at Diffusion, a web-event and demo day hosted by Outlier Ventures which takes place on the 28th of May. Until then, you can learn more by reading the website or whitepaper.
(Disclaimer: The author does not have any vested interests in ZIP)