Why price stability matters for digital currencies
One of the main reasons cryptocurrencies such as Bitcoin struggle to gain widespread use in real-world commerce is high price volatility. Large and sudden price swings make it difficult for:
Businesses to price goods and services
Users to store value confidently
Digital currencies to function in international trade
The Digital Trade Coin (DTC) was proposed specifically to address this issue by introducing a stability mechanism grounded in real economic assets.
How does DTC achieve price stability?
1. Asset-backed value foundation
Unlike many cryptocurrencies that rely purely on market speculation, DTC is backed by a pool of real assets, which may include:
Major fiat currencies (e.g. USD, EUR)
Commodities
Highly liquid financial instruments
These assets are held and managed by a specialized institution known as a narrow bank, whose sole purpose is custody, settlement, and redemption—not risk-taking or speculative investment.
➡️ As a result, each DTC has a clear intrinsic value, derived from tangible assets.
2. Redeemability and arbitrage mechanism
Holders of DTC can redeem their tokens for fiat currency through the narrow bank under defined conditions.
If the market price of DTC falls below its asset-backed value:
Investors buy DTC at a discount and redeem it for fiat, reducing supply and pushing the price back up.If the market price of DTC rises above its intrinsic value:
Additional DTC is issued with corresponding asset backing, increasing supply and bringing the price down.
➡️ This creates a self-correcting supply–demand mechanism that keeps price fluctuations within a narrow range.
3. Role of sponsors and asset providers
System sponsors are responsible for:
Supplying initial and ongoing asset collateral
Ensuring full backing of issued DTC tokens
They are incentivized to maintain stability because:
Stable value builds trust
Higher trust increases adoption in global trade
Broader usage strengthens the entire ecosystem
Why this model is more stable than typical cryptocurrencies
Most cryptocurrencies:
Lack intrinsic value
Depend heavily on speculative demand
Use algorithmic pegs without real collateral
DTC, by contrast, combines blockchain technology with traditional financial principles, similar to how central banks and reserve-backed systems stabilize national currencies.
This hybrid approach makes DTC:
Less volatile
More suitable for cross-border payments
Potentially viable as a neutral global trade currency
Conclusion
Price stability is the core innovation of Digital Trade Coin. By anchoring its value to real assets, enabling redemption, and using supply-adjustment mechanisms, DTC moves beyond speculative crypto models and toward a practical digital currency for global commerce.