A Decentralized BCH-Backed Stablecoin System: The Missing Piece for Bitcoin Cash Mass Adoption

Impact of BCH Price Volatility

Imagine a small coffee shop in Manila that has started accepting Bitcoin Cash (BCH) for payments. The shop owner, excited about the low fees and fast transactions, decides to price a cup of coffee at 0.003 BCH. However, within a few hours, BCH’s price fluctuates from ₱17,000 to ₱22,000 causing the coffee’s price to swing from ₱51 to ₱66. This sudden volatility creates uncertainty — some customers delay purchases, hoping for a better rate, while others overpay due to rapid price shifts. Meanwhile, the shop owner struggles to manage costs, as suppliers still price ingredients in Philippine Pesos (PHP), not BCH. Despite being an excellent medium of exchange, BCH’s volatility makes it a poor unit of account, creating friction in real-world commerce.

Now, consider another scenario where the coffee shop continues pricing its goods in PHP, but customers can pay using BCH, with the wallet automatically converting the fiat price to BCH at the time of payment. This system eliminates the need to manually adjust BCH prices, offering greater convenience. However, it introduces a different problem — consumers who hold BCH are still exposed to price volatility. Someone who budgets their weekly expenses in BCH may suddenly find that their BCH buys fewer goods due to a price drop. If BCH’s value declines unexpectedly, they might postpone purchases, struggle to afford necessities, or frequently convert BCH into fiat to manage risks. This unpredictability discourages everyday use and forces BCH holders to constantly monitor exchange rates, making financial planning difficult — especially for those living on tight budgets.

Multi-Stablecoin System as a Solution

For BCH to function as everyday money, it must address this unit-of-account problem. While traditional fiat currencies like USD, EUR, and PHP provide relative stability, they are centralized and inflationary. BCH, on the other hand, offers a trustless, decentralized alternative but currently lacks price stability. The fundamental challenge is that as BCH adoption increases, its price tends to rise, making it more appealing to hold than to spend. This store-of-value characteristic conflicts with its use as a daily currency, as businesses and individuals need stable reference points for pricing goods, paying salaries, and making long-term financial commitments.

This is where BCH-backed, fiat-pegged stablecoins become essential. A multi-stablecoin system, where stablecoins pegged to national currencies (USD, EUR, PHP, etc.) are backed by BCH, would enable stable pricing and predictable spending power while maintaining the benefits of decentralization and low fees. Unlike centralized stablecoins like USDT or USDC, which rely on fiat reserves held by banks, BCH-backed stablecoins can operate on trust-minimized, decentralized models. This approach allows businesses to set stable prices, consumers to spend without worrying about exchange rates, and the entire BCH ecosystem to grow without sacrificing usability.

By integrating a multi-stablecoin system, Bitcoin Cash can bridge the gap between crypto and real-world economies, ensuring price stability while maintaining its role as a decentralized settlement layer. Merchants and consumers can enjoy fast, permissionless BCH transactions while transacting in stable, familiar units of value. Instead of being limited by BCH’s price volatility, people can use BCH-backed stablecoins for payments and savings, making BCH a practical alternative to traditional financial systems. This model enhances BCH’s real-world utility, unlocking true global adoption without compromising financial stability.

Programmable P2P Cash: BCH’s Unique Advantage

Bitcoin Cash’s programmability makes it uniquely suited for a decentralized stablecoin system. Unlike Bitcoin, which has limited scripting capabilities, BCH has undergone continuous upgrades to its virtual machine (VM), expanding its smart contract functionality. The introduction of CashTokens in May 2023 was a critical milestone, enabling fungible tokens for stablecoins and non-fungible tokens for governance and smart contracts directly on the BCH blockchain. These innovations eliminate reliance on third-party platforms or secondary layers, making it possible to create a fully decentralized, BCH-backed stable token without requiring centralized issuers or intermediaries. This is a game-changer, allowing stablecoins to operate purely on-chain with transparent and trust-minimized mechanisms — all while BCH remains fast and low fee, ensuring seamless everyday transactions.

Subsequent upgrades have further strengthened Bitcoin Cash’s smart contract capabilities. The November 2023 upgrade introduced VM enhancements such as introspection opcodes, allowing contracts to verify transaction details efficiently — critical for implementing decentralized collateral management. The May 2024 upgrade improved native covenant capabilities, enabling the creation of more powerful and secure decentralized applications (dApps) directly on BCH. These advancements make it easier to securely overcollateralize BCH-backed stablecoins, ensuring they maintain stability and reducing counterparty risks. Unlike centralized stablecoins, which rely on issuers and custodians, a BCH-backed stablecoin can provably enforce its reserves through on-chain mechanisms, making it a trust-minimized alternative in the digital economy.

These continuous upgrades position Bitcoin Cash as a powerful platform for decentralized finance (DeFi), enabling trustless financial applications that were previously only possible on Ethereum-like blockchains. By leveraging CashTokens and the evolving BCH VM, the ecosystem can support multiple fiat-pegged stablecoins, each transparently backed by BCH, without relying on centralized intermediaries. This ensures financial sovereignty, censorship resistance, and seamless global commerce integration, fulfilling BCH’s vision as peer-to-peer electronic cash system that is not just a medium of exchange but also a stable and usable currency for daily transactions.

Emerging Stablecoin Solutions in Bitcoin Cash

Stablecoin solutions are becoming integral to the Bitcoin Cash (BCH) ecosystem, offering users stable value while leveraging BCH’s fast and low-cost transactions. One such solution is Moria USD (MUSD), developed by Riften Labs. Moria is an open-source protocol that enables users to borrow tokens representing real-world assets, such as USD, by locking in BCH as collateral. This system ensures full and transparent backing, utilizing the D3lphi oracle for accurate price feeds. Users can borrow MUSD by depositing BCH, maintain the required collateral to avoid liquidation, and repay to unlock their BCH. Additionally, MUSD can be swapped for Bitcoin Cash on platforms like Cauldron, providing flexibility and liquidity within the BCH network.

Another innovative approach is StableHedge, which we are developing at Paytaca. Just like Moria USD, StableHedge is a decentralized stability solution designed to mitigate BCH’s price volatility without relying on centralized issuers. It operates by allowing users to deposit BCH into the platform, receiving StableHedge tokens pegged to an external asset, such as USD. The deposited BCH is allocated between a Redemption Contract, ensuring liquidity for redemptions, and a Treasury Contract, which engages in leveraged short positions on platforms like BCH Bull. This dynamic hedging mechanism aims to maintain the token’s stable value, providing users with a reliable medium of exchange within the BCH ecosystem.

Both Moria USD and StableHedge exemplify the growing efforts to enhance financial stability and usability in the Bitcoin Cash network through decentralized, on-chain solutions.

The Need for Seamless Wallet Integration

While stablecoin development in Bitcoin Cash is promising, the next major challenge is achieving deeper and more seamless integration within wallets like Paytaca. Stablecoins and BCH-backed stability solutions are only as useful as their accessibility. If users must manually engage with complex mechanisms or navigate separate applications, adoption will remain limited. To truly bring stability to everyday BCH transactions, wallets must offer an intuitive experience where stablecoins and stability solutions function as effortlessly as fiat-pegged payment options in traditional finance.

For example, merchants using Paytaca’s POS system need a frictionless way to accept BCH payments without worrying about volatility. While StableHedge already offers automatic stabilization for incoming payments, this system must evolve into a fully integrated, user-friendly experience that requires minimal manual setup. Similarly, consumers who wish to transact in stable value should be able to do so seamlessly within the wallet — whether through StableHedge, Moria USD, or future BCH-native stablecoin solutions.

By prioritizing tighter integration of stablecoin functionality, Paytaca can play a crucial role in bridging the gap between volatility and usability. Instead of BCH being seen primarily as a speculative asset, it can truly function as peer-to-peer electronic cash — stable, spendable, and accessible for daily transactions. Ongoing development in stablecoin adoption within Paytaca will be a key factor in ensuring that BCH remains a viable alternative to traditional payment systems, fulfilling its vision as both a store of value and a global transactional currency.