> Traders are taking advantage of this arbitrage mismatch, buying up DEI coins and exchanging them for $1 worth of collateral, making matters worse. Deus Finance reacted by halting the redemption process in order to try and stabilize the coin.
Good luck with that.
Who else is reminded of the story of George Soros "[making] $1.5 billion in just a single month [in late 1992] by betting [that] the British pound and several other European currencies were priced too richly against the German deutsche mark"[0] ?
I don't quite understand how these traders are "making matters worse" by using the defining characteristic of a "stablecoin". If anything is making matters worse, it would seem to be the "reaction" of halting the redemption process.
Presumably because it would be more likely to stabilize if they didn't take advantage but it's designed so they would so one can't really complain about that.
Yes, normally buying DEI would help drive demand and thus price back upward. The article mentions that arbitrage bots do this all the time and it helps maintain the peg. It's only a problem when it's too difficult to mint new DEI (putting collateral into the system).
> The same way we can do by organizing bank runs. They’re illegal [..]
Source?
Imagine we're all back in early September 2008, and one of us were to post that Lehman Brothers was suffering unprecedented losses due to the subprime mortgage crisis.
Would you count that as organizing a bank run?
> in reality the system is just broken
Indeed. Yet another system which only reveals just how broken it is when you apply enough pressure.
Modern finance would argue it isn't broken and is working as designed. You're running perilously close to an Austrian school of thinking about currency for daring to suggest that everyone should in theory be able to get their money out at the same time!
Think of all the businesses you'd hamstring! All of the exec bonuses that wouldn't happen! Think of the traders, and speculators!
...I'll admit I do, and the ensuing chaos and having to come to terms and actually having to adjust the the economic vote of no confidence is a favorite pass time of mine.
> You're running perilously close to an Austrian school of thinking about currency for daring to suggest that everyone should in theory be able to get their money out at the same time!
With the amount of financial stimulus that governments have done in the last two years, in the event of a bank run there are possibly finance ministers who would simply print the required money and drop it from helicopters on the mobs waiting outside the banks.
I'm sorry I don't think I can access that content.
Is it along the lines of jurisdictions that have laws on the books to try to prevent rumor or malicious speech from causing runs on the banking system?
What if you're telling the truth when you say a bank (or some other financial institution or vehicle) is bankrupt and that investors should withdraw their money?
A bit like shouting fire in a crowded theatre, when the theatre actually is on fire... not a crime, more of a public duty.
Sounds a lot like the same mechanism that undid the Iron Finance stablecoin [0]:
> One IRON token is always redeemable for $1 worth of collateral, which on IRON is a mixture of TITAN and the Circle and Coinbase-created stablecoin USDC.
Undercollateralized algorithmic stablecoins that use their own issued coin as a '1:1' collateral don't work because they depend on ponzi growth to maintain the illusion of it working.
Overcollateralized algo stables such as DAI are much more sustainable. They require substatially more of a user's unrelated capital (whitelisted assets not based on the stablecoin's issuing protocol such as eth or wbtc which also have relatively deep liquidity available on the market) to be locked up and held as collateral to mint the stablecoin. And that makes drawing down the supply much smoother when times get rough as folks with their capital locked up will repay their debt on their own or have the market do it for them in a liquidation of locked capital. This repayment is what burns the supply and keeps the stable from falling far below peg. In fact historically, DAI's problem was that it would go way over peg during drawdowns because damand for DAI to stave off or participate in liquidations would push the usd price of dai way up.
It is highly capital inefficient model, as it takes roughly at least $1.50 of the other asset to mint $1.00 worth of stablecoin, and users will usually go for a much higher ratio to prevent the liquidation threshold from kicking in. And this capital inefficiency really kneecaps growth since you can't mint anywhere near as much of the stablecoin, but it also means the protocol and thus the stablecoin is much more robust in downturns.
Now it still has real risks because the protocol still depends on lively and accurate oracles to watch and report the collateral values, and that liquidations execute properly when collateral values fall enough to trigger them. But those risks are much more manageable compared to the risks undercollateralized stablecoins present.
DAI has been stable because the assets that are used to defend the 1:1 peg have been liquid. In the event of a credit crunch/liquidity freeze, the assets that need to be sold to defend the DAI peg aren't going to have an acceptable buyer, thus breaking the peg and causing DAI to fail.
Everyone is thinking way too hard about this. There's no mathematical or economic way to create a parallel US currency that won't break in a credit crisis. It's called the Impossible Trinity [1] because it's empirically impossible to do the following all at once:
1. Setting a fixed currency exchange rate
2. Allowing capital to flow freely with no fixed currency exchange rate agreement
3. Autonomous monetary policy
If you do number 1 (set a fixed currency exchange rate, aka 1 DAI : 1 USD), you CANNOT allow for the free flow of capital in and out of your exchange regime. It will eventually break every. single. time. Even if you're a massive sovereign nation, you still can't defend a peg against the Trilemma [2]
Crypto investors should understand that they aren't up against ideology here or "haters", they are up against empirical mathematic principles.
Interesting, this reminds me of how perpetual motion machines can be dismissed out of hand by citing the 2nd law of thermodynamics. As with plausible-seeming perpetual motion machines, the key to a popular stablecoin seems to be to make it complicated enough that it's difficult to analyze from first principles.
I think you've hit the nail on the head. Stablecoins exist in the non-crypto world [1] and they all are slaves to the Trilemma - there are trillions at stake if someone could figure out a way around this, but, much like the 2nd law of thermodynamics, you can't make the math work. Crypto doesn't offer a technology solution to this issue since it's not a matter of tech, but rather financial math.
If you're a fan of crypto and still reading, here's a hint at the next financial innovation after pegged currencies that you can try to replicate in the cryptoverse: XDR [2]
I don't read parent's comment as advocating the creation of a stablecoin pegged to XDR, but rather repurposing the principle of targeting (flexibly) a basket of underlying reserve assets as a unit of account in cryptoland.
But choosing the same basket as XDR would still satisfy that goal, and picking different currencies would be a trivial difference. And if that's the extent of the idea, the parent could have just said so, rather than taking on this coy mystique of "oh, I'd reveal my deep insight, but, novices like you have to do the research and figure it out yourself, else you won't be ready for it".
DAI sacrifices 3 [+] so it should be able to meet 1 and 2, though, right? Much the same as GUSD maintains one by obligating itself to honor redemptions.
[+] Dai's monetary policy is not autonomous; new units can only be issued for sufficient collateral and must be destroyed when value falls too low, a constraint that would make a central bank not be regarded as autonomous.
In terms of free capital flows with no fixed exchange rate, this is the "it works until it doesn't" part of the problem. DAI only survived the recent run because they had a rainy-day fund in their "PSMs" or Peg Stability Modules.
The PSM takes your USDC and mints new DAI and gives it to you. When DAI is >$1 you can make an instant profit doing this. (take 1 USDC, trade it for 1 DAI that you can sell for $1.001.)
The PSM takes your DAI and gives you USDC (while stocks last.) When DAI is >$1 you can make an instant profit doing this. (buy 1 DAI trading at $0.999, and swap it for 1 USDC worth $1.)
Notice the issue? The PSM within DAI is contingent on having enough USDC (proxy for USD) to keep the peg. When that reserve runs out, the PSM mechanism breaks and the peg fails.
If the auctioning functions correctly, there will always be more reserves as compared to Dai. If the "reserves run out", then there would be no Dai to buy.
But DAI doesn't control USDC, which means that they cannot control the reserve piece of the equation. This is the independent monetary policy + free capital flow piece of the trilemma.
The auction function doesn't work if USDC suddenly isn't worth 1 USD, because then you're facing down a reserve that isn't worth "more" than DAI, even though the algo still thinks it's in balance.
Basically you've tied DAI to USDC, which in turn is tied to Coinbase, which in the event of a bank run/bankruptcy event will freeze assets and cause massive capital flight causing people to sell their USDC for less than 1 USD as they flee for safety. This causes DAI to become unbalanced because their reserve of USDC isn't actually worth what it should be in USD terms, causing DAI to also lose the peg in terms of real US dollars.
I'm telling you, there isn't a way to make this stuff work. It's financial alchemy.
That is a legitimate concern, but irrelevant to the trilemma you've mentioned.
If USDC loses value, those vaults will be liquidated and the collateral will shift over to alternates - ie. eth. The scenario you are mentioning only plays out if USDC falls so much (and quickly enough that the auction bots don't respond) that it cancels out the overcollateralization from eth. given that dai is 166% collateralized, it wpuld have to drop a ton, which is difficult to imagine when it is credibly backed by real assets.
But the liquidation of USDC represents the flow of real assets OUT of the ecosystem, thus rapidly inflating the price of ETH and any other cryptocurrency denominated in dollars. Aka if you start selling 2 USDC for 1 USD, then the price of ETH goes from $3000 to $6000 overnight. BUT those dollar signs in front of the price aren't US dollar signs, they are USDC dollar signs. Which means that I can engage in massive arbitrage between exchanges.
Exchanges respond by sealing themselves off to protect their $3000 ETH from the $6000 fake ETH trade prices, thus creating a massive freeze in the market, thus wrecking the redemption system that underpins DAI.
It's very, VERY important to realize that all of these things are interwoven. There's no such thing as "USDC collapsing" without it also taking all the crypto traded on Coinbase with it.
... no. The price of Ethereum in USDC is irrelevant. There is no arbitrage to be had. If the price of USDC falls, you have to spend more and more USDC to mint one Dai because Dai is tied to the price of the dollar, not USDC.
Explain to me how you arbitrage USDC falling out of Dai?
I really encourage you to read up more on this. There are real risks that come with Dai as a stablecoin (including eth or USDC collapsing very quickly) but they are not the risks that you are identifying.
My background is in international finance, and therefore when I promise you that DAI cannot defend a virtual peg without holding large amounts of actual underlying US treasuries or physical USD, I'm only making that promise because it's been true for every currency that has ever attempted to maintain a peg with the US dollar. Maybe it's "different this time" but I sincerely doubt it.
I likewise encourage you to think about this from first principles and read up on the mechanics of a currency peg. You MUST be able to quickly sell T-bills on the market swiftly to defend your currency peg, otherwise you will see your currency break from the pegged range. DAI is shifting the reserves from directly holding USD or T-bills to holding USDC instead, which isn't the same thing as USD and WILL cause problems for DAI.
I wish this was a joke. How about you try to collect the $1m Millennium price with your proof of the Riemann hypothesis based on "empirical mathematic principles"? To be 100% clear about this: there's no such thing as empirical mathematical facts, there has never been and there will never be, not in this universe or any other. No matter how many (finitely many) roots of the zeta function you collect, they will never constitute a proof.
To your point: you do realize that stablecoins like Dai have given up monetary autonomy, right? The amount of Dai in circulation is governed by users/the market, not the protocol or a central bank. You seem to be acting in bad faith, because you deliberately only discuss two points, but according to this theory, a stable exchange rate and capital mobility are indeed compatible if you're willing to let the market dictate your monetary policy.
Isn't entire point of stablecoin that you can redeem it for the face value at any time? Not being able to redeem it seems like violating the contract or changing the rules while game is running...
Are all the users programmers, are they fluent with the language and frameworks? Could they even read the code if they wanted to?
Even if they could read the code and understand that there is a mechanism in place that allows designated humans to pause redemption, the code says nothing about when and how this mechanism should be used.
The user might reasonably expect such a mechanism would only be used in an emergency, like the network has been hacked, or there is a bug. They might expect that it would never be used for the financial advantage of the network operators simply because the coin has depegged and redemption is acting as expected.
> Are all the users programmers, are they fluent with the language
That's a fair criticism, but isn't it the status quo in the industry in general? Surely most people with stakes in the markets don't truly understand the regulations or the innate dynamics of them.
What makes central bank currencies special is that institutions like the Fed can "mint" or "burn" dollars whenever they please to maintain the "peg". In reality they're targeting a 2% floating rate of inflation, and the "minting" is done by making loans to banks that are motivated by economic stability instead of profit. Crypto stable coins don't have this luxury because this mechanism is founded upon trust in the central bank's governance and the underlying government.
Also the advantage! Sometimes central banks screw up the minting process and severely damage the currency (see: Argentina, Venezuela, Zimbabwe). Historically, currencies are a mixed bag and we should be glad there is more than one.
Yea, but to me it sounds like the same problem as a bank run. If everyone tried to retrieve their money from the bank at the same time they wouldn't have enough money.
Correct. These exchanges are banks, which are reliant on statistical multiplexing. There is quite literally zero difference between the sets of failure states that "stablecoins" are vulnerable to.
...which makes you wonder: why the cryptographic overhead at all? Oh wait... Because places want to be banks, without adhering to the regulations thereof...
That's true for banks but it's not a similar mechanism in any way. You should look into the term 'algorithmic stablecoin', these are basically a scam and don't work, which is why they keep losing their peg. There are other examples long before the media started paying attention and people in the crypto space have warned about this for ages.
Of course, some might call fractional reserve banking a scam as well but what these algorithmic stablecoins are doing isn't the same thing as the credit creation by private banks. It's more like they tried to create a "decentralized" central bank. I put that in quotations because the ones I know aren't actually decentralized either, they just use such buzzwords to trick traders.
Not all stablecoins work that way. There are more reputable ones like DAI or USDC. Actually the first stablecoins were all collateralized, the shananigans started in 2017 during the last bubble and now there are even more of these scammy projects because the market has grown so much. Adoption brings in a lot of newbies with money, and that in turn attracts charlatans of course. You can get a feel for what level of education the general public has when even in a tech forum most people don't understand anything about the economics and mechanisms of all these projects.
1. purely algorithmic stable coins (on-chain), such as UST. Voodoo, if you ask me. Can be decentralised.
2. (over)collateralised stable coins (on-chain), such as DAI (not DEI, which is at issue here). Collateralised by other crypto, smart contracts, and what have you. Can still be decentralised.
3. collateralised stable coins (off-chain), such as USDC or (allegedly) USDT. Those are collateralised by good old USD (or treasuries or commercial paper). Those need a central authority that holds on to the USD (or whatever form the collateral takes). So, makes sense that they have TOS.
The "entire point"? What, in your mind, does redemption mean for an algo stable?
Obviously, as we've seen, algo stables are subject to their own engineered ponzinomics, but I don't think redemption is "the entire point", or even a cognizable concept.
Yes, a true "stablecoin" would be 100% backed by deposits in a known and verifiable money market account and able to be withdrawn into USD or other real currency on demand at a 1:1 ratio. None of the things called stablecoins today meet this very simple set of criteria.
My understanding is that an attestation that you have a billion dollars looks at your bank balance, and observes that you have a billion dollars in your accounts.
An audit looks at the history of your overall financials, to ensure that you didn't just borrow that billion dollars two days ago for the sole purpose of passing the audit. Or that you didn't, like, cash a half-billion dollar check from yourself to yourself, and have the money immediately show up in the destination account, before it was debited from the source account.
I definitely feel like this is one of those situations where "if you have nothing to fear you have nothing to hide" actually applies.
I couldn't get a mortgage without a thorough check that income was indeed real income, the idea that billions in assets could be "attested" and not actually audited is incredibly shady.
2) On a particular day (the Report Date) Circle held an amount of USD-denominated assets at least equal to the number of USDC in circulation in a segregated account.
Note what is absent: No statement as to what these assets are. No statement as to where they came from and whether they were in the account the day before or the day after the Report Date.
> What's the difference between "attested" and "audited" in this context.
Attestation: "Person X has $50 million dollars in an account."
Audit: "Person X has $50 million dollars in an account, and we know how it got there, who has claims on it, and whether it's fairly likely to still exist tomorrow."
> On the morning of September 15, 2017, Tether opened an account at Noble Bank.
Later that day, Bitfinex transferred $382,446,847.71 from Bitfinex’s account at Noble Bank into Tether’s account at Noble Bank. Friedman conducted its verification of Tether’s assets as of 8:00 p.m. EST.
> On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account.
An audit would've flagged this. An attestation does not.
It's like a kid who answers "are you eating cookies before dinner" with "no" because they stopped when you asked the question and are not currently eating one.
The market cap of USDC is something like $52 billion. No bank or banks would allow Circle to hold all that in a commercial bank account, so they diversified into holding treasuries. I don't really see the issue with that.
Then why not replace "US dollar denominated assets" with "cash and short-dated U.S. government obligations, consisting of U.S. Treasuries with maturities of 3 months or less" in the actual report and have Grant Thornton attest to that?
Their website says: "USDC is fully backed by cash and short-dated U.S. government obligations". I'm sure they'd absolutely love an official audit of that, but given the murky regulatory environment for crypto, I'm also sure that Grant Thornton is refusing to do anything more than it already is.
I admit I'm biased, I've used USDC personally & professionally, and I know people involved with running USDC. They're not evil geniuses. And even if they were, you could make so, so much money by breaking it ala Soros & the Bank of England, that I think it would've happened by now.
I'm sure Grant Thornton would be happy to do a full audit of Circle's assets IFF Circle was willing to hand over all of their banking/brokerage statements and allow them to contact those institutions. Verifying the quantity of cash and Treasuries sitting in an account, the length of time they have been there, and the counterparties to their largest transactions is trivial and doesn't compromise any trade secrets which is why it's such a huge red flag for Circle (and Tether) that they refuse to do this while continuing to tease that they will do it at some point in the indeterminate future.
You don't see an issue that USDC has not had a real audit for that $52 billion?
I could say my pencil is worth $52 billion and therefore I have the assets to cover $52 billion USDC and that would be the same as their 'transparency' reports which don't itemize a single asset, just an 'attestation' that the amount is covered.
> Yes, a true "stablecoin" would be 100% backed by deposits in a known and verifiable money market account and able to be withdrawn into USD or other real currency on demand at a 1:1 ratio.
You could invest it in bonds issued by the central bank for the currency you're tied to. But that would only provide a stable income with essentially zero risk (since your binds are denominated in the same currency you're linking to).
But that won't be enough money for these people, of course
The point of stablecoins is to have something that's the same value as a dollar, but which can interface with ("all the wonderful magic of") smartcontracts.
One way to achieve that is to have a big trusted organization honor redemption on demand. (GUSD and, I think but don't quote me, USDC.)
Another way is for an org to consistently honor enough redemptions (but not on an on-demand basis) that it trades at par (USDT, for now).
Another (dubious, increasingly unreliable) way is for some cryptocurrency to automatically buy the stablecoin when it falls below par (TerraUSD/UST with LUNA, already failed).[1]
Yet another is to issue the stablecoin only in return for a significant collateral buffer (with other cryptocurrencies) and force sellbacks when the collateral gets too close to critical (DAI and, I think, FEI, not to be confused with the DEI in this story).
[1] TerraUSD's platform had the Ponzi-esque Anchor paying 20% returns, but is stabilizing mechanism did not (attempt to) depend on this in any direct sense.
The market isn't 'scary', this is a small stablecoin, and overall the crypto market is up today[0]. Also exchanges do have issues when the volume is much above the norm but this if anything happens as or more often when there's a lot of buying pressure. It's also much more of an issue with e.g. Coinbase than Binance. Binance are more likely to let you trade as you wish but temporarily disable withdraws while they move funds around.
> Binance are more likely to let you trade as you wish but temporarily disable withdraws while they move funds around
I was under the impression that providers being able to "temporarily disable withdrawals" [due to lack of liquidity, political pressure, or indeed any other reason] is one of the key things that crypto didn't suffer from?
On-chain sure. I am not sure why you'd expect guarantees off-chain. If you let me handle an asset for you instead of handling it yourself you are bound by how I operate, not just how the asset itself operates. Though I am also not sure why you'd think liquidity doesn't matter, that's neither here nor there.
> If you let me handle an asset for you instead of handling it yourself you are bound by how I operate, not just how the asset itself operates
Is it possible (just for example) to exchange fiat for crypto, or crypto for fiat, or indeed one crypto for another, without having to involve an "off-chain"* counterparty which comes with no guarantees?
In the fiat world it would appear one can do an exchange "old school" by going to a physical bank branch and exchanging [physical] fiat for fiat (USD to EUR or whatever) and not have to worry that the transaction is going to be halted half way through due to "temporary restrictions" leaving you unable to access your capital.
* I'm not sure I properly understand this phrase as you've used it
>Is it possible (just for example) to exchange fiat for crypto, or crypto for fiat, or indeed one crypto for another, without having to involve an "off-chain"* counterparty which comes with no guarantees?
Fiat exists inherently off-chain, so you can't not involve an off-chain as you put it, unless you count stablecoins (government or non-government issued) as fiat. Crypto for crypto or crypto for stablecoins you can exchange purely on-chain via DEXs.
>In the fiat world it would appear one can do an exchange "old school" by going to a physical bank branch and exchanging [physical] fiat for fiat (USD to EUR or whatever) and not have to worry that the transaction is going to be halted half way through due to "temporary restrictions" leaving you unable to access your capital.
When you involve a bank or brokerage or paypal you do face those same risks (but possibly to a lesser extent) with fiat.
> When you involve a bank or brokerage or paypal you do face those same risks (but possibly to a lesser extent) with fiat.
Aren't money exchange services fairly heavily regulated, for precisely this reason?
I'm asking specifically about unregulated counterparty risk. Which there seems to be quite a lot of in the grey area between crypto and, well, everything else that isn't pure crypto.
There actually is a p2p marketplace for buying and selling of crypto called Bisq. You don't need a third party wallet. All trades are from/to BTC. It's a native Java app and it relies on the Tor Network.
Yes, you can trade crypto assets on-chain with decentralized exchanges like uniswap, sushiswap etc. Of course you can not fiat-crypto trading on chain , but you can do USDT-crypto trading.
I think the point of criticism is (as alluded by the previous poster) that crypto (I can't believe that this term now means cryptocurrency, not cryptography) proponents like to say that they are different from traditional markets which are "corrupted" by those with power.
That said, I agree that this should be a point to debate not downvote.
Sorry, I saw on Coinmarketcap a market cap of around $4bn for DEI, which is about 25% of UST, or 2.5% of the entire USD stable coin "market" (while UST was about 10%). Is that what you meant?
At peak, DEI was only around $100 million or so. Compared to roughly $20 billion for UST.
You could also look at the volume. UST frequently had $500 million of volume each day. DEI only had a couple million at best. (Volume is of course also a flawed metric and can be faked, but the lack of effort in faking volume is a signal in and of itself.)
Interesting. Coingecko is basically reporting #(float) * price for a coin, while Coinmarketcap is reporting #(minted) * price. Neither of which feel perfectly accurate for token pricing, but do seem like reasonable high and low endpoints, with the gecko version closer to an estimate of 'other peoples money' involved in the coin.
The smart contracts are still ironbound to whatever they end up compiling to. It's the pesky humans who are ruining things. It can be easily argued that any cryptocurrency involving human intervention is vulnerable to ... human intervention.
Oh, don't worry about it, with the amount of (increasing) energy demand and the resulting pressure on climate change, Crypto is working hard at removing that bad influence.
Yeah, those attributes describe just one point in the design space of tokens running on distributed ledgers. It's perfectly possible to create tokens that require trust, that have centralised elements or that can have their transactions easily censored.
Yep. Pretty much nothing created after 2015 is an actual cryptocurrency. It's just the normal finance scammers dressing their scams up with cryptocurrency buzzword camo. It hasn't been possible to organically grow a cryptocurrency from the vulnerable starting state to usefulness in nearly a decade.
I hate this meme, "No True Scotsman" is not the same thing as language being descriptive and evolving over time. There are two concepts the parent is describing: the set of things described as crypto made before 2015 and the set of things described as crypto made after 2015. The two groups are well defined.
The fact that there isn't a formal name for the era of "pre-finance-bro crypto" or "first wave crypto" doesn't mean it's has anything to do with the scotts. The parent's language might be a little ambiguous but that's to be expected when trying to describe yet unnamed things and their meaning is clear enough.
Willfully misunderstanding someone's words to create a logical flaw that isn't there should be its own fallacy.
superkuh did not specify what exactly changed.
Saying nothing created after 2015 is an "actual cryptocurrency" without justifying that somehow makes me think this might be a "no true Scotsman" argument.
What constitutes these eras? And why do you bring that up when it was about a class of products not being "an actual cryptocurrency". I would have thought there are properties to the product that make it belong to the class, not merely when it was created.To me these unnamed things and their meaning you talk about are absolutely not clear enough.
I believe you two have a point. But it doesn't come across...
PS:
I would argue in 2015 "crypto" was mostly known as abbreviation for cryptography and had nothing to do with decentralized public ledgers.
I'm in no way trying to argue that the parent's classifications or conclusion make sense, just that it's not NTS because the parent isn't trying to make some universal assertions about crpyto in general and denying the exceptions but comment that the "scene" has changed drastically and the word cryptocurrency along with it.
NTS would be something like
* "All things people are calling cryptocurrencies made after 2015 are just finance-bro scams."
* "But what about TotallyLegitCoin, it's not a scam."
This is a stablecoin which has a centralized management team that can halt and control activity on the blockchain, which is fundamentally different from a bitcoin or monero which is a truly decentralized system with no controlling organization that can change anything without slow bulding, mass consent of all participants in the network, and is anyway naturally very stable because of its simplicity and extremely conservative and risk averse development process.
It's more like an Englishman yelling out that they're a Scotsman as they ransack the public square. It's not a fallacy to point out that they're simply not a Scotsman.
I mean, language is descriptive, and while it's useful to be able to maintain a distinction between what the world called "cryptocurrencies" in 2015 and what we call "cryptocurrencies" today, that ship has sailed.
at the same time they are not really currencies, they are "stablecoins" on a many-times replicated digital machine playground where you can pay to add your own machine to interact with the others, and sometimes it turns into Robot Wars and the little coins get mercilessly cut up into bits of worthless parts that are then sold for scrap in the actual currency that runs the playground
> organically grow a cryptocurrency ... to usefulness
You might be right, but the only thing they were ever useful for, was money laundering.
So, I don't think that drawing a greater distinction between the first wave of money-laundering crypto, vs the current wave of Ponzi crypto, is really a defense of either.
Oh? Is that what I've been doing all these years paying my VPS bills and buying computer hardware? I was money laundering? Was it also money laundering when I donated to wikileaks after the US Dept. of Justice forced the credit card companies to blacklist them? All those donations to the internet archive: just money laundering.
And little did I know that others were laundering their money through me when they donated to my websites' bitcoin addresses.
I guess everything that isn't some incorporated third party transfering the money for you must be money laundering. Corporate persons transfer money. Human persons launder. Got it.
Your niche use of cryptocurrency isn't a valid counterpoint to the reality that cryptocurrency, in its general use, is for gambling and money laundering.
I can use a handgun for hunting, but that doesn't mean its primary use-case is hunting.
No, because they offer actual legitimate services that are used frequently by legitimate customers. They've also all happened to do large scale money laundering, but that isn't their primary focus and isn't how they're generally viewed.
Bitcoin is accepted as payment essentially nowhere, in the grand scheme of things. Yes, you've found some niche places that allow it, but it's rare. When I think ransomware, the first thing that comes to mind is cryptocurrency (specifically Bitcoin and ETH). When I think of money laundering, I think of NFTs, through ETH. If you talk to most normal people and ask them what they think of when you talk about bitcoin, it's probably buying illegal drugs.
The first principle is that you must not fool yourself, and you are the easiest person to fool.
While some people are really good at lying or dodging direct questions, many more are very good at lying to themselves. If you believe your own bullshit it's remarkably easy to look sincere while spewing it.
There are certainly many scammers out there, but also some people who believe their own marketing material. But the thing is that once you start picking apart one infinite growth pyramid, then you start seeing them everywhere, and eventually respectable people start trying to draw lines and claim that the bullshit on this side of the line is obvious and bad, but the bullshit on the other side is okay because reasons (reason #1: we can keep this running for at least another 100-200 years at which point I will be long dead)
I heard on the radio a financial planner talking about the desperate need for regulation in the crypto space because of the terra/luna crash. I laughed, I mean I really laughed. I'm a happy no coiner, and I don't know why people are so excited to experience banking in the 1820's.
Same thing with DAOs democratizing governance. Have you been to a city council meeting? You want ANYONE to be able to create a proposal that everyone else has to vote on?
Too many people are married to the idea of how "democracy" and "decentralization" works in ideal conditions and turn a blind eye to their practical faults.
Yes I do. We could accomplish so much more with a direct democracy. This Roe v Wade thing? We could have a referendum and be done with it. Instead it will be fought over by ineffectual politicians for the next decade and accomplish little.
Yes I realize that sometimes referendums give sub-optimal results (i.e. brexit), but I'd much rather live in a truly representative democracy that occasionally gets it wrong than a republic that doesn't represent the people's wishes at all.
I don't think you understand how referendums work. They require a certain number of signatures to even be considered. There would obviously be a filtering mechanism for trolls.
The perquisite to successful DAO's is actually a strong centralized universal identity system (which is ironically counter to cryto-bro anarcho-capitalists philosophies).
From there it's pretty easy to associate real political capital with digital decisions.
E.g. Automatic n+1 "ban proposing user" option added to all proposals. If after n votes (where n is large) the sum(ban proposing user) > 0.25*sum(all other options), proposal is removed and user is banned until a proposal to unban is passed.
Or, just like everything else, the same forces that brought us to this point would weaponize direct democracy as a denial of service attack against itself and we'd still be able to accomplish nothing.
Agree. Especially if you change the wording a bit.
I do think something like Brexit is fine for a referendum. It's a singular issue and clearly very important. In California we have referendums for weird tax issues that become impossible to be informed on and it leads to bad outcomes.
Brexit was fine for a referendum? Are you kidding me?
This Country hasn't held a fair, informed referendum. Whether that be the AV , Scottish independence or brexit.
The game has changed, you have social media companies, Russia, Palantir and Cambridge Analytica types weaponizing misinformation.
The electorate got pushed to voting against their interests for both Brexit and AV by absolute bullshit lies. (E.g. 350 million to the NHS, AV referendum killing babies...)
At this point in time, we have seen the same thing happen in India, Brazil, the US, UK...
With direct democracy we have people voting on issues they don't understand. With representative democracy we have people voting on politicians, whose positions the voters don't understand, to deal with issues the voters don't understand. Why is the latter better?
Also, I would very much like to see a 5 hour free form interview with major political candidates. I feel like politicians mostly just repeat prepared remarks and don't really have a thorough understanding of issues and/or are not that smart.
Neither are better, but at least corruption and lobbying are somewhat more obvious with politicians. That and at least in theory representative politicians should be more conscious about the consequences of their decisions by hopefully being held accountable to their constituents.
At the moment, the issues surrounding external influences, Cambridge Analytica/PLTR style voter manipulation occur outside the scope of electoral regulators.
In reality, both systems are failing spectacularly given they are being abused by lobbyists, monetary interests, gerrymandering, FPTP, and sheer electoral fraud.
E.g.
The Tories openly lying (Brexit empty promises, Scaremongering, AV killing babies).
The Tories splitting by campaigning for the left vote to abuse FPTP.
The Tories openly ignoring electoral spending restrictions because the fines are ineffective.
The electoral college system/voter boundary abuse resulting in people in London/California having far less voting power than those in rural regions.
Neither system will be fair until the above aspects are rectified.
In the future, we are going to need to take unpleasant actions for which the current government models fail absolutely. Take climate change, or even the most recent pandemic. The current government models in the West failed spectacularly compared to places like China or Singapore.
There is currently no need to get 50%+1 voters on board with any arbitrary policy that politicians/corporations/others want passed. Hence the current mismatch between the policies that are passing and their current popularity.
If 50%+1 of voters becomes the metric to hit, it will almost certainly be achieved. Looking at California's ballot referendums, it's clear that it's no impossible task to get voters to approve something against their best interest or ostensibly against their stated political values and beliefs.
Roe v. Wade being overturned is making it so states can vote on their own abortion policies. That's closer to a direct democracy and closer to local democracy. You've also referred to Brexit as a suboptimal result, when Brexit was a move about breaking away from a large bureaucratic body of mostly unelected decision makers. The EU is the least democratic body in the West, so I'm having a very hard time understanding exactly what it is you want.
Also, just wanted to point out that you said you'd rather live in a "representative democracy" when talking about direct democracy. Representative democracy is another term for a republic.
California essentially has a referendum system. But it's very confusing. Every ballot has like ~20 of them so as an informed person I have views on many of them. But then there are ones like "Should we fund this stem cell research project for 4B that looks into this" and people have no idea how to vote. Things sound good and then you realize it was funded by very specific group of people and the money would go to their own project. Even though we shit on legislators having super well-informed people with staffs actually does lead them to work out kinks and negotiate good policy that pleases a larger swath of people.
Exactly, I don't want to have to be an expert on every issue that needs to be decided. And I don't want to trust regular people with other jobs and areas of focus to be those experts either. Job specialization was an important invention. Let's give people the job of figuring out policy, and let's hold them accountable by regularly voting on whether they stay in office.
> This Roe v Wade thing? We could have a referendum and be done with it.
I don't think "be done with it" on abortion is remotely possible. The two sides are completely intractable. In my long life I've never heard anyone be persuaded by the other side.
Besides, overturning RvW will not federally prohibit abortion. It will leave it up to the states, which will decide democratically.
This satisfies nobody.
For example, here in Washington State, there is no chance that abortion will be outlawed by the State. But that hasn't stopped major demonstrations protesting the Supreme Court.
The "two-sides" were created by Roe v Wade. There were always other sides, a 50 year false dilemma where you couldn't even bring it up because "yeah but which side are you on?" Glad that's over! Kind of sad about the inconvenience for people in areas where they expected something different, and I'm moderately annoyed at the next decade where people try to recreate the two sides at the state and congressional level. But it does force room for inspiration!
> It will leave it up to the states, which will decide democratically. This satisfies nobody.
Not wishing to be unnecessarily provocative, but if each state were to have to set the policy isn't it likely it would be that which is most popular in that state?
Wouldn't more people be satisfied overall? Even if some states end up hating each other a bit more ... than they already do
I was pro-choice until my early-20s and I changed my view. I've met others who were in favor of complete freedom for abortions and now oppose them because they see as veiled eugenics. Not to mention the countless stories of women who attempted or had abortions and regretted it for the rest of their lives and became vocal opponents of it.
But they didn't die from a botched unlicensed one, which is the alternative we have to take into consideration, even if we don't like them. Making abortion illegal == scared young women die.
I think part of the fear is that they will not stop at just overturning RvW. Once it’s overturned, there’s a risk of a federal ban being proposed by congress.
You think voting on Roe vs Wade would solve it? Not a snowball chance in hell. Republic is there to make it so that wishes of different parts of the state that do not align at all do not rip the state to pieces and lead to a civil war. Governing by simple majority in long term never worked and never will.
Everyone likes to talk about will of the people. Well here is news. Different people have different desires, in different regions of the country majority wants to do different things. Only way to keep lid on this without the whole thing blowing up is to have representation of the this and slow the process down as much as possible, quick changes are the most disruptive/dangerous.
>Different people have different desires, in different regions of the country majority wants to do different things
Sure. But there is a big problem when the minority of people in an area end up getting what they want because the system that is in place isn't able to properly enfranchise the majority.
> Yes I do. We could accomplish so much more with a direct democracy.
Absolutely not, lol.
The world is way, way too complicated for every individual to have a meaningful and informed opinion about every particular topic. That's why we delegate to experts in the field. There's no way I want some corn farmer in Iowa voting on monetary policy. Most people here haven't the faintest idea how monetary policy works. The comments here are horrifying, and this is a pretty elite group to begin with.
Similarly there's no way I want some city-slicker who's never held a hoe to vote on farm policy.
That's before we even start in on civil rights.
It's a flawed, backwards idea best left in the dustbin of history. It just doesn't stand up to scrutiny. Specialization is good. Delegation is productive.
That's a great opinion, but even if so - you know who has less idea? You and me. And you know who has even less idea? Some random corn farmer.
So why on earth would you advocate for the people who know the least about a topic to make the decisions? It's bananas.
There's no janitorial staff on Apple's board. There's no cooks on the Facebook board. There's no software engineers on the Twitter board. At least in industry we've - more or less - accepted that the folks with the relevant experience should be making the relevant decisions. This should be no less true in governance.
Economists cause more harm than good, id rather they be not in charge of anything important and left to play in an Academic sandbox and publishing papers nobody will read.
UK citizen here. We implemented direct democracy by having a largely ill informed and sometimes deliberately misled population vote on the highly technical and complicated matter of EU membership. Ask us how it's going.
The alternatives are a corporatocracy, a dictatorship, etc. All of those things will be bad for you to live in, except if you are at the top. If you are at the top now, you should not weigh in here. As such, I have to assume you are not at the top - which makes me wonder why you hate yourself so much you believe you should have no voice. Doesn't sound healthy to me.
I have a voice, I vote with my feet. I don't get to choose what products Apple makes or what games Nintendo releases, but I do get to choose wether I engage in their ecosystems.
In any system I'm not obligated to participate in, I prefer benevolent dictatorships. If I disagree with the dictator, I can take my business elsewhere.
No I'm not a president or dictator, so no I'm not at the top of anything. I would describe myself as a realist. And in the real world it is extremely ineffective for everyone to have an equal voice in all matters.
Have you ever seen a road? Do you think everyone got an equal say and vote if and how that road was built? Cities that operate well and are not total disasters to live in, have governments that can improve infrastructure without having to include everyone's opinions equally. Obviously I think that is unfair, especially if I am the person who doesn't want brighter street lights on my street, but I don't want my city to end up like San Francisco where apartments cost 2 Million dollars and are surrounded by tent cities and taxes are super high.
Is "plutocratizing" a word? Because that's what most of them are actually doing -- granting power to whoever has purchased (or rented!) the largest number of tokens.
Typical DAOs are neither decentralized nor autonomous, but the idea of voting is not as bad as you suggest. In fact, it's the same decision making procedure that corporations use.
Banking from 1820? I’m currently listening to a podcast, streaming back 40 sats per minute, supporting indie content creators using the btc lightning network. Banking from the 1820’s jeez.
It's easy for me to see how the 'supervillain origin story' for some bad actors can start with looking at how naive young people are and deciding to exploit it.
We don't want to study history. It's boring. The immersive experience of doing the historical re-enactment is much more intense, and something you can talk about for years to come. Eventually to the next batch of people who want to learn things the hard way, until it's happened so often that you turn into that old person you swore you'd never be when you were that age.
These aren't games though. Learning things the hard way can mean death, chronic illness or crippling debt that affects the entire rest of your life. School needs history lessons, and more of them, but there's also quality vs quantity (how do you make history interesting to kids who think this is just an old story and not a parable?)
Yes, many crypto projects are permissioned scams. The few that aren't just may change the world yet. There are plenty of people who continue to work on these projects as markets fluctuate and crypto trends come and go.
This is when which blockchain it's on really matters. DEI is on Fantom. Unclear who controls that. It's a "consensus blockchain", which means some group of operators has control.
With UST, the issuer controlled the blockchain and shut it down completely.
>With UST, the issuer controlled the blockchain and shut it down completely.
The issuer didn't control Terra. The Terra blockchain is unable to come to connesus about creating a new block if 33% of the staked Luna goes offline. You just have to get the largest validators to agree to go offline and it will stop.
These so-called 'stablecoins' are bound to end badly, frankly. It's the same story repeating itself again and again, just need to wait long enough for a new generation to come of age and think that past history does not apply to them.
> buying up DEI coins and exchanging them for $1 worth of collateral
Doesn’t seem like this would be possible? When the peg fails, wouldn’t all the people holding the coin flood the redemption process, immediately draining it of all USD?
Or put it this way: those traders buying the coin for 80 cents and then redeeming it for a dollar…who are they buying it from and why wouldn’t they redeem it? They just left 20 cents on the table. I feel like I’m missing something.
Wouldn't it had made more sense for the "market makers" to buy the coins themselves at half the price instead of waiting for arbitragers to just pocket the extra money?
Not clear. Tether is back at $0.9988, and the 9% decrease in that headline is market cap not price - it never got anywhere near 9% below peg. I’m very skeptical of Tether’s collateral, but it seems to have withstood this and maintained its peg for now.
I'm as cynical about Tether as any sane person, but it's important to disambiguate between value on an exchange and redeemable value. If USDT is $0.90 on every exchange, but you can still redeem 1 USDT for 1 USD from Tether, then it is maintaining its peg. UST's value on an exchange was the peg by design, because it was algorithmic, but that's not true of non-algorithmic stable coins -- i.e: Tether.
> Tether charges a 0.1% fee for withdrawals up to a maximum of $1,000, which means Tether is redeemable at $0.99 for up to $1 million, and then $1 above $1million in terms of money in the bank.
It’s peg is isn’t entirely accurately described as $1.
> Tether charges a 0.1% fee for withdrawals up to a maximum of $1,000, which means Tether is redeemable at $0.99 for up to $1 million, and then $1 above $1million in terms of money in the bank.
Plus a $100k minimum to withdraw and a $150 fee for KYC.
As you say, there’s reason to be very skeptical of their collateral. We know 9% of market cap has been paid out in a matter of days. If they were only, say, 10% collateralized by liquid assets, then they would be on the edge of collapse right now. That may be pessimistic but we can’t know because they don’t provide audited reports.
Exactly, thats the thing people seem to look past. A stable-coin could theoretically be entirely stable up until they were absolutely insolvent. They just allow redemption and treat everything as business as usual until their collateral runs out. Then they close up shop and everyone else gets 0.
Plus: Say everyone assumes that USDT is about 60% collateralised with very liquid stuff, and everyone holding USDT is comfortable with that undercollateralisation. Now USDT has just lost 10% market cap, so now they're just 55% collateralised (before: 60/100, now: 50/90). You might still be comfortable with that cushion, but some people might not. They'll redeem their USDT.
'Bring of collapse' is likely an exaggeration. Tether might fall but this is weak evidence, it lost 4-5 cents of peg for a few hours or less and people pulling out a few billion is not something it hasn't survived before.
The code can't exactly prevent it unless your collateral is another crypto asset but then you can't peg against something like the Dollar because the crypto asset is guaranteed to fluctuate in price. Code can't enforce anything outside of the blockchain. It has to rely on an oracle and oracles can lie.
... and why the most popular one (i.e. Tether) would be the sketchiest one?
Stablecoins ought to be exceedingly boring and non-sexy. The key requirement ought to be "obvious, abundant and solid collateral", and nothing else should matter.
> "stablecoin loses peg" is an absolute proof that it wasn't a stablecoin any more than tranches of CDOs made high-quality bonds out of junk.
In the end, it's statistics (assuming that 10 out of 100 similarly sized debts default, the expected value for such a CDO is 90% of the face value of all its debts) and the assumption there will not be any major market issues such as a bank run, a pandemic or war that suddenly increase the risk of debts going bad - or in this case, the stablecoin running out of the liquidity it needs to maintain the peg.
People need a way to make dollar denominated transactions on blockchains. The Fed doesn't provide a way to do this natively, so companies have stepped in to solve the problem in various creative and fraught ways.
I think fully collateralised stable coins (the only ones that are stable) are not very profitable, in particular in times of negative rates. The Swiss central bank, for example, charges 0.75% p.a. to hold onto your CHF.
Unfortunately, dollars aren't digitally native, or easily transportable. It requires gatekeepers to give permission, which often isn't processed in real time.
For now, until they decide to "pause" the blockchain like Terra. Stablecoins are centralized and your ability to use them is entirely dependent on the central authority letting you.
Fine, there's one that's a DAO instead of a central authority, it's hard to keep track of all the different flavor of crypto scams. This one will collapse when a bug is found and someone gains full control instead.
It's backed by a multi-collateral set of assets. If they drop below the vault threshold for over-collateralization, they will be automatically auctioned off.
What process is in place to guarantee (!) that the price of the collateral does not gap down below the value required to secure the peg? You realise that a stop loss order sell order triggered when an asset hits 100, say, turns into a market order and might be executed at basically any value.
There is no guarantee. We are talking about auctions so your discussion of different types of orders is irrelevant.
if it dips below $1.45 in collateral for $1, the auctions will be triggered and Dai collateral will shift to USDC & RWA. If the price slips 50% before the auction bots can bid (it is close to instantaneous, so it would have to be an extremely fast crash of more than 50% - which I'm not sure we've ever seen in eth/btc), then you are shit out of luck. This is a risk.
But it's not as big of a risk as the stupid reasons these other stablecoins have been failing.
DAI highly depends on USDC, ETH and BTC. If there is a bank run on DAI, they have to sell their collateral which leads to price drop in BTC/ETH which will make the situation worse. USDC, their other collateral, is controlled by a US company and therefore to some extend by the US government.
Crypto transactions aren't processed in real time. Most networks can only handle, what, less than 10 transactions per second? Even when you start adding additional layers there is only so much you can do.
Realtime transactions with traditional currencies are a solved problem. The UK has had this for years in their banking system, the US will have it by the end of 2023 (FedNOW network).
you also need a bag and a plane/bus/etc ticket to give that heap of dollars to a desired seller. X bank dollar is not the same as USD, you can be locked out of your money quote easily. Plus all the other regular points if you want to buy or sell some crypto
Google examples, there are a lot of very much different cases, sometimes wild ones. As example, whole country of Russia was locked out of all non-RUB assets in their banks (at this moment restrictions are partially lifted), in Belarus you need 10+ work days to take at most 10K USD and 3K EUR out of bank per month.
The problem is, when discussing international sanctions, that most of the finance is probably illegal. The US bans, say, economic activity in Iran. Iran bans economic activity in the US. Now all the finance in both economies is illegal.
Something being illegal doesn't really say what can and cannot be done. Or what is a good idea. Or what is moral. It is a vague signpost and really only matters as far as things can be enforced.
Canada would essentially lock down financial system access for members of an unpopular demonstration.
Sanctions are literally "your money no longer exists". Or it does, but we refuse to allow you to transact with it. Financial access is a hugely powerful diplomatic/political tool.
Certainly you can find cases of government overreach if you look hard enough but they aren't common. The USD is backed by faith in the US Government, and it would be financial suicide for the wealthy to destroy that faith by just randomly locking people out of their bank accounts.
Meanwhile people get "locked out" or just lose their crypto far more regularly. Lost passwords, crashed drives, hacked online wallets, rug pulls, crashing values, fake "pegs", misplaced decimals during transactions, etc. 20% if bitcoin is forever inaccessible, and that percent will only go up, never down.
The "you can be locked out of your fiat" cohort are the climate deniers of the financial world "If the earth is warming why was there a record low temperature somewhere yesterday?". "Your fiat isn't safe - just look how those donations to the truckers in Canada were reversed!"
I'm certainly no expert on Argentina, but I'm talking about dollars backed by the US government, not pesos that the Argentine government was pretending were worth a dollar. I'm sure even when the hard peg was in effect it would have been impossible to actually convert the bulk of the pesos to dollars - I'm sure no foreign bank would cooperate. This was no different than some crypto coin pretending to be worth a dollar.
Or you can back your "stablecoin" with dollars. For each coin issued put a dollar in a vault. There is no other asset on earth pegged to the dollar, so it is impossible to back it with anything other than dollars.
Similarly, if I wanted to pay someone a $1, I would give them a $1. Except I am trying to send some cash to my retired mother in Belarus for a month and a half. She is not under any sanctions, her bank is not sanctioned. Yet wire transfer stuck in some Fed's system (for the second time, first time i sent it, it was just returned 3 weeks later without explanation, and only now I know the real reason.)
Traditional money transferring companies all exited Belarus (PayPal, Western Union, etc.) Now we exploring ability to send some kind of crypto, either bitcoin or stablecoin, in Belarus as a last ditch effort to send over some $1s...
Have you looked at the Stellar Project? They've got a lot of remittance systems running on it that may suit you. Algorand is also a low-cost alternative, if you're looking to frequently send small amounts (assuming your mother has access to a fiat off-ramp like Binance).
Unfortunately, most (all?) international transfers are no-go for her. So we are looking for someone inside Belarus who can do a cash transaction or local bank transfer instead.
If you wanted to trade some other crypto for USD without incurring taxation issues, you could get a "pegged" stablecoin and hold that without incurring any taxation since you haven't redeemed anything for money, and maybe trade it for other coins later on if you so chose.
There's function in the stablecoins in terms of crypto trading, but of course there's risk that your always pegged stablecoin isn't.
Sometimes you don't want to have large quantities in cash. So you store it in a bank. But sometimes you want it outside of the (possibly corrupted) legal system, or want to take money outside of the (corrupted) country. In that case, a stable cryptocurrency seems to do fine.
It's truly online without any government being able to confiscate it (if you play it smart).
There are plenty of times when I don't want to use FEDwire, SWIFT, VISA, you name it. Its all dollar centric.
I have plenty of clients that only want to use SEPA (europe and some european country colonies), because they're familiar with it and for some specifically because its not dollar centric. People fear the US will try to establish jurisdiction over them or inconvenience their ability to transact now or in the future, whether that is unfounded or not. (They're not legal experts, they just have chain letters forwarded around whatsapp)
I'm sure you only want to use things that are familiar as well and would scoff at any client trying to do commerce in a system that isn't common to you.
WISE (Transferwise) has extremely arbitrary limits, holdups, freezes, opaque issues, and a ridiculous terms of service if you've ever looked. Revolut is the same way.
Western Union is expensive, and cumbersome.
Paypal is a worse version of WISE, and is known for its international issues and patch work of countries it services. Let alone arbitrary freezes.
Crypto is fast, exposure to any crypto is as short or as long as you want (worth saying because its a common imagined issue people have with using crypto because they think it'll change value alot over the time period they need it. its a very simple understanding). And people can convert it to something more liquid in their local economy with their local offramps. For many years I've basically used crypto to circumvent using international wires, the same transaction becoming a domestic wire and therefore less room for error and less arbitrary scrutiny. There are probably zero statistics on this. Client overseas pays me, I wire to USD domestically same day.
I don't know enough about crypto to understand what it means that the team is working to restore the peg. Unless something is literally 100% collateralized by the thing it is pegged to, what code changes are there in the world that can legitimately maintain that peg under all conditions?
When I read "working to restore the peg" I read either "frantically looking for a bailout" or "frantically looking for a way to turn this into a rug pull".
There is exactly one way to peg a currency to the USD. It is to simply declare it is pegged, and have a super power sized military to force people to act like it is. Even then you are constrained by the geography your military controls.
The only way to peg it is to always be willing to give someone a $1 for one, which will drive the price towards a $1 assuming you can convince people to buy them.
The problem is that this coin won't give you $1 - assuming they're allowing redemption at all, it will give you .80c worth of coinbase's USDC and .20c worth of DEUS tokens. If you believe DEUS is going to crash, that means the value of DEI is 80c maximum through USDC.
Coinbase is of course is dire straits as its stock has plummeted from ~$360 (it's all time high) in early november to $130 in early may and is currently sitting at around $70, so while it isn't a coin, the future of USDC is tied to coinbase and the future of USDC is unknown especially if its parent company is floundering and stock is down to ~20% of its high in november and down ~73% YTD. I would describe their situation as "volatile".
DEUS had already lost more than 50% of its value between the beginning of April ($1100) and the beginning of May ($420 ha!), and its continuing on its way down ($200 currently).
So not sure how they can maintain a peg when 20% of that peg is in 'currency' that is in free fall, and the other 80% is tied to coinbase whose stock is in freefall this year. They never had any currency backing it at all - it was always coinbase's USDC and DEUS which is the 'luna' of DEI's 'terra'.
coinmarketcap.com says there are 7.46 billion DEI coins out there => a 'market cap' of about $4.4B, yet coingecko.com says there are only 89 million coins (implying $52M) - that's a huge difference. Which one is right?
FWIW, there doesn't appear to be any 'real world' exchange that handles DEI.
I noticed that DEI is backed with BTC as one of the funding options. I think it's a bit risky to back a stablecoin with a non-stablecoin that can have wild price movements.
I suspect you're wrong, unless by collateralized you mean they store other cryptocurrencies of questionable value as their collateral. In that case sure they're probably just overflowing with funds, until they actually need to use them during a crash.
Dai is backed by other cryptos, so 100% transparent, and it was around in the last crash in 2018 and held up well. At the time it was backed 100% by ETH (it is now multi-collateral) and maintained the peg as ETH crashed from $1400 down to $80/ETH.
It's a very different system from UST. The backing is made up from collateral from borrowers. If the price goes too far down, their position is liquidated, with borrowers losing their collateral to maintain the peg.
So the funds are all accounted for, and there's an active system to convert the funds to stabilize the peg. By design Dai will still be $1 when there's only $100 left of crypto backing the peg.
DAI may still be vulnerable to a liquidity crisis. I.e. if there are no buyers for the collateral. This is probably not an issue if DAI is relatively small, but what if it becomes the dominant stablecoin?
FYI that did happen 2 years ago due to congestion on ethereum. Well technically there was a buyer but he bid 0 DAI to win the auctions. DAI remained pegged and they got rid of the debt by minting and auctioning off MKR.
It’s just that actually backing your PLNC 1:1 with actual Złoty[0] you can actually retrieve, leaves very little room for the people behind the coin to get rich.
Why would anyone bother running a real stablecoin? Even real banks don't maintain 100% reserves, because if they did there would be no way for them to profit.
In the US, banks also pay FDIC insurance premiums. A stable coin could run the same way - buy insurance on the portion of the deposits that they gamble with.
It reminds me of junior devs reimplementing existing functions thinking they'll be faster just to discover that they're either slower or not completing the task, but instead of losing a few hours of work we're playing with billions of $
Because once you've deployed the smart contract, you don't need to run it anymore, it's just out there for everyone to use. That part is actually interesting about smart contracts (but unclear why it would attract so much VC interest).
The Liquity stablecoin actually works that way, they don't even have an own web app.
Maybe someone should make a stablecoin that aims to trade $1 to $.9999 and the operators take their cut purely for auditing and maintaining the backing.
Thus a true backed stablecoin where the operators have proper incentives.
That's a unicorn that doesn't exist because after you set up your Proper Incentives and take it to the Proper Government Agencies to get Proper Approval, they'll tell you "no". Then the project gets shut down and you get back in line to wait another 5 years for government regulations to maybe happen.
And that's how you get sketchy companies in Bermuda holding $100 billion in Schrodinger's assets, as well as other oddities like mining companies holding billions in assets because an ETF holding billions in assets would be illegal.
Wrapped coins are actually stable, aren't they? You get one for one, and both sides are on a blockchain.
In real life there's no stablecoin. Even fully backed deposits can be traded at some other amount than 1:1, for whatever reason. Totally depends on whether you actually think the exchange can be done, and there are various reasons it might not.
But what's the sudden obsession on HN with collateralization of blockchain assets?
Algorithmic pegs are far more interesting and democratic. That scammers have discovered they can push ponzinomics out the door as well does not change this.
What proof do you need that collateralization, replete with shady or non-existent audits, is not a source of stability, and that something interesting, like approaches using pure mathematics, are more auditable and, in the short- and perhaps long-term, more stable?
The dream collateralized stablecoin, audited in some transparent way, is still vulnerable to a good old fashioned heist.
The gatekeeping of all projects that don't see the bank vault as the holy grail of community economics feels unbecoming of HN to me. This is creativity and science at work.
Again, I understand that, in addition to sincere efforts to find an algorithmic solution, we get ponzi scum peddling their things. I don't understand why people buy those, and that's an element of human nature we can hopefully overcome as this process goes on.
But you're watching collateralized coins fail, and your response is, "the only valid approach is collateralization!" ?
Algorithmic pegs are inherently vulnerable to mass down turns. Which makes them mostly useful for only very short term transfer use instead of even multiday holdings.
I think your point is broadly sound, though. But it's not an argument against algorithmic pegs; it's an argument against stablecoins _in principle_. And on that point, I agree.
No. A currency board (a stable coin that is 100% backed by the underlying) is theoretically sound, if boring. An algorithmic stable coin is fashionable nonsense.
"theoretically" here means, with cooperation from the local state, who agrees not to seize the assets. And cooperation from the local organized crime syndicate, who agrees not to seize the assets. And with a consensus-driven on-chain oracle representing the auditing process, the key custody of which is entrusted to... someone.
I'm just baffled that on HN of all places we're saying we prefer violent paleo-economic solutions to mathematical verifiability.
>"theoretically" here means, with cooperation from the local state, who agrees not to seize the assets
The local state is a boogeyman here to prop up the cyclical scams of stablecoins. There is nothing mathematical verifiable in meatspace; you only have trust. Somehow despite there being 0 cases of the USG seizing legitimate crypto assets, and several failures of algorithmic stablecoins, the "boring" option is still being fearmongered as unsafe.
The mathematical verifiability of Terra was supposedly meant that it would only lose its peg once in a million years based off of thousands of simulations. Turned out, shockingly, mathematical verifiability and economics don't mix all that well and I won't be surprised if "mathematical verifiability" of any of these stable coins is NP-hard.
But it's baffling than HN prefers paleo-economic solutions to trying to solve NP-hard problems.
The bigger issue with the off-chain backed coins is verifying assets. I think it's pretty well accepted now that Tether was just lying about their cash reserves in the beginning and now don't even try to claim they're backed with cash but a dubious opaque mix of commercial debt, cash, and crypto.
Casting the state as a phantom, rather than a real and challenging obstacle, is ignoring one of the primary motivations for ongoing development of the internet.
Of course we don't want structures in this realm that rely on the predatory societal organization of humanity's childhood.
The whole point is to move past that.
I'm not saying blockchain tech does that on its own of course - and I think we all recognize that some of the asinine and childish habits of capitalism are leaking into crypto.
Nevertheless, to be internally consistent certainly means that the role of the state (even if it has been on relatively good behavior in this limited aspect lately) needs to be taken seriously in the context of the system.
It's far better to craft solutions that are more difficult for the state to compromise. How is this even in dispute?
Yes, and how do you think that's attainable when the value of the dollar is always in flux, much of the collateral is corporate paper, and trying to liquidate will result in price movement of the underlying collateral?
Frankly, it seems to me stablecoins are a market pipedream.
USDT doesn't even have to liquidate the corpo paper if it gets that far. Their agreement says they can just hand you the paper itself and call that settled, then it's up to you to turn that into real money.
You're talking about backed stablecoins which are only a subset of stablecoins. In the common usage of the term, stablecoins include both backed stablecoins and algorithmic stablecoins.
Direct backed stable coins require trust in the custodian. Algorithmic stable coins don't require the same trust, so there are benefits. And there are some that have been working well for a long time, and continue to work well in current market conditions. Look into DAI.
In practice most people are trading one trusted party for another. Instead of trusting the custodian, algorithmic stable coins require trusting the designer/developer of the smart contract(s). Not just because the code could be buggy, but also because the developer could have missed (or lied about) a corner case that could lead to a death spiral as what happened with UST.
That's not to mention that, as what's happening with DEI, the developers could do something like halt redemption making your holdings suddenly illiquid at the pegged price.
DAI seems safe given how over-collateralized it is. But a drop of 60+% in the collateral basket used by DAI is not inconceivable. In particular what happens if USDC's custodian is found to be untrustworthy? And the value of non-pegged cryptocurrencies tend to be strongly correlated, so a mix of crypto assets is not a diverse as one would hope.
> But a drop of 60+% in the collateral basket used by DAI is not inconceivable.
Dai has survived a 94% drop in the value of its backing collateral in 2018, and it maintained the peg well. It would, however, be a problem if the drop was _instant_ and sustained. But it should be able to handle the speed of the drop we saw in Luna.
Your point is taken regarding trading types of trust with respect to bugs or backdoors. There is certainly a level of trust required there.
If there were to exist such a stable coin, that is always 1:1 with USD, wouldn't that negate the need for the coin? Just convert your crypto into actual USD whenever you want. Why have the intermediate stable coin step at all?
Stablecoins will all collapse eventually, and then take down all but a few of the cryto currencies.
To my understanding (I am not a crypto expert, just a casual observer) Stablecoins basically collateralize a certain percentage of the outstanding coin in order to provide the "peg"... so maybe 1:10 coins is backed by USD, Btc, real estate, or whatever... and then the exchange rate is set and as long as everyone plays along, it works. If an actor starts redeeming a significant percentage of coin for collateral, then there is less and less collateral to prop up the coin. Same effect if that collateral loses value.
It is also my opinion that most crypto "has value" only because it is relatively liquid and can be "cashed out" to USD via an exchange or stablecoin. When people start to recognize the stablecoin scam, the price of all crypto will collapse because the liquidity and USD exchange will disappear in an instant.
edit: same thing happened with the USD when it lost the gold backing (and too much redemption led to the decoupling, not enough collateral). In the crypto world, I would say that BTC is the gold equivalent that provides the collateral and legitimacy, so maybe a temporary panic will provide a good BTC buying opportunity? We will see.
So that's just 1 kind of stablecoin. The other is algorithmic - Terra was in that model. There are many excellent descriptions online, but essentially the backing entity buys and sells another coin (Luna in the case of Terra) whose value can fluctuate to maintain the price of their stablecoin. They are kinda genius in theory and so far rather messy in practice.
No doubt, there are a lot of brilliant minds at work in this space and I hope it becomes more mainstream.
I'm still a bit of a skeptic though when it comes to anything other than Bitcoin and tend to believe that it's all just a liquidity game and if you can maintain the illusion of USD liquidity, you will keep the ball rolling and rake in a lot of money. Ultimately they do it so they can exchange their coin for USD, or maybe buy real estate, etc.
USDC is over-collateralized by cash and US government securities. There is a difference between centralized (at least) 1:1 tokens backed by dollars, and "decentralized" algo-stablecoins that use convoluted exchange mechanisms and often lose their peg.
You can deposit USDC at Coinbase, circle, other exchanges and get cash easily.
It's HN, even a slightly unpopular opinion will result in half of your comment history getting downvoted, especially on topics with fanatical followings like crypto. ¯\_(ツ)_/¯
The DAI algorithmic stablecoin has been around for over 2 years now and hasn't broken its peg (though it has fluctuated around $1 a lot in the beginning). All these stablecoins breaking their pegs usually promise some crazy yield one way or another and are therefore much less stable than they appear to be.
> The DAI algorithmic stablecoin has been around for over 2 years now and hasn't broken its peg
Past performance doesn't guarantee future rewards. This same sentence could be said for Terra/UST up until sometimes last week.
Afaik the two differences between DAI and UST is 1. DAI is backed by Eth instead of Luna, and 2. DAI is ideally backed to 200%, although the requirements have been adjusted downwards (so < 200%).
So explain to me what's backing DAI except for hopes and prayers of cryptobros worldwide that Ethereum is gonna change the world someday, very soon (and probably around when it moves over to Eth 2.0 sometimes in the next 18 months, this time for sure!)
DAI is primarily backed by USDC actually, and then ETH. There is a funny argument to be made about that, but you didn't make it.
My thoughts are that the MakerDAO (DAI) community existed too early and didn't have other backing options, so gravitated towards centralized collateral for their decentralized stablecoin, despite the irony.
There are newer communities of stablecoins with a similar design to DAI that chose different decentralized collateral options, and are functioning just as well.
None of them are perfect though, usually some baggage with the founding team, or a shitty governance platform. But they're working okay.
My only point here is let's just criticize the accurate thing.
Generating yield by staking is a literal ponzi scheme. Generating yield by loaning means taking on default risk so your stablecoin is no longer stable in that you can lose principal.
The regulators are asleep at the wheel. All the people posting "Yoooooooo! 20% yield on my stablecoin. Living large!" on Instagram will be the first to demand that the government "do something" when their life savings evaporates overnight.
> Stablecoins will all collapse eventually, and then take down all but a few of the cryto currencies. To my understanding (I am not a crypto expert, just a casual observer) [...]
These two sentences appear to contradict each other...
This is possibly one of those rare cases when knowing a bit less is actually helpful.
Any "stablecoin" not based on 100% hard asset redemption is a financial perpetual motion machine in proportion to how much of its market cap is not backed by hard assets. It can work for a while but it is fundamentally unstable and fundamentally guaranteed to collapse after a certain point. Knowing "too much" about the cryptocurrency mechanics and this algorithm and that detail of how they redeem and all the other mechanical details really reminds me of people who put forth very complicated mechanical perpetual motion machines and basically meet all objections about how perpetual motion is not possible by pointing at their machine and saying (in essense) "But look how complicated that is! You can't prove it doesn't work, it's too complicated!"
But I don't have to. I don't need to learn the details of the exact obscure magnetic effect you're using or delve deeply into your exotic dark-matter-catalyzed fusion or theory about how your machine captures zero point energy or take out my crystals to examine your machine's chi. All I need to see is that energy is conserved and/or your machine is not actually putting out any power across long terms.
Stablecoins are not possible in the long term. I don't need to know the exact financial machinations of this or that stablecoin to know that. They are fundamentally castles in the sky.
The other problem "stablecoins" have is that there is very little incentive for anyone to create a coin that is actually hard-backed by 100% assets. In that situation, all the backer is doing is signing up to lose the assets once the market burps, the stablecoin appreciates even a bit, and everyone redeems them. There's this fundamental mismatch between incentives, a fundamental inability to peg one asset to another by fiat, a number of fundamental impossibilities, really.
I find myself wondering if it comes back to the fundamental misapprehension shared by so many crypto advocates that money's value is just completely arbitrary, and easily changed. If so, why not just arbitrarily declare that this stable coin is worth one dollar? We shouldn't even need any backing to that claim at all, since money's value is so arbitrary, so 10% backing in dollars and 30% backing in other cryptocurrencies should be more than enough, right? Well, even if money's value is an "opinion", it turns out the collective opinion of millions of people and numerous governments still provides the system rather a lot of mass, and it doesn't move around easily as they think and isn't as arbitrary as they think. Certainly it isn't infinitely strong; I'm rather a dollar skeptic myself lately. But there's a big difference between the concepts of a completely arbitrary value of low mass and any value with the mass of millions or billions of people and governments behind it.
The reason I say it is because currency pegs in practice never last forever, they all fail eventually... even the USD. My criticism is not toward the crypto space or any coin in particular but rather the idea of maintaining a long term stable peg.
In general I'm rather bullish on the long term prospects of crypto currencies.
> Investors should keep an eye on USDT as the largest stablecoin and how its prices move in relation to other major coins to determine the direction of the markets.
Looking forward to seeing what's next for YC-backed Stablegains.
(Glad I invested with them instead of buying UST myself as I got out early in the de-peg at 1:1. Thanks to investors for funding that and for the 15% APY while the good times lasted.)
Traders arent taking advantage of the situation. They are doing what they're supposed to to bring back the peg. You are supposed to buy up the stablecoin to restore the peg. The fact that this causes a death spiral is why people keep saying these projects are worthless.
I have noticed that people come on here to gloat about things like this due to the pure hatred of crypto flowing through their veins without realizing that they are cheering on regular people suffering ultimately at what will be the expense of big banks and Wall Street and governments.
What I mean is when these cryptos have problems or are hacked, regular people are the ones who stand to lose everything in most cases.
You can believe that people are dumb for “falling for the scam” in the first place and deserve it, but if you really believe that then I feel sorry for you.
It’s pretty obvious and has been for quite some time that the ultimate goal here is for a central bank digital currency (CBDC), and stories like this as well as the UST collapse play right into that hand.
I guess what I’m saying is be careful what you wish for. A government/central bank issued digital currency will be far worse for privacy and security than any of these insignificant stablecoins. Imagine the government deciding when and where you are allowed to access your money or what you are allowed to spend it on and what items or stores you are allowed to shop for/in.
I feel like it is even possible that Wall Street is BEHIND the collapse of these stablecoins. They couldn’t pay for better press to help convince the public that a CBDC is necessary for the future. I suspect the CBDCs are already ready to go, but their last step is convincing the public they need one. The push for a cashless society has been going on for a number of years now and seems amplified lately.
What I wish for is that governments hadn't sat on their hands when ordinary people were being scammed into these things in the first place. The entire cryptocurrency ecosystem represents a massive failure to regulate, and a massive victory of technical flim-flam salesmen in bamboozling the governments in the world into being afraid to regulate in case they strangled something valuable, when in fact they were allowing normal folks to get ripped off massively.
If "regular people" are losing money, it's because "regular people" have been duped and regulators have been duped. It's sad they're losing money, but it's also entirely predictable.
But do you know what? After years of being told I'm just a jealous idiot who doesn't understand cryptocurrency or blockchains by the oh-so-smart 'investors' in this space, I'm going to enjoy a bit of shadenfreude here, whatever you think of that.
If the whole space collapses I will celebrate - hopefully fewer regular people will be duped in future.
This is where I'm confused. What are the actual advantages that cryptocurrency provides that are superior to the Fed and similar central banks? So far, in practice, they seem to lack quite a lot, in terms of actual security. And, in terms of privacy, I don't understand how crypto provides any real-world advantages to most people that banks don't provide, unless you want to operate outside the law. What am I missing here?
Politicians can arbitrarily write blank checks to 'bail out' as many banks every year as they want, printing as much money as needed, but mostly that money goes to themselves and all their friends. They then lie about having done that, and if you press them on it they'll gaslight you to tell you that was all normal.
As a result, all the world's evil, all the world's scams, they all just kinda bubble upwards. People pay off the debt from one stupid scam by borrowing more money. That money eventually comes from idk someone's 401K fund, which is 'too big to fail', more money gets printed, a bailout happens, and off we all go again.
They shuffle the problems around the world so you don't see them. A problem in California would be a disaster, but if you can successfully shuffle the problem around the world to idk Syria, or uhh Ukraine this year isn't it, then you can simply drop a thermobaric weapon on them and then just carry on again.
As long as there's a lunatic somewhere with his grubby thieving little hand on the money printer, furiously cranking out new dollars or rubles or whatever, then there's always more money to pay off the lies.
Some people think it'd be nice if they could knock that shit off. It's kinda fucking up the world economy. Also some people may have perished.
A form of money that works for everyone should be (a) freely tradable online, (b) backed by a real-world asset such as energy, (c) fair and randomly distributed in terms of inflation, not given to one madman, (d) open source and fully auditable, (e) voted upon by all parties so no one majority can seize power.
We have this now, for this first time in our history, because of the Internet. It'd be nice to finally make use of it for something worthwhile.
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
How is the government (a publicly elected body that is subject to being held to account by that same public) telling when you can spend you money somehow worse than a private company (without any accountability) deciding their shitcoin is no longer allowed to trade or that they don't fancy pegging it properly anymore?
I was with you at the beginning but let's be clear that algorithmic stablecoins are indeed scams. It's quite possible to create a perpetual motion machine, if you just forget friction exists, or entropy, or some other subtle law of physics. In the same way, algorithmic stablecoins let you sell nothing for something just by making the process complicated enough.
I don't hate crypto per-se. Nor am I particularly gloating about it. However I hope that the silver lining here is that this will be yet another in my evergrowing list of examples to share when I advise people not to get involved in crypto. It's not a safe environment and the people getting hurt don't deserve to get hurt. The only weapon I have to help more people not get hurt is to use these cautionary tales to help inform them of the risk. The track record of crypto indicates that right now many governments are better at the whole monetary policy thing than any blockchain.
Will blockchains fix these problems and mitigate the worst facets of human nature? Maybe, but I have no reason to believe they will right now and every argument that they will is rooted in a faith based statement about the inevitability of technilogical progress. A faith I don't subscribe to and therefore is unconvincing to me.
Like you I'm skeptical. But there are certainly things I have faith in that other people have no reason to believe so I'll allow other people their own faith based beliefs as well.
The longer we prop up a crumbling tower the more people's money will be sunk into it when it inevitably falls. That's what happened in '08, we had this fantastical tower that was so big we couldn't let it fall so none of the people actually responsible felt any pain so we're building new dumber towers.
> It’s pretty obvious … the ultimate goal here is for a central bank digital currency (CBDC)
How is that obvious, or maybe — to whom?
I think the whole CBDC idea as more like governments trying to pile on to the “blockchain” trend. We already have plenty of digitalization of our finances and it seems to be working ok, and while I’m sure there are some closet totalitarians who’d love to have a database of all transactions, I don’t think CBDC is the way they’re going to (try to) get there.
> I think the whole CBDC idea as more like governments trying to pile on to the “blockchain” trend.
No. Central bank digital currencies need not be implemented with inefficient blockchain technology. Privacy is a big issue, but the solution to that is not a public blockchain. CBDC could be huge in actually disintermediating many banks.
Note that in some societies (eg Sweden) most transactions are already cashless, so the whole issue of privacy is orthogonal to CBDC.
My opinion on why this particular community on HN is interested in crypto collapse stories is a) that we are probably embedded in the tech world already so a “happy” story (fund raise, adoption) just isn’t notable enough. Same reason why cable news only covers disasters. Then b) because many folks like me genuinely believe that many crypto schemes are ponzis and our technical brains have a cognitive dissonance to something wrong/nonsensical being propped up as right. And then c) it’s probably just the effect of a group dynamic whereby weakly held opinions are magnified in a shared setting making small things feel like large biases. I doubt most people here are actively protesting crypto or working towards its downfall.
Yes, you just nailed it. It’s the cognitive dissonance. “That doesn’t make any sense, huh” leads to getting annoyed when the world seems to disagree with something that you just can’t figure out any other way.
> It’s pretty obvious and has been for quite some time that the ultimate goal here is for a central bank digital currency (CBDC), and stories like this as well as the UST collapse play right into that hand.
I'm not really sure why you would say this. If anything, I would say that stories like these point much more strongly towards an entirely crypto-less future. Who is going to trust the crypto ecosystem as a whole after all these collapses?
> I feel like it is even possible that Wall Street is BEHIND the collapse of these stablecoins. They couldn’t pay for better press to help convince the public that a CBDC is necessary for the future. I suspect the CBDCs are already ready to go, but their last step is convincing the public they need one.
And now you're swerving into full-on conspiracy theory speculation territory. Get a grip, man!
Due to Metcalf's Law (currencies are the poster child for network effects), there is room in the marketplace for only a small handful of cryptocurrencies. Therefore bad cryptocurrencies are effectively an attack on good cryptocurrencies.
I am generally pro-crypto, but I cheer when bad cryptocurrencies fail. And there are is a lot of bad right now...
Once again, the only thing that maintains value in an asset is the collective belief of said value. This applies to currencies and other assets. It doesn't matter what assets you have backing a peg because there's always a trust element. Even if, say, the US dollar was 100% backed by gold, there'd still be a trust element that the government would honor redemptions. Once again, the US dollar has never been 100% backed by gold. It was a peg, which doesn't even require you to hold any gold. And FDR changed the peg, which was a sovereign devaluation. The same thing could've happened with 100% gold reserves.
And what gives the US dollar its value is really the long dick of the US government.
What we're seeing here once again if Crypto Andys learn exactly why the financial system is the way it is.
An algorithmic stablecoin is ridiculous. Collateral helps but it all boils down to trust. Consider this quote:
> Deus Finance reacted by halting the redemption process in order to try and stabilize the coin.
This is exactly the sort of intervention a central bank performs when managing a currency. So what exactly are we gaining with crypto?
I've been into crypto since 2012 and have never heard of this coin. USDX on Kava lost it's peg too but there are no articles about that because it's another small cap coin. Though USDX never was meant to follow the dollar exactly it is down significantly more than normal.
Pegging has never worked for fiat currencies, and I don't know why anyone thought this would work for cryptocurrencies.
One classic example is when the US dollar was pegged to gold, and then the fiat dollar was inflated until the banking system collapsed, resulting in the Great Depression.
417 comments
[ 2.6 ms ] story [ 275 ms ] threadGood luck with that.
Who else is reminded of the story of George Soros "[making] $1.5 billion in just a single month [in late 1992] by betting [that] the British pound and several other European currencies were priced too richly against the German deutsche mark"[0] ?
[0] https://www.forbes.com/sites/steveschaefer/2015/07/07/forbes...
Nothing to see here, move along
is the incentive that "currently it trades below 1.0, so I buy it, then redeem it for 1.0" which should drive the price up, right?
where does the money come from to finance this arbitrage? is there a redemption pool that shrinks every time someone executes this cycle?
They’re illegal, but in reality the system is just broken
Source?
Imagine we're all back in early September 2008, and one of us were to post that Lehman Brothers was suffering unprecedented losses due to the subprime mortgage crisis.
Would you count that as organizing a bank run?
> in reality the system is just broken
Indeed. Yet another system which only reveals just how broken it is when you apply enough pressure.
Think of all the businesses you'd hamstring! All of the exec bonuses that wouldn't happen! Think of the traders, and speculators!
...I'll admit I do, and the ensuing chaos and having to come to terms and actually having to adjust the the economic vote of no confidence is a favorite pass time of mine.
With the amount of financial stimulus that governments have done in the last two years, in the event of a bank run there are possibly finance ministers who would simply print the required money and drop it from helicopters on the mobs waiting outside the banks.
4 years of jail
Is it along the lines of jurisdictions that have laws on the books to try to prevent rumor or malicious speech from causing runs on the banking system?
What if you're telling the truth when you say a bank (or some other financial institution or vehicle) is bankrupt and that investors should withdraw their money?
A bit like shouting fire in a crowded theatre, when the theatre actually is on fire... not a crime, more of a public duty.
> One IRON token is always redeemable for $1 worth of collateral, which on IRON is a mixture of TITAN and the Circle and Coinbase-created stablecoin USDC.
[0] https://thedefiant.io/iron-finance-implodes-after-bank-run/
Algorithmic stablecoins don't work
Overcollateralized algo stables such as DAI are much more sustainable. They require substatially more of a user's unrelated capital (whitelisted assets not based on the stablecoin's issuing protocol such as eth or wbtc which also have relatively deep liquidity available on the market) to be locked up and held as collateral to mint the stablecoin. And that makes drawing down the supply much smoother when times get rough as folks with their capital locked up will repay their debt on their own or have the market do it for them in a liquidation of locked capital. This repayment is what burns the supply and keeps the stable from falling far below peg. In fact historically, DAI's problem was that it would go way over peg during drawdowns because damand for DAI to stave off or participate in liquidations would push the usd price of dai way up.
It is highly capital inefficient model, as it takes roughly at least $1.50 of the other asset to mint $1.00 worth of stablecoin, and users will usually go for a much higher ratio to prevent the liquidation threshold from kicking in. And this capital inefficiency really kneecaps growth since you can't mint anywhere near as much of the stablecoin, but it also means the protocol and thus the stablecoin is much more robust in downturns.
Now it still has real risks because the protocol still depends on lively and accurate oracles to watch and report the collateral values, and that liquidations execute properly when collateral values fall enough to trigger them. But those risks are much more manageable compared to the risks undercollateralized stablecoins present.
Everyone is thinking way too hard about this. There's no mathematical or economic way to create a parallel US currency that won't break in a credit crisis. It's called the Impossible Trinity [1] because it's empirically impossible to do the following all at once:
1. Setting a fixed currency exchange rate
2. Allowing capital to flow freely with no fixed currency exchange rate agreement
3. Autonomous monetary policy
If you do number 1 (set a fixed currency exchange rate, aka 1 DAI : 1 USD), you CANNOT allow for the free flow of capital in and out of your exchange regime. It will eventually break every. single. time. Even if you're a massive sovereign nation, you still can't defend a peg against the Trilemma [2]
Crypto investors should understand that they aren't up against ideology here or "haters", they are up against empirical mathematic principles.
[1] https://en.wikipedia.org/wiki/Impossible_trinity
[2] https://www.thebalance.com/black-wednesday-george-soros-bet-...
If you're a fan of crypto and still reading, here's a hint at the next financial innovation after pegged currencies that you can try to replicate in the cryptoverse: XDR [2]
[1] https://en.wikipedia.org/wiki/List_of_circulating_fixed_exch...
[2] https://en.wikipedia.org/wiki/Special_drawing_rights
You present yourself as deeply knowledgeable about these topics, I’m surprised you missed it:
https://www.investopedia.com/terra-5209502
[+] Dai's monetary policy is not autonomous; new units can only be issued for sufficient collateral and must be destroyed when value falls too low, a constraint that would make a central bank not be regarded as autonomous.
The PSM takes your USDC and mints new DAI and gives it to you. When DAI is >$1 you can make an instant profit doing this. (take 1 USDC, trade it for 1 DAI that you can sell for $1.001.)
The PSM takes your DAI and gives you USDC (while stocks last.) When DAI is >$1 you can make an instant profit doing this. (buy 1 DAI trading at $0.999, and swap it for 1 USDC worth $1.)
Notice the issue? The PSM within DAI is contingent on having enough USDC (proxy for USD) to keep the peg. When that reserve runs out, the PSM mechanism breaks and the peg fails.
To suggest otherwise is financial alchemy.
The auction function doesn't work if USDC suddenly isn't worth 1 USD, because then you're facing down a reserve that isn't worth "more" than DAI, even though the algo still thinks it's in balance.
Basically you've tied DAI to USDC, which in turn is tied to Coinbase, which in the event of a bank run/bankruptcy event will freeze assets and cause massive capital flight causing people to sell their USDC for less than 1 USD as they flee for safety. This causes DAI to become unbalanced because their reserve of USDC isn't actually worth what it should be in USD terms, causing DAI to also lose the peg in terms of real US dollars.
I'm telling you, there isn't a way to make this stuff work. It's financial alchemy.
If USDC loses value, those vaults will be liquidated and the collateral will shift over to alternates - ie. eth. The scenario you are mentioning only plays out if USDC falls so much (and quickly enough that the auction bots don't respond) that it cancels out the overcollateralization from eth. given that dai is 166% collateralized, it wpuld have to drop a ton, which is difficult to imagine when it is credibly backed by real assets.
Exchanges respond by sealing themselves off to protect their $3000 ETH from the $6000 fake ETH trade prices, thus creating a massive freeze in the market, thus wrecking the redemption system that underpins DAI.
It's very, VERY important to realize that all of these things are interwoven. There's no such thing as "USDC collapsing" without it also taking all the crypto traded on Coinbase with it.
Explain to me how you arbitrage USDC falling out of Dai?
I really encourage you to read up more on this. There are real risks that come with Dai as a stablecoin (including eth or USDC collapsing very quickly) but they are not the risks that you are identifying.
I likewise encourage you to think about this from first principles and read up on the mechanics of a currency peg. You MUST be able to quickly sell T-bills on the market swiftly to defend your currency peg, otherwise you will see your currency break from the pegged range. DAI is shifting the reserves from directly holding USD or T-bills to holding USDC instead, which isn't the same thing as USD and WILL cause problems for DAI.
I wish this was a joke. How about you try to collect the $1m Millennium price with your proof of the Riemann hypothesis based on "empirical mathematic principles"? To be 100% clear about this: there's no such thing as empirical mathematical facts, there has never been and there will never be, not in this universe or any other. No matter how many (finitely many) roots of the zeta function you collect, they will never constitute a proof.
To your point: you do realize that stablecoins like Dai have given up monetary autonomy, right? The amount of Dai in circulation is governed by users/the market, not the protocol or a central bank. You seem to be acting in bad faith, because you deliberately only discuss two points, but according to this theory, a stable exchange rate and capital mobility are indeed compatible if you're willing to let the market dictate your monetary policy.
And what is an "empirical mathematical principle"?
Even if they could read the code and understand that there is a mechanism in place that allows designated humans to pause redemption, the code says nothing about when and how this mechanism should be used.
The user might reasonably expect such a mechanism would only be used in an emergency, like the network has been hacked, or there is a bug. They might expect that it would never be used for the financial advantage of the network operators simply because the coin has depegged and redemption is acting as expected.
They should probably stick to long lasting products like BTC, ETH, or XMR.
> The user might reasonably expect such a mechanism would only be used in an emergency
A de-peg event is an emergency if there's not enough real value to back it.
The USD was depegged from gold in the seventies for very similar reasons.
In both cases the printer got ahead of the backing.
Today we use a currency that survived a de-peg event due to military backing.
That's a fair criticism, but isn't it the status quo in the industry in general? Surely most people with stakes in the markets don't truly understand the regulations or the innate dynamics of them.
We’re truly living like it’s 1929.
...which makes you wonder: why the cryptographic overhead at all? Oh wait... Because places want to be banks, without adhering to the regulations thereof...
"Fractional reserve."
Of course, some might call fractional reserve banking a scam as well but what these algorithmic stablecoins are doing isn't the same thing as the credit creation by private banks. It's more like they tried to create a "decentralized" central bank. I put that in quotations because the ones I know aren't actually decentralized either, they just use such buzzwords to trick traders.
Not all stablecoins work that way. There are more reputable ones like DAI or USDC. Actually the first stablecoins were all collateralized, the shananigans started in 2017 during the last bubble and now there are even more of these scammy projects because the market has grown so much. Adoption brings in a lot of newbies with money, and that in turn attracts charlatans of course. You can get a feel for what level of education the general public has when even in a tech forum most people don't understand anything about the economics and mechanisms of all these projects.
Tether freezes $150 million in USDT https://cointelegraph.com/news/tether-freezes-150-million-in...
Circle Confirms Freezing $100K in USDC at Law Enforcement's Request https://www.coindesk.com/markets/2020/07/08/circle-confirms-...
1. purely algorithmic stable coins (on-chain), such as UST. Voodoo, if you ask me. Can be decentralised.
2. (over)collateralised stable coins (on-chain), such as DAI (not DEI, which is at issue here). Collateralised by other crypto, smart contracts, and what have you. Can still be decentralised.
3. collateralised stable coins (off-chain), such as USDC or (allegedly) USDT. Those are collateralised by good old USD (or treasuries or commercial paper). Those need a central authority that holds on to the USD (or whatever form the collateral takes). So, makes sense that they have TOS.
Obviously, as we've seen, algo stables are subject to their own engineered ponzinomics, but I don't think redemption is "the entire point", or even a cognizable concept.
>The wording on the Circle website changed from the previous "backed by US dollars" to "backed by fully reserved assets" by June 2021.
>USDC reserves are regularly attested (but not audited) by Grant Thornton, LLP
This is the same bullshit that Tether has repeatedly pulled.
An audit looks at the history of your overall financials, to ensure that you didn't just borrow that billion dollars two days ago for the sole purpose of passing the audit. Or that you didn't, like, cash a half-billion dollar check from yourself to yourself, and have the money immediately show up in the destination account, before it was debited from the source account.
I definitely feel like this is one of those situations where "if you have nothing to fear you have nothing to hide" actually applies.
I couldn't get a mortgage without a thorough check that income was indeed real income, the idea that billions in assets could be "attested" and not actually audited is incredibly shady.
https://www.centre.io/hubfs/PDF/2022%20Circle%20Examination%...
1) There are 51.39 billion USDC in circulation.
2) On a particular day (the Report Date) Circle held an amount of USD-denominated assets at least equal to the number of USDC in circulation in a segregated account.
Note what is absent: No statement as to what these assets are. No statement as to where they came from and whether they were in the account the day before or the day after the Report Date.
In the crypto world, where you can borrow a few billion dollars for a few seconds cheaply, that doesn't mean much.
Has anybody trusted the attestations, but verified (audited)?
Attestation: "Person X has $50 million dollars in an account."
Audit: "Person X has $50 million dollars in an account, and we know how it got there, who has claims on it, and whether it's fairly likely to still exist tomorrow."
As a concrete example:
https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
> On the morning of September 15, 2017, Tether opened an account at Noble Bank. Later that day, Bitfinex transferred $382,446,847.71 from Bitfinex’s account at Noble Bank into Tether’s account at Noble Bank. Friedman conducted its verification of Tether’s assets as of 8:00 p.m. EST.
https://ag.ny.gov/press-release/2021/attorney-general-james-...
> On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account.
An audit would've flagged this. An attestation does not.
It's like a kid who answers "are you eating cookies before dinner" with "no" because they stopped when you asked the question and are not currently eating one.
I admit I'm biased, I've used USDC personally & professionally, and I know people involved with running USDC. They're not evil geniuses. And even if they were, you could make so, so much money by breaking it ala Soros & the Bank of England, that I think it would've happened by now.
I could say my pencil is worth $52 billion and therefore I have the assets to cover $52 billion USDC and that would be the same as their 'transparency' reports which don't itemize a single asset, just an 'attestation' that the amount is covered.
But where would be the money in that?
But that won't be enough money for these people, of course
> None of the things called “real world currencies” meet today this very simple set of criteria.
—-
I dont own crypto but Im able to see the hypocrisy in our current global financial system.
The point of stablecoins is to have something that's the same value as a dollar, but which can interface with ("all the wonderful magic of") smartcontracts.
One way to achieve that is to have a big trusted organization honor redemption on demand. (GUSD and, I think but don't quote me, USDC.)
Another way is for an org to consistently honor enough redemptions (but not on an on-demand basis) that it trades at par (USDT, for now).
Another (dubious, increasingly unreliable) way is for some cryptocurrency to automatically buy the stablecoin when it falls below par (TerraUSD/UST with LUNA, already failed).[1]
Yet another is to issue the stablecoin only in return for a significant collateral buffer (with other cryptocurrencies) and force sellbacks when the collateral gets too close to critical (DAI and, I think, FEI, not to be confused with the DEI in this story).
[1] TerraUSD's platform had the Ponzi-esque Anchor paying 20% returns, but is stabilizing mechanism did not (attempt to) depend on this in any direct sense.
"The team behind cryptocurrency X has halted a primary use of the tokens."
Hmm...
Typically happens when the market's scary.
0. https://www.coingecko.com/
I was under the impression that providers being able to "temporarily disable withdrawals" [due to lack of liquidity, political pressure, or indeed any other reason] is one of the key things that crypto didn't suffer from?
Is it possible (just for example) to exchange fiat for crypto, or crypto for fiat, or indeed one crypto for another, without having to involve an "off-chain"* counterparty which comes with no guarantees?
In the fiat world it would appear one can do an exchange "old school" by going to a physical bank branch and exchanging [physical] fiat for fiat (USD to EUR or whatever) and not have to worry that the transaction is going to be halted half way through due to "temporary restrictions" leaving you unable to access your capital.
* I'm not sure I properly understand this phrase as you've used it
Fiat exists inherently off-chain, so you can't not involve an off-chain as you put it, unless you count stablecoins (government or non-government issued) as fiat. Crypto for crypto or crypto for stablecoins you can exchange purely on-chain via DEXs.
>In the fiat world it would appear one can do an exchange "old school" by going to a physical bank branch and exchanging [physical] fiat for fiat (USD to EUR or whatever) and not have to worry that the transaction is going to be halted half way through due to "temporary restrictions" leaving you unable to access your capital.
When you involve a bank or brokerage or paypal you do face those same risks (but possibly to a lesser extent) with fiat.
Aren't money exchange services fairly heavily regulated, for precisely this reason?
I'm asking specifically about unregulated counterparty risk. Which there seems to be quite a lot of in the grey area between crypto and, well, everything else that isn't pure crypto.
The commenter didn't even take a stand on crypto vs fiat. The market isn't scary. The stock market also halts trades when things get rough.
That said, I agree that this should be a point to debate not downvote.
https://coinmarketcap.com/currencies/dei/
Note the red explanation marks that indicate how the data is inaccurate.
https://www.coingecko.com/en/coins/dei-token has a better estimate.
At peak, DEI was only around $100 million or so. Compared to roughly $20 billion for UST.
You could also look at the volume. UST frequently had $500 million of volume each day. DEI only had a couple million at best. (Volume is of course also a flawed metric and can be faked, but the lack of effort in faking volume is a signal in and of itself.)
The fact that there isn't a formal name for the era of "pre-finance-bro crypto" or "first wave crypto" doesn't mean it's has anything to do with the scotts. The parent's language might be a little ambiguous but that's to be expected when trying to describe yet unnamed things and their meaning is clear enough.
Willfully misunderstanding someone's words to create a logical flaw that isn't there should be its own fallacy.
What constitutes these eras? And why do you bring that up when it was about a class of products not being "an actual cryptocurrency". I would have thought there are properties to the product that make it belong to the class, not merely when it was created.To me these unnamed things and their meaning you talk about are absolutely not clear enough.
I believe you two have a point. But it doesn't come across...
PS: I would argue in 2015 "crypto" was mostly known as abbreviation for cryptography and had nothing to do with decentralized public ledgers.
NTS would be something like
* "All things people are calling cryptocurrencies made after 2015 are just finance-bro scams."
* "But what about TotallyLegitCoin, it's not a scam."
* "But that's not really a cryptocurrency."
This is a stablecoin which has a centralized management team that can halt and control activity on the blockchain, which is fundamentally different from a bitcoin or monero which is a truly decentralized system with no controlling organization that can change anything without slow bulding, mass consent of all participants in the network, and is anyway naturally very stable because of its simplicity and extremely conservative and risk averse development process.
It's more like an Englishman yelling out that they're a Scotsman as they ransack the public square. It's not a fallacy to point out that they're simply not a Scotsman.
You might be right, but the only thing they were ever useful for, was money laundering.
So, I don't think that drawing a greater distinction between the first wave of money-laundering crypto, vs the current wave of Ponzi crypto, is really a defense of either.
And little did I know that others were laundering their money through me when they donated to my websites' bitcoin addresses.
I guess everything that isn't some incorporated third party transfering the money for you must be money laundering. Corporate persons transfer money. Human persons launder. Got it.
I can use a handgun for hunting, but that doesn't mean its primary use-case is hunting.
Bitcoin is accepted as payment essentially nowhere, in the grand scheme of things. Yes, you've found some niche places that allow it, but it's rare. When I think ransomware, the first thing that comes to mind is cryptocurrency (specifically Bitcoin and ETH). When I think of money laundering, I think of NFTs, through ETH. If you talk to most normal people and ask them what they think of when you talk about bitcoin, it's probably buying illegal drugs.
Ah yes. The "experts" that have only heard about Bitcoin from Fox/MSNBC/etc news. I'm sure they know what they're talking about.
There are certainly many scammers out there, but also some people who believe their own marketing material. But the thing is that once you start picking apart one infinite growth pyramid, then you start seeing them everywhere, and eventually respectable people start trying to draw lines and claim that the bullshit on this side of the line is obvious and bad, but the bullshit on the other side is okay because reasons (reason #1: we can keep this running for at least another 100-200 years at which point I will be long dead)
"What do you mean the bank is out of money?"
Makes em easy to dupe...
Yes I realize that sometimes referendums give sub-optimal results (i.e. brexit), but I'd much rather live in a truly representative democracy that occasionally gets it wrong than a republic that doesn't represent the people's wishes at all.
A. Hitler Mustache
B. KKK Hood
Do you think everyone should have to vote on that?
From there it's pretty easy to associate real political capital with digital decisions.
E.g. Automatic n+1 "ban proposing user" option added to all proposals. If after n votes (where n is large) the sum(ban proposing user) > 0.25*sum(all other options), proposal is removed and user is banned until a proposal to unban is passed.
I do think something like Brexit is fine for a referendum. It's a singular issue and clearly very important. In California we have referendums for weird tax issues that become impossible to be informed on and it leads to bad outcomes.
This Country hasn't held a fair, informed referendum. Whether that be the AV , Scottish independence or brexit.
The game has changed, you have social media companies, Russia, Palantir and Cambridge Analytica types weaponizing misinformation.
The electorate got pushed to voting against their interests for both Brexit and AV by absolute bullshit lies. (E.g. 350 million to the NHS, AV referendum killing babies...)
At this point in time, we have seen the same thing happen in India, Brazil, the US, UK...
Also, I would very much like to see a 5 hour free form interview with major political candidates. I feel like politicians mostly just repeat prepared remarks and don't really have a thorough understanding of issues and/or are not that smart.
At the moment, the issues surrounding external influences, Cambridge Analytica/PLTR style voter manipulation occur outside the scope of electoral regulators.
In reality, both systems are failing spectacularly given they are being abused by lobbyists, monetary interests, gerrymandering, FPTP, and sheer electoral fraud.
E.g. The Tories openly lying (Brexit empty promises, Scaremongering, AV killing babies). The Tories splitting by campaigning for the left vote to abuse FPTP. The Tories openly ignoring electoral spending restrictions because the fines are ineffective. The electoral college system/voter boundary abuse resulting in people in London/California having far less voting power than those in rural regions.
Neither system will be fair until the above aspects are rectified.
In the future, we are going to need to take unpleasant actions for which the current government models fail absolutely. Take climate change, or even the most recent pandemic. The current government models in the West failed spectacularly compared to places like China or Singapore.
If 50%+1 of voters becomes the metric to hit, it will almost certainly be achieved. Looking at California's ballot referendums, it's clear that it's no impossible task to get voters to approve something against their best interest or ostensibly against their stated political values and beliefs.
See: The ballot initiative exempting commercial property from Prop 13 that failed: (https://ballotpedia.org/California_Proposition_15,_Tax_on_Co...), and the initiative to overturn California's law requiring ride share drivers to be classified as employees that passed: (https://ballotpedia.org/California_Proposition_22,_App-Based...).
Also, just wanted to point out that you said you'd rather live in a "representative democracy" when talking about direct democracy. Representative democracy is another term for a republic.
Not really. Since we're talking about Brexit, it's worth noting that the UK is a representative democracy but is definitely not a republic.
I don't think "be done with it" on abortion is remotely possible. The two sides are completely intractable. In my long life I've never heard anyone be persuaded by the other side.
Besides, overturning RvW will not federally prohibit abortion. It will leave it up to the states, which will decide democratically.
This satisfies nobody.
For example, here in Washington State, there is no chance that abortion will be outlawed by the State. But that hasn't stopped major demonstrations protesting the Supreme Court.
Not wishing to be unnecessarily provocative, but if each state were to have to set the policy isn't it likely it would be that which is most popular in that state?
Wouldn't more people be satisfied overall? Even if some states end up hating each other a bit more ... than they already do
Everyone likes to talk about will of the people. Well here is news. Different people have different desires, in different regions of the country majority wants to do different things. Only way to keep lid on this without the whole thing blowing up is to have representation of the this and slow the process down as much as possible, quick changes are the most disruptive/dangerous.
Sure. But there is a big problem when the minority of people in an area end up getting what they want because the system that is in place isn't able to properly enfranchise the majority.
Absolutely not, lol.
The world is way, way too complicated for every individual to have a meaningful and informed opinion about every particular topic. That's why we delegate to experts in the field. There's no way I want some corn farmer in Iowa voting on monetary policy. Most people here haven't the faintest idea how monetary policy works. The comments here are horrifying, and this is a pretty elite group to begin with.
Similarly there's no way I want some city-slicker who's never held a hoe to vote on farm policy.
That's before we even start in on civil rights.
It's a flawed, backwards idea best left in the dustbin of history. It just doesn't stand up to scrutiny. Specialization is good. Delegation is productive.
So why on earth would you advocate for the people who know the least about a topic to make the decisions? It's bananas.
There's no janitorial staff on Apple's board. There's no cooks on the Facebook board. There's no software engineers on the Twitter board. At least in industry we've - more or less - accepted that the folks with the relevant experience should be making the relevant decisions. This should be no less true in governance.
Yes there is. 3 out of the 11 members the board are clearly software engineers.
In any system I'm not obligated to participate in, I prefer benevolent dictatorships. If I disagree with the dictator, I can take my business elsewhere.
Have you ever seen a road? Do you think everyone got an equal say and vote if and how that road was built? Cities that operate well and are not total disasters to live in, have governments that can improve infrastructure without having to include everyone's opinions equally. Obviously I think that is unfair, especially if I am the person who doesn't want brighter street lights on my street, but I don't want my city to end up like San Francisco where apartments cost 2 Million dollars and are surrounded by tent cities and taxes are super high.
As if procedural hacks were not enough (leveraged seizure of stake sufficient to exploit anyone...?),
who could possibly both be smart enough to write a contract, yet dumb enough to entrust it with their own money?
Trick question. That's the crypto koan of rue. The answer is no one. The rest is an exercise a lot of students are learning the hard way.
Is "plutocratizing" a word? Because that's what most of them are actually doing -- granting power to whoever has purchased (or rented!) the largest number of tokens.
We don't want to study history. It's boring. The immersive experience of doing the historical re-enactment is much more intense, and something you can talk about for years to come. Eventually to the next batch of people who want to learn things the hard way, until it's happened so often that you turn into that old person you swore you'd never be when you were that age.
These aren't games though. Learning things the hard way can mean death, chronic illness or crippling debt that affects the entire rest of your life. School needs history lessons, and more of them, but there's also quality vs quantity (how do you make history interesting to kids who think this is just an old story and not a parable?)
With UST, the issuer controlled the blockchain and shut it down completely.
The issuer didn't control Terra. The Terra blockchain is unable to come to connesus about creating a new block if 33% of the staked Luna goes offline. You just have to get the largest validators to agree to go offline and it will stop.
Doesn’t seem like this would be possible? When the peg fails, wouldn’t all the people holding the coin flood the redemption process, immediately draining it of all USD?
Or put it this way: those traders buying the coin for 80 cents and then redeeming it for a dollar…who are they buying it from and why wouldn’t they redeem it? They just left 20 cents on the table. I feel like I’m missing something.
That's not maintaining its peg. That being said, it has been stable at that price for several days now, but let's see what the next few weeks hold.
There are more than enough red flags with Tether already !
> Tether charges a 0.1% fee for withdrawals up to a maximum of $1,000, which means Tether is redeemable at $0.99 for up to $1 million, and then $1 above $1million in terms of money in the bank.
I mean I get it, it's all a scam. But, this feels so...callous.
> Tether charges a 0.1% fee for withdrawals up to a maximum of $1,000, which means Tether is redeemable at $0.99 for up to $1 million, and then $1 above $1million in terms of money in the bank.
Plus a $100k minimum to withdraw and a $150 fee for KYC.
Etc., we have a classic bank run.
a) you don’t trust the people behind the first one (or the country they’re based in, etc)
b) the underlying technology of the new coin is more appealing (tx/s, smart contracts, fees, etc)
That said, this is all Wild West and trusting any of these vendors to actually do what they say seems very risky.
If you’re 80% collateralized and 1% is fu money, there’s no defense against going to 78% collateralized if the code allows it.
Stablecoins ought to be exceedingly boring and non-sexy. The key requirement ought to be "obvious, abundant and solid collateral", and nothing else should matter.
"stablecoin loses peg" is an absolute proof that it wasn't a stablecoin any more than tranches of CDOs made high-quality bonds out of junk.
In the end, it's statistics (assuming that 10 out of 100 similarly sized debts default, the expected value for such a CDO is 90% of the face value of all its debts) and the assumption there will not be any major market issues such as a bank run, a pandemic or war that suddenly increase the risk of debts going bad - or in this case, the stablecoin running out of the liquidity it needs to maintain the peg.
CDOs and all forms of coins are essentially bets.
https://www.gemini.com/cryptopedia/gusd-stablecoin-gemini-do...
https://data.snb.ch/de/topics/snb/cube/snbgwdzid
> Deus Finance reacted by halting the redemption process in order to try and stabilize the coin
The Aristocrats!
Anyway: You will lose either by the tax agencies finding out (when you actually try to buy stuff) or this way.
Good luck stopping Ethereum
> Stablecoins are centralized
Only some, like USDT, USDC.
Just google what DAI is and how it managed.
It's backed by a multi-collateral set of assets. If they drop below the vault threshold for over-collateralization, they will be automatically auctioned off.
if it dips below $1.45 in collateral for $1, the auctions will be triggered and Dai collateral will shift to USDC & RWA. If the price slips 50% before the auction bots can bid (it is close to instantaneous, so it would have to be an extremely fast crash of more than 50% - which I'm not sure we've ever seen in eth/btc), then you are shit out of luck. This is a risk.
But it's not as big of a risk as the stupid reasons these other stablecoins have been failing.
Note that to go from 1.45 to 1 is a drop of 31%.
> Deus Finance reacted by halting the redemption process in order to try and stabilize the coin.
Crypto transactions aren't processed in real time. Most networks can only handle, what, less than 10 transactions per second? Even when you start adding additional layers there is only so much you can do.
Realtime transactions with traditional currencies are a solved problem. The UK has had this for years in their banking system, the US will have it by the end of 2023 (FedNOW network).
> you can be locked out of your money quote easily.
But I am curious, do you have examples that show that this is really the corner case I should be worried about?
Not really, in these cases banks themselves decided to not give away "their" money
Something being illegal doesn't really say what can and cannot be done. Or what is a good idea. Or what is moral. It is a vague signpost and really only matters as far as things can be enforced.
Sanctions are literally "your money no longer exists". Or it does, but we refuse to allow you to transact with it. Financial access is a hugely powerful diplomatic/political tool.
Meanwhile people get "locked out" or just lose their crypto far more regularly. Lost passwords, crashed drives, hacked online wallets, rug pulls, crashing values, fake "pegs", misplaced decimals during transactions, etc. 20% if bitcoin is forever inaccessible, and that percent will only go up, never down.
The "you can be locked out of your fiat" cohort are the climate deniers of the financial world "If the earth is warming why was there a record low temperature somewhere yesterday?". "Your fiat isn't safe - just look how those donations to the truckers in Canada were reversed!"
Entire countries have had access to a currency completely pulled. Not just the US wants to use USD.
Plenty of people can lose access to their money, not just alleged domestic terrorists (and isn't alleged is a scary word?).
"Corralito" is unfortunately a common use word.
https://en.wikipedia.org/wiki/Corralito
Traditional money transferring companies all exited Belarus (PayPal, Western Union, etc.) Now we exploring ability to send some kind of crypto, either bitcoin or stablecoin, in Belarus as a last ditch effort to send over some $1s...
Have you looked at the Stellar Project? They've got a lot of remittance systems running on it that may suit you. Algorand is also a low-cost alternative, if you're looking to frequently send small amounts (assuming your mother has access to a fiat off-ramp like Binance).
There's function in the stablecoins in terms of crypto trading, but of course there's risk that your always pegged stablecoin isn't.
It's truly online without any government being able to confiscate it (if you play it smart).
It all depends on the use-case.
I have plenty of clients that only want to use SEPA (europe and some european country colonies), because they're familiar with it and for some specifically because its not dollar centric. People fear the US will try to establish jurisdiction over them or inconvenience their ability to transact now or in the future, whether that is unfounded or not. (They're not legal experts, they just have chain letters forwarded around whatsapp)
I'm sure you only want to use things that are familiar as well and would scoff at any client trying to do commerce in a system that isn't common to you.
WISE (Transferwise) has extremely arbitrary limits, holdups, freezes, opaque issues, and a ridiculous terms of service if you've ever looked. Revolut is the same way.
Western Union is expensive, and cumbersome.
Paypal is a worse version of WISE, and is known for its international issues and patch work of countries it services. Let alone arbitrary freezes.
Crypto is fast, exposure to any crypto is as short or as long as you want (worth saying because its a common imagined issue people have with using crypto because they think it'll change value alot over the time period they need it. its a very simple understanding). And people can convert it to something more liquid in their local economy with their local offramps. For many years I've basically used crypto to circumvent using international wires, the same transaction becoming a domestic wire and therefore less room for error and less arbitrary scrutiny. There are probably zero statistics on this. Client overseas pays me, I wire to USD domestically same day.
None. But I guess it sounds good to pretend to be doing something useful!
The problem is that this coin won't give you $1 - assuming they're allowing redemption at all, it will give you .80c worth of coinbase's USDC and .20c worth of DEUS tokens. If you believe DEUS is going to crash, that means the value of DEI is 80c maximum through USDC.
Coinbase is of course is dire straits as its stock has plummeted from ~$360 (it's all time high) in early november to $130 in early may and is currently sitting at around $70, so while it isn't a coin, the future of USDC is tied to coinbase and the future of USDC is unknown especially if its parent company is floundering and stock is down to ~20% of its high in november and down ~73% YTD. I would describe their situation as "volatile".
DEUS had already lost more than 50% of its value between the beginning of April ($1100) and the beginning of May ($420 ha!), and its continuing on its way down ($200 currently).
So not sure how they can maintain a peg when 20% of that peg is in 'currency' that is in free fall, and the other 80% is tied to coinbase whose stock is in freefall this year. They never had any currency backing it at all - it was always coinbase's USDC and DEUS which is the 'luna' of DEI's 'terra'.
FWIW, there doesn't appear to be any 'real world' exchange that handles DEI.
88,867,859.101631 DEI
https://ftmscan.com/token/0xDE12c7959E1a72bbe8a5f7A1dc8f8EeF...
>there doesn't appear to be any 'real world' exchange that handles DEI.
SpookySwap is the largest DEX on Fantom.
"But what about -" -- then it's not a stablecoin.
So when the crypto market crashes, some get exposed as a lie, which causes the crypto market to crash...
I suspect you're wrong, unless by collateralized you mean they store other cryptocurrencies of questionable value as their collateral. In that case sure they're probably just overflowing with funds, until they actually need to use them during a crash.
It's a very different system from UST. The backing is made up from collateral from borrowers. If the price goes too far down, their position is liquidated, with borrowers losing their collateral to maintain the peg.
So the funds are all accounted for, and there's an active system to convert the funds to stabilize the peg. By design Dai will still be $1 when there's only $100 left of crypto backing the peg.
DAI may still be vulnerable to a liquidity crisis. I.e. if there are no buyers for the collateral. This is probably not an issue if DAI is relatively small, but what if it becomes the dominant stablecoin?
It’s just that actually backing your PLNC 1:1 with actual Złoty[0] you can actually retrieve, leaves very little room for the people behind the coin to get rich.
[0]: https://en.wikipedia.org/wiki/Polish_złoty
Also, the government is a highly diversified insurer that can create more the underlying asset it is insurring.
Do they have to? Is there any reason they couldn't hedge that money?
If I wasn’t fully occupied with rsync.net I would love to run some kind of utility exchange/market/bank service …
… and I’m not involved or invested in crypto in any capacity.
The Liquity stablecoin actually works that way, they don't even have an own web app.
Thus a true backed stablecoin where the operators have proper incentives.
And that's how you get sketchy companies in Bermuda holding $100 billion in Schrodinger's assets, as well as other oddities like mining companies holding billions in assets because an ETF holding billions in assets would be illegal.
In real life there's no stablecoin. Even fully backed deposits can be traded at some other amount than 1:1, for whatever reason. Totally depends on whether you actually think the exchange can be done, and there are various reasons it might not.
But what's the sudden obsession on HN with collateralization of blockchain assets?
Algorithmic pegs are far more interesting and democratic. That scammers have discovered they can push ponzinomics out the door as well does not change this.
The dream collateralized stablecoin, audited in some transparent way, is still vulnerable to a good old fashioned heist.
The gatekeeping of all projects that don't see the bank vault as the holy grail of community economics feels unbecoming of HN to me. This is creativity and science at work.
Again, I understand that, in addition to sincere efforts to find an algorithmic solution, we get ponzi scum peddling their things. I don't understand why people buy those, and that's an element of human nature we can hopefully overcome as this process goes on.
But you're watching collateralized coins fail, and your response is, "the only valid approach is collateralization!" ?
What approaches? Do you know of a known approach that isn't flawed in some way?
Until proven otherwise, you can't create a stable coin with "pure mathematics".
DAI is imperfect, but I think it's a sincere effort. It hasn't scammed anybody and doesn't appear capable of doing so.
And more and better efforts will follow.
The most interesting stable coin is DAI. It's not particularly profitable, and it's stable and it will be stable no matter what.
I think your point is broadly sound, though. But it's not an argument against algorithmic pegs; it's an argument against stablecoins _in principle_. And on that point, I agree.
"theoretically" here means, with cooperation from the local state, who agrees not to seize the assets. And cooperation from the local organized crime syndicate, who agrees not to seize the assets. And with a consensus-driven on-chain oracle representing the auditing process, the key custody of which is entrusted to... someone.
I'm just baffled that on HN of all places we're saying we prefer violent paleo-economic solutions to mathematical verifiability.
2. Your mathematically verified coin offers no protection against the state or crime syndicate, either (see xkcd about 50 years ago).
The local state is a boogeyman here to prop up the cyclical scams of stablecoins. There is nothing mathematical verifiable in meatspace; you only have trust. Somehow despite there being 0 cases of the USG seizing legitimate crypto assets, and several failures of algorithmic stablecoins, the "boring" option is still being fearmongered as unsafe.
The mathematical verifiability of Terra was supposedly meant that it would only lose its peg once in a million years based off of thousands of simulations. Turned out, shockingly, mathematical verifiability and economics don't mix all that well and I won't be surprised if "mathematical verifiability" of any of these stable coins is NP-hard.
But it's baffling than HN prefers paleo-economic solutions to trying to solve NP-hard problems.
Yeah, but nobody believed that.
Just like now, we all know the other shoe is going to drop on Tether. We all know it.
Are you going to feign surprise when that happens too?
Of course we don't want structures in this realm that rely on the predatory societal organization of humanity's childhood.
The whole point is to move past that.
I'm not saying blockchain tech does that on its own of course - and I think we all recognize that some of the asinine and childish habits of capitalism are leaking into crypto.
Nevertheless, to be internally consistent certainly means that the role of the state (even if it has been on relatively good behavior in this limited aspect lately) needs to be taken seriously in the context of the system.
It's far better to craft solutions that are more difficult for the state to compromise. How is this even in dispute?
(Or have I misunderstood your argument?)
Frankly, it seems to me stablecoins are a market pipedream.
https://tether.to/en/legal/#:~:text=Tether%20reserves%20the,...
USDT (tether) vs UST (terra), and now DAI vs the DEI.
DAI kept its peg from ETH $1440 -> $50 last time and is battle-tested + over-collateralized. Why don't people use that?
That's not to mention that, as what's happening with DEI, the developers could do something like halt redemption making your holdings suddenly illiquid at the pegged price.
DAI seems safe given how over-collateralized it is. But a drop of 60+% in the collateral basket used by DAI is not inconceivable. In particular what happens if USDC's custodian is found to be untrustworthy? And the value of non-pegged cryptocurrencies tend to be strongly correlated, so a mix of crypto assets is not a diverse as one would hope.
Dai has survived a 94% drop in the value of its backing collateral in 2018, and it maintained the peg well. It would, however, be a problem if the drop was _instant_ and sustained. But it should be able to handle the speed of the drop we saw in Luna.
Your point is taken regarding trading types of trust with respect to bugs or backdoors. There is certainly a level of trust required there.
To my understanding (I am not a crypto expert, just a casual observer) Stablecoins basically collateralize a certain percentage of the outstanding coin in order to provide the "peg"... so maybe 1:10 coins is backed by USD, Btc, real estate, or whatever... and then the exchange rate is set and as long as everyone plays along, it works. If an actor starts redeeming a significant percentage of coin for collateral, then there is less and less collateral to prop up the coin. Same effect if that collateral loses value.
It is also my opinion that most crypto "has value" only because it is relatively liquid and can be "cashed out" to USD via an exchange or stablecoin. When people start to recognize the stablecoin scam, the price of all crypto will collapse because the liquidity and USD exchange will disappear in an instant.
edit: same thing happened with the USD when it lost the gold backing (and too much redemption led to the decoupling, not enough collateral). In the crypto world, I would say that BTC is the gold equivalent that provides the collateral and legitimacy, so maybe a temporary panic will provide a good BTC buying opportunity? We will see.
I'm still a bit of a skeptic though when it comes to anything other than Bitcoin and tend to believe that it's all just a liquidity game and if you can maintain the illusion of USD liquidity, you will keep the ball rolling and rake in a lot of money. Ultimately they do it so they can exchange their coin for USD, or maybe buy real estate, etc.
> ...Btc, real estate, or whatever
USDC is over-collateralized by cash and US government securities. There is a difference between centralized (at least) 1:1 tokens backed by dollars, and "decentralized" algo-stablecoins that use convoluted exchange mechanisms and often lose their peg.
You can deposit USDC at Coinbase, circle, other exchanges and get cash easily.
Past performance doesn't guarantee future rewards. This same sentence could be said for Terra/UST up until sometimes last week.
Afaik the two differences between DAI and UST is 1. DAI is backed by Eth instead of Luna, and 2. DAI is ideally backed to 200%, although the requirements have been adjusted downwards (so < 200%).
So explain to me what's backing DAI except for hopes and prayers of cryptobros worldwide that Ethereum is gonna change the world someday, very soon (and probably around when it moves over to Eth 2.0 sometimes in the next 18 months, this time for sure!)
My thoughts are that the MakerDAO (DAI) community existed too early and didn't have other backing options, so gravitated towards centralized collateral for their decentralized stablecoin, despite the irony.
There are newer communities of stablecoins with a similar design to DAI that chose different decentralized collateral options, and are functioning just as well.
None of them are perfect though, usually some baggage with the founding team, or a shitty governance platform. But they're working okay.
My only point here is let's just criticize the accurate thing.
Generating yield by staking is a literal ponzi scheme. Generating yield by loaning means taking on default risk so your stablecoin is no longer stable in that you can lose principal.
The regulators are asleep at the wheel. All the people posting "Yoooooooo! 20% yield on my stablecoin. Living large!" on Instagram will be the first to demand that the government "do something" when their life savings evaporates overnight.
These two sentences appear to contradict each other...
Any "stablecoin" not based on 100% hard asset redemption is a financial perpetual motion machine in proportion to how much of its market cap is not backed by hard assets. It can work for a while but it is fundamentally unstable and fundamentally guaranteed to collapse after a certain point. Knowing "too much" about the cryptocurrency mechanics and this algorithm and that detail of how they redeem and all the other mechanical details really reminds me of people who put forth very complicated mechanical perpetual motion machines and basically meet all objections about how perpetual motion is not possible by pointing at their machine and saying (in essense) "But look how complicated that is! You can't prove it doesn't work, it's too complicated!"
But I don't have to. I don't need to learn the details of the exact obscure magnetic effect you're using or delve deeply into your exotic dark-matter-catalyzed fusion or theory about how your machine captures zero point energy or take out my crystals to examine your machine's chi. All I need to see is that energy is conserved and/or your machine is not actually putting out any power across long terms.
Stablecoins are not possible in the long term. I don't need to know the exact financial machinations of this or that stablecoin to know that. They are fundamentally castles in the sky.
The other problem "stablecoins" have is that there is very little incentive for anyone to create a coin that is actually hard-backed by 100% assets. In that situation, all the backer is doing is signing up to lose the assets once the market burps, the stablecoin appreciates even a bit, and everyone redeems them. There's this fundamental mismatch between incentives, a fundamental inability to peg one asset to another by fiat, a number of fundamental impossibilities, really.
I find myself wondering if it comes back to the fundamental misapprehension shared by so many crypto advocates that money's value is just completely arbitrary, and easily changed. If so, why not just arbitrarily declare that this stable coin is worth one dollar? We shouldn't even need any backing to that claim at all, since money's value is so arbitrary, so 10% backing in dollars and 30% backing in other cryptocurrencies should be more than enough, right? Well, even if money's value is an "opinion", it turns out the collective opinion of millions of people and numerous governments still provides the system rather a lot of mass, and it doesn't move around easily as they think and isn't as arbitrary as they think. Certainly it isn't infinitely strong; I'm rather a dollar skeptic myself lately. But there's a big difference between the concepts of a completely arbitrary value of low mass and any value with the mass of millions or billions of people and governments behind it.
The reason I say it is because currency pegs in practice never last forever, they all fail eventually... even the USD. My criticism is not toward the crypto space or any coin in particular but rather the idea of maintaining a long term stable peg.
In general I'm rather bullish on the long term prospects of crypto currencies.
Has anyone here already done this analysis?
(Glad I invested with them instead of buying UST myself as I got out early in the de-peg at 1:1. Thanks to investors for funding that and for the 15% APY while the good times lasted.)
What I mean is when these cryptos have problems or are hacked, regular people are the ones who stand to lose everything in most cases.
You can believe that people are dumb for “falling for the scam” in the first place and deserve it, but if you really believe that then I feel sorry for you.
It’s pretty obvious and has been for quite some time that the ultimate goal here is for a central bank digital currency (CBDC), and stories like this as well as the UST collapse play right into that hand.
I guess what I’m saying is be careful what you wish for. A government/central bank issued digital currency will be far worse for privacy and security than any of these insignificant stablecoins. Imagine the government deciding when and where you are allowed to access your money or what you are allowed to spend it on and what items or stores you are allowed to shop for/in.
I feel like it is even possible that Wall Street is BEHIND the collapse of these stablecoins. They couldn’t pay for better press to help convince the public that a CBDC is necessary for the future. I suspect the CBDCs are already ready to go, but their last step is convincing the public they need one. The push for a cashless society has been going on for a number of years now and seems amplified lately.
If "regular people" are losing money, it's because "regular people" have been duped and regulators have been duped. It's sad they're losing money, but it's also entirely predictable.
But do you know what? After years of being told I'm just a jealous idiot who doesn't understand cryptocurrency or blockchains by the oh-so-smart 'investors' in this space, I'm going to enjoy a bit of shadenfreude here, whatever you think of that.
If the whole space collapses I will celebrate - hopefully fewer regular people will be duped in future.
This is where I'm confused. What are the actual advantages that cryptocurrency provides that are superior to the Fed and similar central banks? So far, in practice, they seem to lack quite a lot, in terms of actual security. And, in terms of privacy, I don't understand how crypto provides any real-world advantages to most people that banks don't provide, unless you want to operate outside the law. What am I missing here?
Politicians can arbitrarily write blank checks to 'bail out' as many banks every year as they want, printing as much money as needed, but mostly that money goes to themselves and all their friends. They then lie about having done that, and if you press them on it they'll gaslight you to tell you that was all normal.
As a result, all the world's evil, all the world's scams, they all just kinda bubble upwards. People pay off the debt from one stupid scam by borrowing more money. That money eventually comes from idk someone's 401K fund, which is 'too big to fail', more money gets printed, a bailout happens, and off we all go again.
They shuffle the problems around the world so you don't see them. A problem in California would be a disaster, but if you can successfully shuffle the problem around the world to idk Syria, or uhh Ukraine this year isn't it, then you can simply drop a thermobaric weapon on them and then just carry on again.
As long as there's a lunatic somewhere with his grubby thieving little hand on the money printer, furiously cranking out new dollars or rubles or whatever, then there's always more money to pay off the lies.
Some people think it'd be nice if they could knock that shit off. It's kinda fucking up the world economy. Also some people may have perished.
A form of money that works for everyone should be (a) freely tradable online, (b) backed by a real-world asset such as energy, (c) fair and randomly distributed in terms of inflation, not given to one madman, (d) open source and fully auditable, (e) voted upon by all parties so no one majority can seize power.
We have this now, for this first time in our history, because of the Internet. It'd be nice to finally make use of it for something worthwhile.
Will blockchains fix these problems and mitigate the worst facets of human nature? Maybe, but I have no reason to believe they will right now and every argument that they will is rooted in a faith based statement about the inevitability of technilogical progress. A faith I don't subscribe to and therefore is unconvincing to me.
Not sure how that will work when they power the coin of the realm for malware, human exploitation, etc.
https://www.smbc-comics.com/comic/the-village-and-the-tower
How is that obvious, or maybe — to whom?
I think the whole CBDC idea as more like governments trying to pile on to the “blockchain” trend. We already have plenty of digitalization of our finances and it seems to be working ok, and while I’m sure there are some closet totalitarians who’d love to have a database of all transactions, I don’t think CBDC is the way they’re going to (try to) get there.
No. Central bank digital currencies need not be implemented with inefficient blockchain technology. Privacy is a big issue, but the solution to that is not a public blockchain. CBDC could be huge in actually disintermediating many banks.
Note that in some societies (eg Sweden) most transactions are already cashless, so the whole issue of privacy is orthogonal to CBDC.
I'm not really sure why you would say this. If anything, I would say that stories like these point much more strongly towards an entirely crypto-less future. Who is going to trust the crypto ecosystem as a whole after all these collapses?
> I feel like it is even possible that Wall Street is BEHIND the collapse of these stablecoins. They couldn’t pay for better press to help convince the public that a CBDC is necessary for the future. I suspect the CBDCs are already ready to go, but their last step is convincing the public they need one.
And now you're swerving into full-on conspiracy theory speculation territory. Get a grip, man!
I am generally pro-crypto, but I cheer when bad cryptocurrencies fail. And there are is a lot of bad right now...
And what gives the US dollar its value is really the long dick of the US government.
What we're seeing here once again if Crypto Andys learn exactly why the financial system is the way it is.
An algorithmic stablecoin is ridiculous. Collateral helps but it all boils down to trust. Consider this quote:
> Deus Finance reacted by halting the redemption process in order to try and stabilize the coin.
This is exactly the sort of intervention a central bank performs when managing a currency. So what exactly are we gaining with crypto?
Presumably if you have enough assets backing it, then if people start mass selling you can just buy back the currency for the price it’s pegged at.
Press F to pay respects.
Really? Isn't that the mechanism as intended? Why is anyone still selling to them at .64 if there's really an arb?
One classic example is when the US dollar was pegged to gold, and then the fiat dollar was inflated until the banking system collapsed, resulting in the Great Depression.
Earlier examples are every attempt at bimetalism.