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MakerDAO’s “DAI” stablecoin is breaking, as predicted

prestonbyrne.com

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Re: MakerDAO’s “DAI” stablecoin is breaking, as predicted

#21

Post by MicahZoltu »

The thing the author seems to be confused about is that when people talk about stable coin they aren't claiming that the market can't be irrational. They are claiming that over a sufficient period of time the coin will trend towards its target. In the case of DAI today, that target is 1 DAI == 1 USD. This means that while the market may irrationally buy/sell DAI for more or less than 1 USD, over time it will trend towards 1 USD.

For the vast majority of people looking for a stable coin, this is exactly what they want. They don't care so much that on a particular exchange DAI is worth more or less than $1, they care that in a week, or a month or a year DAI will still be worth "about a dollar" and not "100x USD" or "x/100 USD". DAI has the mechanisms necessary to make it profitable to drive the price of DAI back toward 1 USD if it loses its peg and those mechanisms have been shown to generally work in the wild so far.

I have personally made a few bucks when DAI transiently slipped its peg in the past. There are people actively authoring bots that profit off of DAI losing its peg and as those bots become more efficient and gain capital, I think we'll see DAI slip its peg less and less often.

Re: MakerDAO’s “DAI” stablecoin is breaking, as predicted

#23

Post by moomin »

3solarmasses wrote: post #22

How is this mud slinging article so high on hacker news? This guy is just like every other troll who attempts to forge a name for themselves by tearing down other people's hard work.

Yeah, I hate security researchers too. They should shut up about TLS and processor vulnerabilities.

Re: MakerDAO’s “DAI” stablecoin is breaking, as predicted

#24

Post by kwikiel »

In this thread cryptocurrency community will rediscover banking and money.

We have stablecoins or tethers (manny attempts to create something people want) - people want some form of money for peer to peer value transfer, that will allow arbitrage between exchanges and connection to "real world" as almost nobody is pricing their services in ethereum/bitcoin.

Let's say we have 3 competing stablecoins and Gresham's law will apply = people will be moving to "best" coin and leaving others holding bad ones. Imagine that you have 2 banks - one with good reputation and large reserves and second one - almost without them, yet both will be issuing private money redeemable for each other. So how come one can attract customers to his specific stablecoins solution? By offering interest rate - a stablecoin that pays dividend will be better than stablecoin without it.

It's complicated - ideologically stablecoins are similar to economical perpetuum mobile devices, yet the first are impossible due to laws of physics and second one may work because economy depends on human behaviour and humans may act irrationally.

Re: MakerDAO’s “DAI” stablecoin is breaking, as predicted

#25

Post by pjbyrne »

MicahZoltu wrote: post #21

The thing the author seems to be confused about is that when people talk about stable coin they aren't claiming that the market can't be irrational. They are claiming that over a sufficient period of time the coin will trend towards its target. In the case of DAI today, that target is 1 DAI == 1 USD. This means that while the market may irrationally buy/sell DAI for more or less than 1 USD, over time it will trend to…

> They are claiming that over a sufficient period of time the coin will trend towards its target

This is not what the MakerDAO team, nor any other stablecoin shill, is claiming. They are claiming the system "ensures" that the stablecoin is "a money that will always maintain its purchasing power."

"Ensure" and 'always' don't mean "trend towards over time." They mean always, as in all the time. If their intention is to sell a different product, I can only suggest they make more representations which are a little harder to falsify.

Re: MakerDAO’s “DAI” stablecoin is breaking, as predicted

#26

Post by zodiac »

pjbyrne wrote: post #25
MicahZoltu wrote: post #21

The thing the author seems to be confused about is that when people talk about stable coin they aren't claiming that the market can't be irrational. They are claiming that over a sufficient period of time the coin will trend towards its target. In the case of DAI today, that target is 1 DAI == 1 USD. This means that while the market may irrationally buy/sell DAI for more or less than 1 USD, over time it will trend to…

> They are claiming that over a sufficient period of time the coin will trend towards its target This is not what the MakerDAO team, nor any other stablecoin shill, is claiming. They are claiming the system "ensures" that the stablecoin is "a money that will always maintain its purchasing power." "Ensure" and 'always' don't mean "trend towards over time." They mean always, as in all the time. If their intention is to…

If there are thin enough markets of course "always maintains purchasing power" is impossible. This is true for USD ad well.

Re: MakerDAO’s “DAI” stablecoin is breaking, as predicted

#27

Post by _Nat_ »

3solarmasses wrote: post #22

How is this mud slinging article so high on hacker news? This guy is just like every other troll who attempts to forge a name for themselves by tearing down other people's hard work.

This does read more like a blogger trying to self-promote than anything else.

Re: MakerDAO’s “DAI” stablecoin is breaking, as predicted

#28

Post by pjbyrne »

zodiac wrote: post #26
pjbyrne wrote: post #25

Earlier quoted context omitted.

> They are claiming that over a sufficient period of time the coin will trend towards its target This is not what the MakerDAO team, nor any other stablecoin shill, is claiming. They are claiming the system "ensures" that the stablecoin is "a money that will always maintain its purchasing power." "Ensure" and 'always' don't mean "trend towards over time." They mean always, as in all the time. If their intention is to…

If there are thin enough markets of course "always maintains purchasing power" is impossible. This is true for USD ad well.

The difference being that USD doesn't pretend to be pegged to anything. My point about MakerDAO is that the development team is claiming the impossible is possible.

Re: MakerDAO’s “DAI” stablecoin is breaking, as predicted

#29

Post by erikpukinskis »

MicahZoltu wrote: post #21

The thing the author seems to be confused about is that when people talk about stable coin they aren't claiming that the market can't be irrational. They are claiming that over a sufficient period of time the coin will trend towards its target. In the case of DAI today, that target is 1 DAI == 1 USD. This means that while the market may irrationally buy/sell DAI for more or less than 1 USD, over time it will trend to…

Won't someone learn to play the peg slip robots? If you can hack a PS4 you can trick some simple arbitrage robots.

Not saying it's easy, or I could do it... just that it's an inevitability, right? What happens then?

Re: MakerDAO’s “DAI” stablecoin is breaking, as predicted

#30

Post by erikpukinskis »

kwikiel wrote: post #24

In this thread cryptocurrency community will rediscover banking and money. We have stablecoins or tethers (manny attempts to create something people want) - people want some form of money for peer to peer value transfer, that will allow arbitrage between exchanges and connection to "real world" as almost nobody is pricing their services in ethereum/bitcoin. Let's say we have 3 competing stablecoins and Gresham's law…

A stablecoin isn't a store of value. It's an instrument for holding pretend Fiat. It's a way for holders to pretend they are the Fed, and say "Now I have USD! You can have it. Just sell it back to someone else eventually because it's pretend."

It's an index basically, not an actual commodity.

(Except of course in the sense that Everything Is A Commodity in the crypto world.)

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