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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

#51

Post by zodiac »

cornyNetHandle wrote: post #38
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…

It may attempt to trend towards the dollar over time, but will it be trending that way during the time that you personally need it? "The market can remain irrational longer than you can remain solvent", springs immediately to mind. edit: Also, pegging a cryptocurrency to the dollar seems almost comedically perverse. What is it for?

> Also, pegging a cryptocurrency to the dollar seems almost comedically perverse. What is it for?

The general thing you want is for your currency to have stable purchasing power (for goods and services) in the short term, maybe inflate it slowly to encourage investment - monetary policy basically. Targeting a USD peg is a way to do this, of course ideally you'd want your currency to have a monetary policy independent of USD

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

#52

Post by JumpCrisscross »

dragonwriter wrote: post #45
cornyNetHandle wrote: post #43

Earlier quoted context omitted.

If blockchain based currencies prove themselves to be a significant improvement on current monetary systems then state currencies, such as the US dollar, will adopt the new technology, as they have done with all other previous developments in money. This would seem to indicate that a blockchain coin pegged to the dollar only keeps any marginal utility at all during the period where the technology is novel, as blockch…

> If blockchain based currencies prove themselves to be a significant improvement on current monetary systems then state currencies, such as the US dollar, will adopt the new technology, as they have done with all other previous developments in money. The US dollar, as such, often hasn't adopted new developments in money transmission directly (at least, not at the consumer level); the circle of businesses facilitatin…

> The US dollar, as such, often hasn't adopted new developments in money transmission directly (at least, not at the consumer level)

The Federal Reserve began moving money electronically in 1915 [1]. (You read that right. Nineteen fifteen. In the early 80s, telex transmission services began.) The back offices of finance are surprisingly reactive to new technology, when the risks and rewards balance properly.

[1] https://en.m.wikipedia.org/wiki/Fedwire

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

#54

Post by decentralised »

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…

The stability of a system is ensured by it's parts working together. The DAI ensures volatility is reduced, but it doesn't stop trading if someone is irrational.

I don't know why you insist in pushing rhetoric and logical fallacies that make you sound dumb Preston.

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

#55

Post by justincormack »

zodiac wrote: post #36
Spivak wrote: post #33

Earlier quoted context omitted.

But isn't 'hover around the same value long term' maintaing the purchasing power? I guess if you interpret the marketing as 'will literally always be worth $1.00' you'll be disappointed but it's weird to take that interpretation when it's not really attainable for anything that isn't a US dollar.

It's not even technically attainable for USD. If China places huge market orders for a basket of commodities with USD, USD would lose purchasing power wrt the basket for a short amount of time (I think a few seconds is possible).

The USD is not pegged to commodity prices.

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

#56

Post by rebuilder »

It seems to me that any decentralized stablecoin would break the impossible trinity. [0]

Basically, since the interest rate is fixed (at 0 in this case, I believe), there's an incentive to sell DAI in favour of some higher-yielding currency, which creates a downward pressure on the price. So short of preventing DAI from being sold somehow, in order to maintain a peg, someone needs to pump money into DAI at a loss.

You can try to build a complicated system to hide all that, but it seems the goal of a stable peg is simply impossible. Even for nation states it is only possible in the case they have sufficient resources and the will to maintain a peg.

[0]:https://en.wikipedia.org/wiki/Impossible_trinity

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

#57

Post by JohnJamesRambo »

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…

But how much is DAI straying long term? USDT tethers are also often worth a few percent more or less than a dollar in periods of volatility. Is there hope that the 80% will zero in closer to a few percent in the future like USDT?

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

#58

Post by Erlich_Bachman »

DennisP wrote: post #4

I'm a bit skeptical of derivative-based stablecoins in general, but Dai dropped briefly and then went right back to about a dollar, currently $1.02. I don't think they ever claimed that their price stabilization mechanisms would work instantaneously.

And while it dropped momentarily, it dropped to 70%-80% of the USD. In the world where most other cryptocurrencies move that much in a regular day without anyone breaking a sweat - that seems like a very good deal to me.

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

#59

Post by Erlich_Bachman »

Animats wrote: post #40
sna1l wrote: post #11

It is funny because this guy also fundamentally doesn't understand how Basecoin works. "If the price of 1 BASE is above $1, the blockchain prints new $BASE to holders of “BASE Shares” (mother of god), a standalone cryptocurrency which is issued in the genesis block and held by early adopters, which then distributes new Basecoins to them as a “dividend.” Holders of “BASE Shares” are free to either hold onto their Divi…

Well, of course it's easy to ensure that the price doesn't stay above $1. You can make more of them. It's ensuring that the price doesn't stay below $1 that's hard. You have to draw value from some reserve. If that reserve is depleted, you're screwed. All attempts to peg currencies run into that problem.

Would it not be possible to just destroy some of the coins? If they were destroyed for everyone, proportionally to how much they hold, wouldn't that be in interest of everyone? Because it would make the coin itself worth more?

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

#60

Post by relyio »

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…

>stablecoin shill

You make some good points but I'm not sure labeling everyone and everything as "shilling" is helping your case at all.

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