Honestly that's a good thing. Let the government stay out of this mess.
If crypto speculators lose their money I don't want society to have to bail them out like what happened with Icelandic/Cypriot bank account holders.
Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
161–170 of 241 posts
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#162Earlier quoted context omitted.
One of the reasons why the yields are higher for stable coins is they are not bound by central banks‘ interest rates. This is especially true for purely synthetic stable coins (DAI, sUSD, sEUR) because they don’t even need to be backed by the underlying asset. The other reason is they cut the middle man between a creditor and debtor i.e. banks. If banks started to sell financial products based on liquidity pools, the…
The fact that the yields are higher for stablecoins simply means borrowers of stable coins are paying more to borrow stablecoins than they would if the borrowed the underlying currency instead. It has nothing to do with middlemens or central banks's interest rates.
So why can’t banks provide higher yields with simple savings accounts? If it’s got nothing to do with federal fund rates or middle men?
Here in Europe banks are entering an existential crisis as the ECB maintains zero and negative interest rates (of course, this is simplified as there are actually several different federal funds). Banks can’t finance their business anymore. This led to increasing bank fees, bank mergers and basically bad service for their customers including no interest paid on savings.
Defi will sweep away the banking market on the long run if central banks keep doing their lax monetary policy for much longer.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#163Earlier quoted context omitted.
all stable coins can blacklist except DAI
Dai is 60% backed by USDC
This suggests only 5% being backed by usdc: https://daistats.com/#/collateral
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#164Earlier quoted context omitted.
I hold a decent sized block of USDC via BlockFi and earn 8.6% APY. I realize there is inherent risk (after all, I am earning 8.6%) but compare that to 0.5% earned at Goldman Sachs or traditional FDIC insured bank accounts and it's a risk I am willing to take. By default, BlockFi issues GUSD as their stablecoin of choice, but Gemini (GUSD) market cap is only $145m, whereas USDC market cap is 22 with a B billion. Ultim…
At 8.6% APY, would you say you believe you have a sub-8.6% chance of the funds disappearing in a given year? Considering that it would take over a decade to return the original capital in value, I feel that the compensation is low relative to the risk of loss. Ten years is a lot of time for a company to bungle your funds, especially in the cryptocurrency world.
>At 8.6% APY, would you say you believe you have a sub-8.6% chance of the funds disappearing in a given year?
Those 8.6% APY are only available for a month at most. The APY changes all the time as more people deposit their money.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#165I always liked the concept behind BitShares, but I never hear much about it. Conceptually, it seems like it targets the third-party concern.
Anyway, the idea of BitShares is (was?) to ensure stability of their crypto currency through futures contracts. You buy/sell futures contracts that peg their coin to another asset. This guarantees a certain payout at expiration.
For example, you can buy a contract that guarantees you receive (or must pay) the bitshares-equivalent of X USD when the futures contract expires. (You can also have contracts that guarantee the bitshares-equivalent of X ounces of gold, etc.)
So the future (smart) contract itself acts like the fungible stablecoin, even though it's not backed by the actual asset. And it doesn't rely on a trusted third-party. Rather, its stability relies on the futures speculator market that trades these futures contracts.
Such a concept seems like it doesn't have to be limited to bitshares, but can be generalized into a smart contract traded on blockchains like Ethereum, etc.
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#166I keep thinking of Madoff's fund. It was once called "the Jewish T-bill". It worked just fine until there was a significant net outflow. Then, total crash, because the backing assets were not there. Tether is way too much like that. Remember, Tether has no upside . There is no reason to ever hold Tether for any length of time. [1] https://www.timesofisrael.com/before-dying-bernie-madoff-lif...
> Remember, Tether has no upside. There is no reason to ever hold Tether for any length of time. It looks like USDC, issued by a company co-owned by Coinbase (YC incubated right?) and Circle, is quickly replacing tether. One year ago there were about 1/10th of USDC compared to tether, now it's half. Apparently USDC are really fully backed by real USD and the smart contract for USDC can block any address containing US…
Regarding USDC - people in control of usdc can (and did) blacklist any wallet at their own desire, so it's not much different from storing money in bank, exchange etc
How about DAI ? This stablecoin doesn't have both USDT's and USDC's disadvantages
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#167Earlier quoted context omitted.
Does the proxy implementation pattern used in this contract actually mean that the owner of the corresponding keys can not only block addresses from holding USDC, but actually swap out the entire implementation, e.g. for one implementing transaction or inactivity fees?
Why does it matter? They owe you the money in the first place. If they’re ill-intentioned they can just refuse to redeem your coins, or require that you send them to a new contract with different rules. There’s no reason credit instruments should be on a blockchain in the first place, given you’re depending on a central party for redemption.
> There’s no reason credit instruments should be on a blockchain in the first place, given you’re depending on a central party for redemption.
Can you elaborate? Say you issue RUNEKs, how do we move them around freely in a digital world with the assumption that you are not required for transfers?
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#168Earlier quoted context omitted.
The fact that the yields are higher for stablecoins simply means borrowers of stable coins are paying more to borrow stablecoins than they would if the borrowed the underlying currency instead. It has nothing to do with middlemens or central banks's interest rates.
So why can’t banks provide higher yields with simple savings accounts? If it’s got nothing to do with federal fund rates or middle men? Here in Europe banks are entering an existential crisis as the ECB maintains zero and negative interest rates (of course, this is simplified as there are actually several different federal funds). Banks can’t finance their business anymore. This led to increasing bank fees, bank merg…
> So why can’t banks provide higher yields with simple savings accounts? If it’s got nothing to do with federal fund rates or middle men?
Because banks are regulated (to avoid systemic risks), so they need to balance deposits with risk free loans (or discounting the riskier loans with extra capital).
> Defi will sweep away the banking market on the long run if central banks keep doing their lax monetary policy for much longer.
By definition if they provide higher yields, this should be because they are riskier. (It might be a non-obvious risk, e.g. liquidity risk due to lack of lender of last resort).
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#169Earlier quoted context omitted.
It doesn't make sense to compare risk-free FDIC-insured deposits to stablecoins at BlockFi. Full disclosure: I did not find BlockFi's brief descriptions of their risk management strategies to be comforting.
What didn't you like about the risk management strategies?
It's all highly leveraged on all sides, margin calls will amplify things if things start crashing (which will then risk not covering the initial investment, trigger a run, and amplify further).
Re: Bitcoin’s reliance on stablecoins harks back to the Wild West of finance
#170Earlier quoted context omitted.
The fact that the yields are higher for stablecoins simply means borrowers of stable coins are paying more to borrow stablecoins than they would if the borrowed the underlying currency instead. It has nothing to do with middlemens or central banks's interest rates.
So why can’t banks provide higher yields with simple savings accounts? If it’s got nothing to do with federal fund rates or middle men? Here in Europe banks are entering an existential crisis as the ECB maintains zero and negative interest rates (of course, this is simplified as there are actually several different federal funds). Banks can’t finance their business anymore. This led to increasing bank fees, bank merg…
> So why can’t banks provide higher yields with simple savings accounts?
Because yield is the price that borrowers pay for borrowing funds. When there are a lot of funds available for borrowing and not many people wanting to borrow yields will fall. There is just nothing central banks or commercial banks can do to raise yields if there is little demand for loans.