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Report on Stablecoins [pdf]

home.treasury.gov

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Re: Report on Stablecoins [pdf]

#111

Post by wpietri »

dustingetz wrote: post #80
Animats wrote: post #47

This is good. The backing of stablecoins is a very real issue. As the Treasury points out, there's a very real possibility of a run. Two stablecoins have crashed so far, SafeDollar SDO, and $TITAN. They went all the way to zero. Can Tether survive a net outflow? Probably not. They don't have the collateral. Dai is really a derivative of Etherium. Dai is backed by Etherium at 150%. So value in Dai is at risk if the pr…

Risk is that a tether run causes all of crypto to collapse, not just USDT. How many actual dollars are in the system? Everything real has been exfiltrated through electricity bills, taxes and early adopters selling, the entire crypto economy is a hollow shell, leveraged on retail deposits.

Exactly. Ultimately cryptocurrencies are a negative-sum game in that they take in real money and just move that money around, while spending some on overhead.

In contrast, imagine investing in, say, a new fast-food franchise joint. They money you put in there is used to acquire assets that are used to produce goods that people will pay to consume. If it's a well-run business, the value of the outputs will be more than the value of the inputs, making it a positive-sum effort.

Re: Report on Stablecoins [pdf]

#112

Post by silentsea90 »

NikolaNovak wrote: post #87
silentsea90 wrote: post #75

Earlier quoted context omitted.

There's a canonical toxic response to this = HFSP. I don't like that because we're all still learning. I hope you see how the money printer is making scarce assets outside of Govt manipulation more valuable. The Bitcoin rabbit hole goes deep. You're right in that stablecoins might actually be worthless in the long run since they're backed by USD which might be worthless in due course of time. Zoom out of the day to d…

>>There's a canonical toxic response to this = HFSP. I don't feel this was your actual response, but I still need to address it because I don't understand how anybody ever can have that as a remotely legitimate, thought-out response. How can any financial instrument/currency make everybody "rich", in any real terms? If you gave everybody million USD tomorrow, it'd crash so bad that we'd be right back where we came fr…

I will restrict myself to Bitcoin as I don't believe as strongly in the rest though I do own some of those as well. Bitcoin is at a market cap of 1T. That's less than major tech cos (Apple 2.5T, Google ~2T), gold(10T), total USD (~30-40T) etc. If you believe BTC will be used as the global store of wealth and currency, buying anytime (until the time BTC gets there) will make anybody who buys rich.

Of course, after price discovery is more or less complete, we can't all be rich as the value relative to goods and services will stagnate, and BTC will become as boring as gold.

> From where I'm sitting....if somebody else buys it for more.

Sure, and they will if the value of said coin keeps going up. Note that you don't need to sell it for USD, you could be paying for services in said coin directly. Point being that the exchange doesn't need to happen in USD, it can happen in any form of value.

Re: Report on Stablecoins [pdf]

#113

Post by roenxi »

NikolaNovak wrote: post #87
silentsea90 wrote: post #75

Earlier quoted context omitted.

There's a canonical toxic response to this = HFSP. I don't like that because we're all still learning. I hope you see how the money printer is making scarce assets outside of Govt manipulation more valuable. The Bitcoin rabbit hole goes deep. You're right in that stablecoins might actually be worthless in the long run since they're backed by USD which might be worthless in due course of time. Zoom out of the day to d…

>>There's a canonical toxic response to this = HFSP. I don't feel this was your actual response, but I still need to address it because I don't understand how anybody ever can have that as a remotely legitimate, thought-out response. How can any financial instrument/currency make everybody "rich", in any real terms? If you gave everybody million USD tomorrow, it'd crash so bad that we'd be right back where we came fr…

A central plank of the US dollar (all fiat currencies, really) is that if you hold on to them for long enough all the wealth you had when you first picked them up gets transferred to someone else.

Compared to that baseline holding literally anything else - including crypto - has a better theoretical chance of preserving your wealth. When measured in terms of US dollars, that has the appearance of everyone who owns it getting richer.

> How can any financial instrument/currency make everybody "rich", in any real terms?

You have resources, someone else has a really good idea for how to use them. Financial instruments let the situation play out sensibly (you lend them resources, get back resources + something) with easy-to-manage legal enforcement if something goes wrong.

More complicated financial instruments let that scenario play out in more abstract ways. All in theory, in practice most people are bad with debts and more complicated concepts.

Re: Report on Stablecoins [pdf]

#114

Post by Aaronstotle »

lavezzi wrote: post #95
Aaronstotle wrote: post #43

Earlier quoted context omitted.

Tether absolutely poses a large risk to crypto. If companies do issue stablecoins, they should have links to third-party attestations that verify proof of reserves like Circle (USDC) does. Tether could end all of their "FUD" if they ever published such a report. Circle's reporting: https://www.circle.com/en/usdc#transparency (edited to change audits --> attestations)

Circle are not audited, Grant Thornton provide an attestation. There's a big difference.

This is true, I'll edit my comment.

I still think a third-party attestation provides a lot more trust than the shady-stuff going on with Tether.

Re: Report on Stablecoins [pdf]

#115

Post by biztos »

dexwiz wrote: post #49

All these coins are proven to be worthless. When speculation is making everyone money, the money isn't worth much. Edit: Love the immediate fear downvote. No one wants to hear their gold is really just shiny dirt.

I just went through the process of buying something expensive in a "trustless" system in an IRL country. It was pretty painful and very expensive -- I paid $300 just to get a guaranteed check cut!

Of course this is a trivial problem to solve with smart contracts, if you can have things like real-life identity and real-life money mapped to them.

While I don't think any of the crypto stuff out there today solves any of these problems realistically, at least Ethereum sure looks like an experiment in that direction.

That a lot of people are getting rich speculating on crypto absolutely triggers my FOMO, and sometimes my disdain (cf. certain NFT sales) -- but I definitely wouldn't call it worthless.

Some day we may have free, secure, trustless escrow via smart contracts, and a bunch of other neat stuff. I think that's unlikely to be on any of the current networks, but I also think we'll get it decades earlier because of them.

Re: Report on Stablecoins [pdf]

#116

Post by Muromec »

whatshisface wrote: post #109
NikolaNovak wrote: post #87

Earlier quoted context omitted.

>>There's a canonical toxic response to this = HFSP. I don't feel this was your actual response, but I still need to address it because I don't understand how anybody ever can have that as a remotely legitimate, thought-out response. How can any financial instrument/currency make everybody "rich", in any real terms? If you gave everybody million USD tomorrow, it'd crash so bad that we'd be right back where we came fr…

> How can any financial instrument/currency make everybody "rich", in any real terms? By organizing economic activity in a more efficient way than our present system of centrally planned debt supplies. That's what currency is "for" - organizing real activities.

So what kinds of economic activities, besides ransom, drug sales and donations to wikileaks and others not liked by u.s. government does bitcoin facilitate? Remittances to countries under repressive economical regime or under embargo?

Not saying those are good or bad, just aiming to quantify the market size.

Re: Report on Stablecoins [pdf]

#117

Post by wyager »

wpietri wrote: post #111
dustingetz wrote: post #80

Earlier quoted context omitted.

Risk is that a tether run causes all of crypto to collapse, not just USDT. How many actual dollars are in the system? Everything real has been exfiltrated through electricity bills, taxes and early adopters selling, the entire crypto economy is a hollow shell, leveraged on retail deposits.

Exactly. Ultimately cryptocurrencies are a negative-sum game in that they take in real money and just move that money around, while spending some on overhead. In contrast, imagine investing in, say, a new fast-food franchise joint. They money you put in there is used to acquire assets that are used to produce goods that people will pay to consume. If it's a well-run business, the value of the outputs will be more tha…

The positive externalities from sound money and the concomitant demonetization of other assets (like real estate, oil, etc.) are massive, especially in the long term.

Re: Report on Stablecoins [pdf]

#118

Post by wizzwizz4 »

wpietri wrote: post #106
dragontamer wrote: post #62

Earlier quoted context omitted.

The downvotes are because "worthless" is hyperbolic and unhelpful. Clearly, the coins have value because someone out there feels like paying money for them. More importantly: we _HAVE_ to understand the market dynamics here. What's going on is very human and very important to realize. Matt Levine from Bloomberg has a very simple explanation: the cryptocoin world has discovered "senior debt vs junior debt", and are us…

> Clearly, the coins have value because someone out there feels like paying money for them. That's not a great definition of worth. Is the correct value for a Ponzi scheme really determined by the most recent dollar they took in? I'd say not.

It's the main definition of worth that is used when discussing the value of commodities in economics on the internet.

Re: Report on Stablecoins [pdf]

#119

Post by NikolaNovak »

roenxi wrote: post #113
NikolaNovak wrote: post #87

Earlier quoted context omitted.

>>There's a canonical toxic response to this = HFSP. I don't feel this was your actual response, but I still need to address it because I don't understand how anybody ever can have that as a remotely legitimate, thought-out response. How can any financial instrument/currency make everybody "rich", in any real terms? If you gave everybody million USD tomorrow, it'd crash so bad that we'd be right back where we came fr…

A central plank of the US dollar (all fiat currencies, really) is that if you hold on to them for long enough all the wealth you had when you first picked them up gets transferred to someone else. Compared to that baseline holding literally anything else - including crypto - has a better theoretical chance of preserving your wealth. When measured in terms of US dollars, that has the appearance of everyone who owns it…

>>You have resources, someone else has a really good idea for how to use them. Financial instruments let the situation play out sensibly (you lend them resources, get back resources + something) with easy-to-manage legal enforcement if something goes wrong.

I agree with that in general; however, that's not the current premise of most cryptocurrencies - I see them more like gold in that you buy them and hold on to them; not as a capitalist investment into anything specific or generic. I may be wrong...

Re: Report on Stablecoins [pdf]

#120

Post by CryptoPunk »

Animats wrote: post #47

This is good. The backing of stablecoins is a very real issue. As the Treasury points out, there's a very real possibility of a run. Two stablecoins have crashed so far, SafeDollar SDO, and $TITAN. They went all the way to zero. Can Tether survive a net outflow? Probably not. They don't have the collateral. Dai is really a derivative of Etherium. Dai is backed by Etherium at 150%. So value in Dai is at risk if the pr…

FYI, this individual has been deliberately misspelling Ethereum for 5+ years on Hackernews, as a form of mockery:

https://news.ycombinator.com/item?id=9988438

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