Report on Stablecoins [pdf] • Hacker News Board

Re: Report on Stablecoins [pdf]

#201

Post by paulgb » Mon, Nov 01, 2021, 10:09 PM UTC

lamontcg wrote: post #140

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…

Tether can survive a net outflow because Tethers aren't redeemable in that way. If you show up with 1M USDT, they won't give you $1M USD. It'll have to collapse on exchanges with more sellers than buyers, and to determine how that happens you need to actually understand what specific mechanism underlies how the peg is maintained. I suspect Tether is all crypto-backed debt issuance which is denominated in real $USD wh…

> Tether can survive a net outflow because Tethers aren't redeemable in that way

I think it's worth distinguishing here between Tether the company and Tether the coin. Tether the company isn't automatically destroyed by a net outflow for the reasons you mention, but if they are indeed not fully backed, a net outflow could certainly break the peg and kill the coin as we know it.

Re: Report on Stablecoins [pdf]

#202

Post by spir » Mon, Nov 01, 2021, 10:11 PM UTC

TomSwirly wrote: post #194

spir wrote: post #182

Earlier quoted context omitted.

Crypto "expert" here. We will have a catastrophic crash, it's normal and natural. But, the tech is here to stay and is 100x better than existing solutions. Crypto is changing the world, one crash at a time :)

> 100x better than existing solutions. And after ten years, there isn't one actual application of cryptocurrencies except for speculation and crime.

I'm with you, where are the actual applications?

I'd say this criticism was mostly fair up until about two years ago. Within the last two years, the actual applications have flourished.

For example, have a look through this list https://defipulse.com/

If you remain skeptical, that's fair. The good news is, Ethereum is reaching adulthood this year by switching to proof of stake and launching the web of layer-2 networks. Within another three years or so, the "actual applications" will become so ubiquitous as to be impossible to ignore.

Re: Report on Stablecoins [pdf]

#203

Post by adamc » Mon, Nov 01, 2021, 10:11 PM UTC

swader999 wrote: post #196

wpietri wrote: post #111

Earlier quoted context omitted.

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…

You could make the same claim about any kind of money though. Whose to say the USD or GOLD or CAD or tree bark is real money? A productive asset is an entirely different thing. It's not easy to convert an asset for instance or walk across a border with it. People make the fundamental mistake thinking these things are investments, they aren't, it's just currency or forex speculation that we are doing here.

In the case of the USD, the existence of a powerful government with a variety of powers (including coercive ones). Nothing is guaranteed in life, but it is orders of magnitude different from a digital currency offered by private individuals.

Re: Report on Stablecoins [pdf]

#204

Post by swader999 » Mon, Nov 01, 2021, 10:11 PM UTC

BoiledCabbage wrote: post #192

mattnewton wrote: post #185

Earlier quoted context omitted.

I'm a crypto bear myself, but I'm not sure I agree with this argument. Plenty of services are built around "just moving money around" - accounting in this way has a ton of real value or else stripe, visa, paypal etc wouldn't be the huge companies they are. The questions are, whether "investing" by buying and holding is the right way to capture the value that this produces, and whether the benefits of doing it on a di…

visa, paypal... all provide value in allowing commercial transitions. Exchange of goods and services, digitally or on credit. The value it is providing is eliminating the inefficiency of barter (which cash also does), and allowing remote digital transactions, again good for societal benefit. There is no societal benefit to buying, holding, selling a crypto currency. The thing that could provide societal value is smar…

There is value in having a monetary system though. And if BTC is a better system and more people find it's utility for barter or wealth preservation better it might appreciate more in relation to something like the USD which has many different characteristics.

Re: Report on Stablecoins [pdf]

#205

Post by dbmikus » Mon, Nov 01, 2021, 10:13 PM UTC

LatteLazy wrote: post #170

The only real point of stable coins seems to be tax/sanctions evasion. Given that, no respectable institution (tier 1 banks etc) will run one. Given that, all stable coins are only stable till the disreputable nature of the operator catches up with them...

Stablecoins are useful if you want to participate in DeFi with stable currencies.

Re: Report on Stablecoins [pdf]

#206

Post by NationalPark » Mon, Nov 01, 2021, 10:13 PM UTC

CryptoPunk wrote: post #151

wpietri wrote: post #122

Earlier quoted context omitted.

Stablecoin issuers are already effectively banks. In particular, wildcat banks: https://en.wikipedia.org/wiki/Wildcat_banking Spoiler alert: there's a reason we had 150 years without wildcat banks.

The popular conception of the so-called free banking era, and the cause and prevalence of wildcat banking, is wrong. https://www.alt-m.org/2021/07/06/the-fable-of-the-cats/

Even the Cato blogger here concedes that wildcat banks failed more often and were probably fraudulent from the beginning some of the time (but you can't prove it!). His argument more or less boils down to regulation being inherently bad, therefore it's worth it to try this all over again with stablecoins, in case it works this time, also sometimes people got back like 95 cents on the dollar so if you don't count those cases as wildcat banks the story looks a lot better. Not surprising, but it's a lot of words to make such a banal point.

Re: Report on Stablecoins [pdf]

#207

Post by swader999 » Mon, Nov 01, 2021, 10:15 PM UTC

habitue wrote: post #200

swader999 wrote: post #191

Earlier quoted context omitted.

That's the same with many markets though. Market cap is a pretty silly metric to use for almost any market.

It's a useful metric in one particular case, which is if you're looking to buy out the stock

It depends on the stock and what each individual holder is prepared to sell for. So it's exactly the same. In a corporate buyout the individual sellers typically agree on a sale price, but that's a contract on top of the market. Without that in play you'd be subject to the same unknowns and market cap wouldn't guarantee any buyout price. Hostile takeover is one example.

Re: Report on Stablecoins [pdf]

#208

Post by webinvest » Mon, Nov 01, 2021, 10:15 PM UTC

neaanopri wrote: post #173

Fed should make a commitment NOT to bail out crypto people under ANY circumstances!

They might one day bail out the banks that use Ripple (XRP)… as well as the banks that don’t use it.

Bitcoin was literally created due to bailouts. Just read the genesis block of Bitcoin.

Re: Report on Stablecoins [pdf]

#209

Post by zzleeper » Mon, Nov 01, 2021, 10:15 PM UTC

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…

Is there a way to find out what was the market cap of those two? Searched coingecko and a few other places and came empty handed (they just list "price" but no historical market cap or outstanding coins)

Re: Report on Stablecoins [pdf]

#210

Post by scrubs » Mon, Nov 01, 2021, 10:17 PM UTC

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…

Agree! If there was no way for ppl playing in crypto to get their hands on bonafide fiat currency, I don't think anybody would really care about crypto. Remember the Gemini exchange adds looking for qualified investors? Why? because such people have US dollars, which is what Gemini wants to bank.