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Report on Stablecoins [pdf]

home.treasury.gov

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Re: Report on Stablecoins [pdf]

#211

Post by CryptoPunk »

NationalPark wrote: post #206
CryptoPunk wrote: post #151

Earlier quoted context omitted.

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 thos…

You've totally missed and mischaracterized the point of the article. That wildcat banks failed was never in dispute. They failed, by definition.

As the monetary historian notes, wildcat banks were very rare, and the cause of wildcat banking was not, as alleged, lack of centralized regulatory gatekeeping: the failures were generally directly due to regulatory intervention that exacerbated risk, like prohibitions on bank branching which precluded diversification.

Re: Report on Stablecoins [pdf]

#212

Post by X6S1x6Okd1st »

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…

I thought dai would continuously be bought and used to liquidate positions as the price drops.

I.e. if someone mints 100 dai with 150 worth of ETH and the price of ETH drops then anyone can acquire dai and use that dai to access the collateral.

Through that mechanism the supply of dai should contract not the spot price. The bigger worry is that they allow minting Dai from USDC which could freeze their assets

Re: Report on Stablecoins [pdf]

#213

Post by swader999 »

adamc wrote: post #203
swader999 wrote: post #196

Earlier quoted context omitted.

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.

Sure and I agree the USD at the moment has an incredible backing. Also it being the reserve currency and base for most other currencies and commodities is no small thing.

You could argue that BTC is backed by one of the most powerful networks of computing power on the planet. I don't think that's better than what the USD has, but it isn't 'Nothing'. The fact it can't be debased as easily as fiat currencies is not a tangible thing but it does compel interest in it.

Re: Report on Stablecoins [pdf]

#215

Post by liquidise »

sub7 wrote: post #143

From a Coinbase exec: "Tether is a ticking time bomb. Whenever it goes off, it'll be a 70-80% market correction for 2-3 years" Crypto continues to help nobody and achieve nothing in the real world. This administration has been criminally slow in shutting it down, lobby is strong.

> Crypto continues to help nobody and achieve nothing in the real world

Crypto posts on HN seem to be a hotbed for these sorts of hyperbolic, wholly unsubstantiated and objectively false comments. I wish i understood what the motivation was for these sorts of replies.

Re: Report on Stablecoins [pdf]

#216

Post by Scott_Sanderson »

trophycase wrote: post #128
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…

Actually a huge fraction of DAI is backed by USDC and other assets.

Correct, OP seems to be referring to single-collateral DAI aka SAI, which is deprecated. The current DAI is backed by a basket of assets.

IMO, the basket is too heavily weighted towards centralized stablecoins like USDC. I rotated some of my MKR holdings to Terra/Luna, which may have a better peg mechanism (although it is similar to Titan, which exploded).

Re: Report on Stablecoins [pdf]

#217

Post by lvl100 »

spir wrote: post #202
TomSwirly wrote: post #194

Earlier quoted context omitted.

> 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 network…

This is just pathetic.

Re: Report on Stablecoins [pdf]

#218

Post by arcticbull »

mattnewton wrote: post #185
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…

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…

That's not quite correct, although I understand your sentiment.

When you own a share of Square (or Visa, or PayPal) each time a transaction takes place on their network, a portion of that transaction (revenue minus costs) accrues to the company - and by extension increases the intrinsic value of your share. The transaction revenue is spent on furniture, on R&D, on employees and on buffing up their cash position. As a shareholder, you benefit from every single transaction made on their network.

On the other hand with cryptocurrencies like Bitcoin, as a holder of Bitcoin you are a customer not an owner. You lose money on every transaction. That value accrues to miners, and by extension, your local PE firm re-opening a fossil fuel power plant or the Kazakh coal mining complex.

Square shares ~= Hut8 shares.

Bitcoin ~= a Starbucks gift card you hope appreciates in value when Starbucks sells more coffee. Currently there are enough, uh, savvy investors who think it should, so it does. In accounting terms, it won't though because that benefit accrues to shareholders of mining companies, which you are not. You hold a gift card. One that costs money to spend so must be worth less than face value.

Bitcoin is a strongly negative sum MLM, or if you agree with jstolfi, a Ponzi scheme with a fresh coat of paint. [1] The network currently costs $60M per day to operate. That's $21B per year in new money that has to come in to prop up the price. [edit](And all that money goes to burning coal and throwing away mining hardware).

[1] https://www.ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin...

Re: Report on Stablecoins [pdf]

#219

Post by swader999 »

scrubs wrote: post #210
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…

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.

Right now that's the case but there's no guarantee any currency will always remain the one of choice. And BTC doesn't need exchanges, but of course it does help, especially in the early stages.

Re: Report on Stablecoins [pdf]

#220

Post by X6S1x6Okd1st »

chizhik-pyzhik wrote: post #125
gzer0 wrote: post #44

This is specifically referring to non-algorithmic stablecoins. "Stablecoins that are purportedly convertible for an underlying fiat currency are distinct from a smaller subset of stablecoin arrangements that use other means to attempt to stabilize the price of the instrument (sometimes referred to as “synthetic” or “algorithmic” stablecoins) or are convertible for other assets. Because of their more widespread adopti…

This is a very good point. The risk profile of centralized stablecoins like Tether and USDC is way, way different from something algorithmically controlled like DAI.

Although DAI allows minting with USDC right now
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