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Report on Stablecoins [pdf]

home.treasury.gov

261–270 of 697 posts

Re: Report on Stablecoins [pdf]

#261
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.

so basically crypto is deflationary?

Re: Report on Stablecoins [pdf]

#262
post #57

Earlier quoted context omitted.

Is Dai similar to Gemini's GUSD stable coin? It too is backed by Etherium. I think Gemini is paying 8 or 9% APR for holding. Where is that money coming from? Are they loaning out for a higher rate than that?

It’s spelled Ethereum.

Don't worry, that's just the way bridley spells it.

Re: Report on Stablecoins [pdf]

#263
post #182

Historically, we've had major bubbles and crashes in all kinds of financial markets, from stocks and bonds, to property and dotcom stocks. Is there any reason to believe that cryptocurrency is more stable and we won't have a catastrophic crash?

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 :)

The only practical differences in the tech is that it wastes more power, has no insurance, has no fraud remediation, and has no safeguard against volatility. I guess the potential anonymity too, but that's only really a practical benefit if making an illegal transaction.

The only time I can ever see a cryptocurrency being worth it is if you do not have any central authority you can trust. If we ever get to the point where you can't trust the courts to somewhat reasonably protect your money, then I think we have worse problems. Especially since you wouldn't have any physical protection from the legal system.

Re: Report on Stablecoins [pdf]

#264

Earlier quoted context omitted.

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…

Also, not quite correct. Bitcoin isn't figuratively a store of value, it actually is. The amount of bitcoin on DeFi, backing collateral for flash loans and Stablecoin minting is astounding. >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…

> Bitcoin isn't figuratively a store of value, it actually is.

It's a speculative, negative-sum MLM token. I suggest reading up on what a store of value is. [1]

I'm not saying there aren't ways of monetizing it within the network - which may indeed create value, but intrinsically, it is a negative-sum asset, a mechanism of redistributing real cold hard dollars from new participants to old entrants and miners. It creates nothing. Systems built on top of it might, exploiting let's say regulatory arbitrage, facilitating crime or gambling, but intrinsically, it creates no value.

[1] https://www.investopedia.com/terms/s/storeofvalue.asp

Re: Report on Stablecoins [pdf]

#265
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.

This shouldn’t be surprising. Permissionless systems often innovate orders of magnitude faster than permissioned systems.

So many of these threads are filled with comments of the form “well why do we actually need a blockchain for that? Can’t we just do the thing with centralized databases?”

But the point is after 50 years the centralized databases haven’t built those systems. Smart contracts, and instant finality transfers, and a public identity tied to private keys could all exist on ACH. Yet they only happened when blockchains came along.

Blockchains aren’t a technical innovation, they’re a sociological innovation. They remove the responsibility of a centralized administrator if shit hits the fan. Visa won’t allow smart contracts in its network, because it has too much to lose. In Ethereum if the DAO breaks there’s no one to sue. Result smart contracts exist in Ethereum but not Visa.

Same story holds true with the Internet. Do we really need a decentralized network designed to withstand a nuclear war? Surely a single telco network could just as easily serve up websites. Except it never did. The Internet won because it was permissionless and therefore innovation occurred much more rapidly.

Re: Report on Stablecoins [pdf]

#267
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…

If a recession is bad enough some will panic and pull it all out.

The reality is that crypto is not essential—it’s convenient and has potential but it’s value is backed by what? Other financial assets are backed by stuff like voting rights in a company or a physical asset.

Hence: people will dump crypto first.

I suppose Ethereum is different because it is backed by the functionality provided by the distributed Turing machine and all applications which rely on that. So the folks who wouldn’t pull their money out would be product owners who rely on the blockchain as a revenue stream.

My question would be who holds the price up high? Institutions or the broader public holdings of ETH?

Re: Report on Stablecoins [pdf]

#268

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've responded to several commenters who say this with my real world examples, the most notable of which are paying people in Venezuela to do work for me when most mainstream forms of monetary exchange are nearly impossible in/out of that country.

Have you considered that the difficulty of transacting might be by design?

Re: Report on Stablecoins [pdf]

#269
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…

For some time now DAI has been backed by a basket of coins precisely to mitigate the risk of one coin dropping.

Re: Report on Stablecoins [pdf]

#270
post #203

Earlier quoted context omitted.

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.

Yes, the USD is backed by the most absurd proof of violence the world has ever seen. No organization of human civilization has ever been able to summon as much death and despair as the United States. However, most of the ability of the United States to execute such power is centralized in Washington D.C. and New England. Centralization brings immense efficiency, but also vulnerability. Those geographic regions are a…

> Yes, the USD is backed by the most absurd proof of violence the world has ever seen. No organization of human civilization has ever been able to summon as much death and despair as the United States.

That has nothing to do with the currency. I'm not saying its good, or bad, I'm saying you've stapled together two unrelated concepts.

The US army is a small fraction of GDP and exists to support the defense of the US as a nation, and to further its interests abroad. That will remain the case whether the currency is fiat, gold, BTC or shoelaces. Unless you think that the army will be disbanded because BTC is going to make Xi Jinping come to the table with Tsai Ing-Wen over Baijiu and apologize, that the Sudanese are going to lay down their arms, Kim Jong-un is going to find Jesus and so on. However that's completely unfounded.

The US army predates the fiat dollar by two hundred years. World wars were fought on the gold standard.

Further, the backing of dollars is only in limited part due to "the army" - fractional reserve lending means that each time supply is added, demand for that supply is also created as the loan issued must be repaid with those same dollars. This is what actually fully backs the dollar.

It's also why countries that use the USD, like El Salvador, have their own armies. And why some countries that use fiat dollars don't have armies at all, like Japan and Iceland. There is no causative relationship between fiat money and armies. There is a causative relationship between the existence of militaristic states and armies. There are hundreds of years of proof that the backing of the currency has little or no bearing.

This theory is a pile of misconceptions stacked on top of each other.

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