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Report on Stablecoins [pdf]

home.treasury.gov

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Re: Report on Stablecoins [pdf]

#351

Post by epinephrinios »

arcticbull wrote: post #264
RustyConsul wrote: post #250

Earlier quoted context omitted.

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 crea…

In my book, there's some value in protecting the average Joe from the incessant dollar printing that decreases the value of the dollars in their saving accounts.

That's just one argument for Bitcoin, there are more. For example, it provides the opportunity to second/third world countries to break free from the IMF debt slavery.

Re: Report on Stablecoins [pdf]

#352

Post by bubbleRefuge »

stickfigure wrote: post #291
arcticbull wrote: post #270

Earlier quoted context omitted.

> 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 a…

Without the aircraft carriers, any mildly malevolent nation could print dollars. Some already try. There's no question that a large military is necessary to preserve USD as a world currency. You can't ignore this cost. Maybe the US would cut military spending, maybe not, but as long as it wants USD to be the coin of the realm, there's no choice in the matter.

He is right in the figurative sense that the government's power to tax and spend in its own fiat currency is what drives demand for the currency. W. Mosler, one of the founders of MMT, has this allegory: If we are in a room full of people with a single exit and I am blocking the exit with a gun in my hand and tell you you need one my business cards to exit the room, then my business card has value.

Re: Report on Stablecoins [pdf]

#353

Post by hjorthjort »

thehappypm wrote: post #347
stepanhruda wrote: post #302

Earlier quoted context omitted.

There is a very important aspect of opposite pressure. If DAI price ever loses peg and goes to eg 0.90 anyone with open positions immediately starts buying a shitton of them and closing their position, because they just got a 10% discount on paying off their debt, sending the peg back. If the price ever goes to 1.10, anyone with free capital around immediately starts minting new coins and floods the market with them,…

That’s true if there’s faith it comes back up from $.90. If it starts falling to $.99 then $.98 then $.95 then $.90.. you have to decide if it’s really a dip or the end.

Not really. The point is: there's always someone who has a debt in DAI they need to pay off. If they thought the dip would go even further , they would wait longer, because to them, the DAI does have value: it is what they need to get their hands on to get their collateral back.

Re: Report on Stablecoins [pdf]

#354

Post by jcranmer »

RustyConsul wrote: post #279
arcticbull wrote: post #264

Earlier quoted context omitted.

> 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 crea…

It seems our difference in opinion comes from our definition of value. I know people point to the current system and infrastructure of stock exchanges, SWIFT, the IMF, Central Banks, Retail and Commercial Banks, Internet Banks (Such as Stripe, Paypal, ETC.), Credit Unions, Savings and Loan Associations, Investment Banks and Companies, Brokerage Firms, Insurance Companies as working good enough. But for me... Occams r…

> Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code? If there was no value in it, why did we create all those institutions in the first place?

One of the primary reasons for the rise of the complex system of interactions, as you put it, is trust. A lot of financial interactions require dealing with people who might not merely not have your best interests at heart but are literally in diametric opposition to your interests--several financial transactions are inherently zero-sum. So you need mechanisms that give you trust that your counterparty will actually honor their side of the transaction.

Code fundamentally does not provide trust--indeed, you might even say it is the antithesis of trust. Even accomplished software developers are frequently unable to write code that works in edge cases or even slightly abnormal operation. For regular users, code is as opaque as if it were written in Linear B. Indeed, to popular sentiment, software is often equated with a learned notion of bugginess--people tolerate the frequent mistakes of their computers far more than we would any other piece of equipment.

And the cryptocurrency community takes their misunderstanding of trust to new levels. I mean, we're being told by people like you that we shouldn't trust the government, but instead trust code [that the lay person can't and won't understand] written by people like the owners of Tether--people who have been convicted of stealing people's money and, in the history of their own company, lied about what they were doing.

As Matt Levine put it, only in the cryptocurrency industry is "we may be charlatans who will run off with all your money" literally something people feel necessary to put in their risk prospectus.

Re: Report on Stablecoins [pdf]

#355

Post by thehappypm »

hjorthjort wrote: post #353
thehappypm wrote: post #347

Earlier quoted context omitted.

That’s true if there’s faith it comes back up from $.90. If it starts falling to $.99 then $.98 then $.95 then $.90.. you have to decide if it’s really a dip or the end.

Not really. The point is: there's always someone who has a debt in DAI they need to pay off. If they thought the dip would go even further , they would wait longer, because to them, the DAI does have value: it is what they need to get their hands on to get their collateral back.

What if they think DAI is going to go to $0?

Re: Report on Stablecoins [pdf]

#356

Post by njarboe »

giaour wrote: post #283
caf wrote: post #248

Earlier quoted context omitted.

This all sounds intuitively correct, and it seems that similar arguments can be made about gold bullion, right? It costs some amount of money every year to mine, refine, transport and store it, and none of that is accruing to the actual holders of bullion. (One difference being that there is some residual value of the gold for industrial and jewellery uses, but that's hardly what's keeping the bullion price where it…

Gold was also legal tender within living memory in many jurisdictions —- until 1971, you could freely exchange USD for gold and vice versa. In some ways holding gold as a hedge asset is a survival, though as with its intrinsic value, this doesn’t account for its current role in the market.

This is not correct. Gold in the US was freely exchanged for about $20 an ounce in the US until the Great Depression when, on April 5th, 1933 Franklin D. Roosevelt signed Executive Order (no. 6102) prohibiting the hoarding of gold coin, gold bullion, and gold certificates, and requiring them to be delivered to the Federal Reserve Bank. After getting all/most of the gold, on January 31st, 1934, the dollar was set to a new price of $35 an ounce by Franklin D. Roosevelt's Presidential Proclamation (no. 2072). Debts and contracts that specified gold in payment were made illegal and people had to use dollars instead of gold for transactions. Exchanging dollars for gold was not possible at a bank and actually illegal to do with your fellow citizens (certain exceptions applied).

This ended in 1971, when the Bretton Woods agreement of exchange rates broke down and Nixon took the US dollar off the gold standard and in 1975 we were allowed to buy gold again.

[1]https://en.wikipedia.org/wiki/Gold_Reserve_Act

Re: Report on Stablecoins [pdf]

#357

Post by kirse »

arcticbull wrote: post #290
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…

> Can Tether survive a net outflow? Probably not. They don't have the collateral. Luckily for Paolo & friends, their terms of service clearly state that they do not ever have to offer redemptions of USDT for dollars. Or even whatever IOUs and bits of string they may or may not have in reserve. Out of all the stable coins its the most likely to withstand a "run" because they do not have to pay you if you ask. In fact…

After that hedge fund issued a $1M reward on Tether backing I did some more investigation and the thing I realized is that 1) Tether is inherently backed by BS and 2) crafting any sort of Tether short is near impossible because everyone in the game - Tether, the exchanges, etc. - will all be against you if you're winning in the short. There's that scene in "The Big Short" where Mark Baum and crew know the subprime bonds are junk but they visit the ratings agency and they're not downgrading. [1]

That same thing will happen if crypto has a major run. The exchanges already conveniently "go down" when Bitcoin dumps even now. Every single time, it's become a running joke. If we had a serious Tether blow-up or BTC move that would rock the boat, everything would get locked down and you'd have no way to buy back your Tether short for pennies on the dollar. When tril/billions are on the line, ain't no way you're getting your millions, especially in this unregulated wild west.

[1] https://www.youtube.com/watch?v=9xZx1lf2tvs

Re: Report on Stablecoins [pdf]

#358

Post by usehackernews »

arcticbull wrote: post #293
RustyConsul wrote: post #279

Earlier quoted context omitted.

It seems our difference in opinion comes from our definition of value. I know people point to the current system and infrastructure of stock exchanges, SWIFT, the IMF, Central Banks, Retail and Commercial Banks, Internet Banks (Such as Stripe, Paypal, ETC.), Credit Unions, Savings and Loan Associations, Investment Banks and Companies, Brokerage Firms, Insurance Companies as working good enough. But for me... Occams r…

> Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code? All of these systems are already software. > If there was no value in it, why did we create all those institutions in the first place? Centralization makes them massively more efficient than crypto. If there was a way to make them more efficient that did not involve throwing risk models out the window or reg…

My friend's family lives in Bosnia. He lives in the United States.

He supports his family with his income, and frequently sends money from the United States to Bosnia.

Best case scenario, using Paypal (Xoom), a centralized company, this takes him two days. Two days is the best case scenario!

With Bitcoin it is almost instant.

They switched to cryptocurrency after a near disastrous situation with the length of time the transfer took.

How is Bitcoin less efficient here?

Sure, it's one use case, but just because something doesn't benefit you does not mean it's not beneficial for anyone.

Re: Report on Stablecoins [pdf]

#359

Post by foxylad »

RustyConsul wrote: post #325
arcticbull wrote: post #293

Earlier quoted context omitted.

> Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code? All of these systems are already software. > If there was no value in it, why did we create all those institutions in the first place? Centralization makes them massively more efficient than crypto. If there was a way to make them more efficient that did not involve throwing risk models out the window or reg…

Do you think we will forever be organized and segregated by governments? Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future? The current financial system is not all software. When i pay in crypto, i give you my money. When i pay in the current financial system I am giving you every bit of information to rob me blind a…

> When i pay in the current financial system I am giving you every bit of information to rob me blind and hoping you don't take it all.

I don't understand this. You're saying if I send you $0.01 via internet banking, you can somehow take everything in the account?

It doesn't work this way in NZ, where it is common to put your bank account details on invoices so people can pay you directly.

Re: Report on Stablecoins [pdf]

#360

Post by epinephrinios »

mailbag wrote: post #85
okareaman wrote: post #64

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?

Arguably, we've already seen multiple catastrophic crashes in cryptocurrencies.

And the market rebounded without a government bailout.
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