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Report on Stablecoins [pdf]

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Re: Report on Stablecoins [pdf]

#401

Post by salawat »

Aaronstotle wrote: post #114
lavezzi wrote: post #95

Earlier quoted context omitted.

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.

An attestation is doesn't mean squat. It means someone witnessed something once and some agreement was executed in accordance with some policy.

You want an audit. I have been there, seen the procedures, run the numbers, and independently verified that when followed yield the same result as reported.

It's the difference between "Seem's legit" and "The numbers check out".

Re: Report on Stablecoins [pdf]

#402

Post by jmull »

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.

I doubt that.

For a stable coin to actually be worth $1, there has to always be someone ready to give me $1 for 1 stable coin. I see no guarantee of that over time for DAI. No different than other stable coins.

Re: Report on Stablecoins [pdf]

#403

Post by anonporridge »

dcolkitt wrote: post #265
chizhik-pyzhik wrote: post #125

Earlier quoted context omitted.

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 tr…

> there’s no one to sue

This is a feature, not a bug.

Legal risk holds back a ton of innovation from taking over processes normally governed by nature, which we can't sue, to those governed by people and institutions, who we can sue. It prevents us from taking risk, even if we know we can probably solve the problem better than nature.

You can't sue a decentralized system, because there's no throat to choke.

Re: Report on Stablecoins [pdf]

#404

Post by jkhdigital »

salawat wrote: post #326
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…

>All the V3 crypto protocols have exactly as you describe above. However, instead of the money going into the coffers of the company, it goes into a 'Development fund' That will award the crypto to people who have applied and been voted on by the community to launch a project/technology in the protocol. So you replaced "shareholders" with "developers of cryptocurrencies/beneficiaries of the development fund". Does a…

> made it as energy inefficient as humanly possible in the case of PoW

I'd encourage you to broaden your understanding of the purpose of PoW and specifically the energy used. The energy used is the cost of securing a PoW blockchain--quite literally, the cost of the energy used is what makes it difficult to mount a successful attack. It is simple and universally accessible. It is not "inefficient"; it is functioning exactly as intended.

What I think you are really trying to say is that you think the benefits provided by a PoW blockchain do not merit the economic expense of securely maintaining it. And that's a fine opinion to have. But the only reason you pay attention to the electricity cost is because it is highly visible--you probably have no clue how much electricity is consumed by all the other economic activities that you may consider pointless or wasteful.

Re: Report on Stablecoins [pdf]

#405

Post by anonporridge »

sanderjd wrote: post #301
colatkinson wrote: post #13

From the "Recommendations" section: > Legislation should address the risks outlined in this report by establishing an appropriate federal prudential framework for payment stablecoin arrangements.29 In particular, with respect to stablecoin issuers, legislation should provide for supervision on a consolidated basis; prudential standards; and, potentially, access to appropriate components of the federal safety net. To…

Exactly. Regulation can only be long-term good for the space, which is sorely lacking in legitimacy.

The space has so far peaked at a $2.6 trillion valuation without a sense of legitimacy.

Where the hell could it go if it gets an official stamp of approval by the US government?

Re: Report on Stablecoins [pdf]

#406

Post by bytelines »

CryptoPunk wrote: post #211
NationalPark wrote: post #206

Earlier quoted context omitted.

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 ba…

I mean it's published by the Cato Institute. Regulatory gatekeeping is the root cause of all problems.

Joking aside, I didn't see the prohibition on branching specifically called out, other than to say that Scotland (which did allow it) did not see banknote discounting, and that ultimately it was the 1864 National Banking act which finally ended the practice.

The most common thread it seemed to be were that banks held confederate bonds and caused massive losses after the war broke out.

Ironically I think the author makes an excellent comparison between Wilcat banking to Stablecoin. I've replaced a few key words like "notes" and "loans" and "currency" with coin and stablecoin:

> Nor did they make any loans, their profits having instead consisted entirely of fees drawn on the transactions from their stablecoins. "People needed the coins they produced at a time when money was scarce," Du says. "So the community acquiesced in their conduct."

> But, the debate continues, if the public "acquiesced," in what sense can the stablecoins be said to have bamboozled it? Would having no stablecoin at all to trade with really have been better than having to rely on suspended ones?

Re: Report on Stablecoins [pdf]

#407

Post by neatze »

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…

> Do you think we will forever be organized and segregated by governments?

As long there is scarcity of resources, there will be wars/conflicts and humans will be collective species, even if we don't have scarcity of resources, some humans will invent a few, and even if humans will not invent one, it is debatable since I don't know of any evidence where humans can survive individually. This is without mentioning social classes over multiple generations.

Re: Report on Stablecoins [pdf]

#408

Post by arcticbull »

tremarley wrote: post #348
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…

The only people that have no issues with centralisation are the people who are benefiting from it. World Bank estimates 31 percent of people globally do not have a bank account. Decentralisation helps these people. When you deposit money into a bank account, it is not your money. It is the bank's money. You aren't allowed to use it, or spend it how you like without the permission of your bank. Crypto doesn't have thi…

> World Bank estimates 31 percent of people globally do not have a bank account. Decentralisation helps these people.

Banking helps these people. Remember a fully-realized BTC transaction fee (pricing in electricity and mining hardware) is right around $250 each. That's a non-trivial amount of the GDP per capita of a lot of these countries you're alluding to.

Poor folks are also the most vulnerable to the massive volatilities of this so-called currency.

Real, centralized solutions help these people. Solutions like M-Pesa [1]. And Postal Banking, which a hundred years of legacy solving exactly these problems. [2]

> There are financial tools that only people with net worths of over $100 million have access to, such as market making, arbitrage, liquidations, insurance lending etc. Crypto solves this.

It certainly does not haha. It makes them less efficient, which is why not a single crypto-powered business in the last 14 years is competitive with any centralized solutions except in the areas of regulatory arbitrage or by throwing risk models out the window.

> If centralised finance had the potential to be more efficient, there should have been more innovation decades ago. Centralised finance needs to catch up.

It's obviously more efficient, and pretending otherwise doesn't change that.

[1] https://en.wikipedia.org/wiki/M-Pesa

[2] https://en.wikipedia.org/wiki/Postal_savings_system

Re: Report on Stablecoins [pdf]

#409

Post by jcranmer »

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…

> 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?

Without governments, how are social strictures enforced? How are externalities, positive or negative, accounted for? How does a government-less world not look like Somalia? (Or are you suggesting that you really would like to live in a place like Somalia?)

This isn't to suggest that existing governments are perfect (far from it), but it seems to me that the anarchic counterpart is infinitely worse.

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