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Report on Stablecoins [pdf]

home.treasury.gov

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Re: Report on Stablecoins [pdf]

#471

Post by panarky »

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…

How much trust should we place in crypto analysis from someone who cannot spell "Ethereum"?

Re: Report on Stablecoins [pdf]

#472

Post by baby »

mgamache wrote: post #94
fancyfredbot wrote: post #66

"If well-designed and appropriately regulated, stablecoins could support faster, more efficient, and more inclusive payments options." Anyone else find it bizarre that the solution to slow payments might turn out to be distributed ledgers based on proof of work? It feels like the last thing you'd expect - especially since we're starting from a position of managing money through trusted centralised authorities. It's a…

All traditional methods use gatekeepers that control the flow of money. If you can't do what you want with your money is it really yours? The Trustless nature of BTC involves a seeming waste of energy, but you get a lot in return (like ownership of your money).

> The Trustless nature of BTC involves a seeming waste of energy, but you get a lot in return (like ownership of your money).

You get that too with proof of stake. Bitcoin really only has the branding of being the first mover, and as such as a strong chance of remaining the digital gold (not a digital currency that’s fast and easy to transact)

Re: Report on Stablecoins [pdf]

#473

Post by arcticbull »

bedobi wrote: post #444
arcticbull wrote: post #396

Earlier quoted context omitted.

> ... and the article you link to, seems like complete nonsense to me, and your snarky recommendation to "read up on what a store of value is" is silly. Just to be clear, my point was that the classical definition of a "store of value" isn't something that goes up exponentially and flails around wildly at the whims of folks trying to liquidate leveraged positions. It's broadly regarded as something you can purchase a…

> literally every frothing at the mouth holder of crypto will allege it for you, as they are incentivized to do. Bring in more people, you get wealthier. Sound familiar? It's a decentralized MLM. Just because idiots abuse cryptos for baseless manias doesn't make the underlying technology or idea or thing bad, nor a pyramid scheme or an MLM. You could say the same thing about property, art, vintage cars, any number of…

> Bitcoin is definitely experiencing baseless manias, but it's very clearly not a MLM or pyramid scheme.

I'd love to see you address any of jstolfi's points directly!

> Agree this is bad but that's an artifact of what people are doing with Bitcoin, not an inescapable fundamental quality of Bitcoin. Bitcoin can and for a long, long time used to run just fine on comparatively little energy and transaction costs measured in cents.

It really can't. Its security is proportional to its wastefulness. It must always waste more than its opponents are willing to spend to destroy it meaning its waste must grow with its valuation. It's a proof of waste algorithm.

> I'm not making claims about whether Bitcoin (or any other crypto) is a currency, or a good currency.

I am making the claim its so utterly bad at being a currency pretending it's a currency is pointless and harmful to the discourse.

> This just isn't true. It's not difficult to imagine how a distributed tamper proof ledger could be useful, or find actual practical uses of blockchains.

It's been 14 years. There isn't a single use that isn't crime or regulatory arbitrage - or solving a problem crypto created for itself. The proof is in the pudding, and there's simply no pudding.

> ... but the legitimate uses cases do exist.

If you find one, and productize it, you will be the single wealthiest person alive. Elon better step aside.

Re: Report on Stablecoins [pdf]

#474

Post by baby »

fancyfredbot wrote: post #137
mgamache wrote: post #94

Earlier quoted context omitted.

All traditional methods use gatekeepers that control the flow of money. If you can't do what you want with your money is it really yours? The Trustless nature of BTC involves a seeming waste of energy, but you get a lot in return (like ownership of your money).

Sure, but my point was not really about trust. My point is that speed is easier to achieve without Blockchain than with it. It's strange that the centralised solution is slower.

That’s because the current system is not centralized, the current system is heavily decentralized. It basically is based on a lot of different banks trying to partner with one another. Blockchains are distributed databases, and as such they emulate a centralized server. That’s why it’s faster.

Re: Report on Stablecoins [pdf]

#475

Post by baby »

whytaka wrote: post #286
fancyfredbot wrote: post #66

"If well-designed and appropriately regulated, stablecoins could support faster, more efficient, and more inclusive payments options." Anyone else find it bizarre that the solution to slow payments might turn out to be distributed ledgers based on proof of work? It feels like the last thing you'd expect - especially since we're starting from a position of managing money through trusted centralised authorities. It's a…

I’m under the impression that we are starting with decentralized ledgers with traditional banking. The problem solved by blockchain is the synchronization/balance of payments between the ledgers by just making everyone track the same unified ledger.

You got it right. Blockchains emulate a centralized server, whereas the current financial system is heavily decentralized and hence slow.

Re: Report on Stablecoins [pdf]

#476

Post by ElderMillennial »

cs702 wrote: post #468
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 agree, with one caveat. There's always a chance that the organizations issuing these "stablecoins" pull off something analogous to what Nixon did when he ended the convertibility of the US Dollar into gold, making it impossible, in fact illegal, for anyone to call up the US Treasury and request that they exchange a bunch of dollars with gold from Fort Knox.[a] Many so-called "gold bugs" and "Austrian School economi…

Citation needed.

The last 40 years have been a period of high inflation, shrinking (real) wages, and "shrinkflation" losses in quality of life.

One could argue that this has happened precisely because financial institutions can invent "wealth" independent of creating things with intrinsic value through labor/industry -- leaving an unproductive segment of society nominally wealthy by fabricating dollars for themselves. For example, in the past two years, "elites" have handed themselves trillions in fabricated dollars.

Something that couldn't happen, if dollars were gold backed.

Re: Report on Stablecoins [pdf]

#477

Post by baby »

sschueller wrote: post #18

If the US would just provide its own stable coin it would kill all other USD stable coins and there would be no more issues. Who would want tether if you can get government backed USD stable coins?

It doesn’t mean that the US stablecoin would be easily usable on different cryptocurrencies, and easily swappable across different cryptocurrencies.

Re: Report on Stablecoins [pdf]

#478

Post by arcticbull »

qeternity wrote: post #412
arcticbull wrote: post #290

Earlier quoted context omitted.

> 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…

> The Crypto-USDT pairs will quickly go no-bid I think what you mean is the Crypto-USDT pairs will go no offer (i.e. no USDT bid) as people turn to dump crypto against a fiat leg.

Oof, my bad. You're of course correct.

Re: Report on Stablecoins [pdf]

#479

Post by panarky »

tuesdayrain wrote: post #434
paulgb wrote: post #420

Earlier quoted context omitted.

I’ve been shorting a few bitcoin-related public companies on the theory that in a run on Tether they will have to liquidate large bitcoin holdings and bring down the rest of the market. It’s not as direct, but I’m less worried about counterparty risk. I wrote up my thesis here: https://paulbutler.org/2021/betting-against-bitcoin/

>I’ve been shorting a few bitcoin-related public companies on the theory that in a run on Tether they will have to liquidate large bitcoin holdings I doubt a run on tether would even cause a 50% drop in BTC price. Hope your account doesn't blow up when Bitcoin inevitably reaches 1 million per coin ;)

Either markets work or they don't.

Sure, in the short term, unregulated markets can be manipulated.

But Tether's been around more than seven years, more than enough time for the "smart money" to profit by obliterating them.

You can sell Tether on Coinbase for U.S. Dollar deposits to your bank account.

The fact that Tether maintains its 1:1 peg to the dollar is a signal that maybe all the smart guys who have been confidently predicting its imminent and inevitable failure for the last seven years might be missing something.

Re: Report on Stablecoins [pdf]

#480

Post by arcticbull »

tuesdayrain wrote: post #447
arcticbull wrote: post #290

Earlier quoted context omitted.

> 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…

>The Crypto-USDT pairs will quickly go no-bid History has shown that this does not happen in crypto. Even for coins like Bitconnect and Confido that plainly turned out to be scams, there were still buyers long after the news was revealed. People like to bet on dead cat bounces, or some kind of news after the fact that redeems the coin.

It did happen at Gox and Quadriga, although I suspect you're probably right that the market will equalize above zero.
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