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Report on Stablecoins [pdf]

home.treasury.gov

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Re: Report on Stablecoins [pdf]

#641

Post by graeme »

tylerrobinson wrote: post #618
graeme wrote: post #613

Earlier quoted context omitted.

You can lend them to centralized lending platforms such as Celsius, or on Defi platforms, for 9+% APR. This is a highly risky activity pitched as not risky.

Ah, thank you for explaining. I assume the idea here is that the borrower of the stablecoin is then using it to make a bet on the continued price appreciation of some other currency, making it a leveraged bet. Crazy risky. Who is supposed to enforce the terms of the borrowing? Or is it done programmatically somehow?

Yup, exactly. Most used seem to be loans to buy more crypto.

With centralized lenders (Nexo, Celsius, Blockfi) you sign over ownership of your crypto to them and hope they will meet their promises.

In Defi it’s programmatic. I am less familiar with the mechanics there. I figure there is massive risk when I see 20+% yields but do not understand the system.

Re: Report on Stablecoins [pdf]

#642

Post by bduerst »

blhack wrote: post #321
bduerst wrote: post #243

Earlier quoted context omitted.

Do you really? Or does your binance/coinbase debit card convert your crypto to USD and send dollars out via ACH?

Why would that matter? Do you believe that you aren't transacting with USD when you buy something using the VISA network? Or with apple pay? Or a check?

It matters because you're not using crypto to pay, you're paying US dollars (over ACH). Same with VISA, Apple Pay, and personal checks.

Re: Report on Stablecoins [pdf]

#643

Post by nybble41 »

imtringued wrote: post #589
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. If I borrow a Bitcoin what makes you think that I can repay the Bitcoin after it grew 10x in value? Who is doing 10x the work? (10x more productive)

> If I borrow a Bitcoin what makes you think that I can repay the Bitcoin after it grew 10x in value?

That would make Bitcoin a very good store of value. However, to benefit from the "store of value" property you have to, you know, actually store the bitcoin yourself, not sell it now and try to buy it back later…

Re: Report on Stablecoins [pdf]

#644

Post by wpietri »

mattnewton wrote: post #543
wpietri wrote: post #422

Earlier quoted context omitted.

Exactly. Nobody before 2009 would have described a highly volatile unbacked synthetic commodity as a "store of value". That's just what Bitcoin partisans shifted to when they realized it was unworkable for its stated purpose as a payment system. E.g.: https://avc.com/2017/08/store-of-value-vs-payment-system/

Why not? There have been much stranger stores of value in the past https://en.m.wikipedia.org/wiki/Rai_stones

Bitcoin is much more volatile than modern stores of value.

Re: Report on Stablecoins [pdf]

#645

Post by stat »

baby wrote: post #472
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).

> 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)

Have you heard of the lightning network?

Re: Report on Stablecoins [pdf]

#646

Post by challenger-derp »

paulgb wrote: post #420
kirse wrote: post #357

Earlier quoted context omitted.

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 bo…

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/

Halving risks & information assymetry risks are pretty solid arguments for future headwinds faced by btc miners. Investopedia states that by August 2021, only 2.3M BTC out of the 21M cap remain to be mined (https://www.investopedia.com/tech/what-happens-bitcoin-after...). However, what is preventing a fork of bitcoin from addressing this?

Re: Report on Stablecoins [pdf]

#647

Post by mrep »

nybble41 wrote: post #640
mrep wrote: post #591

Earlier quoted context omitted.

21 billion in mining rewards / 100 million transactions per year is about 210 dollars per transaction. You'd need an average transaction size of $7,000 for a 3% fee to be comparable which it most certainly is not.

Mining rewards are not fees. They're the initial distribution mechanism (as a fairer alternative to pre-mining). The median transaction fees[0] which users actually pay are much lower: about 65¢ currently. With Lightning transactions they're negligible, potentially as low as 0.00000001 BTC (0.064¢). You can expect this to increase over time as the mining rewards drop, but there is no need to replace all the mining re…

Miners are incentivized to keep adding hardware/electricity until total cost = revenue. To pay their bills, they have to sell their new bitcoin to people which is effectively like a fee as their selling of 21 billion dollars in new bitcoin supply to pay their bills reduces the price of bitcoin acting like a fee on buying it.

Re: Report on Stablecoins [pdf]

#648

Post by wyager »

arcticbull wrote: post #497
wyager wrote: post #483

Earlier quoted context omitted.

> Bitcoin ~= a Starbucks gift card you hope appreciates in value when Starbucks sells more coffee Are you under the impression that Bitcoin is a company? This analogy really doesn't make sense from any angle, even being extremely charitable, so it's hard to address.

Bitcoin is a combination of a set of tokens, BTC, and a set of miners. Miners are either sole proprietors or, increasingly, publicly traded companies which operate the network collectively. When a transaction takes place, value is extracted from the BTC everyone holds and is transferred to these entities. The more transactions take place, the more value accrues to miners, not to holders. It's in fact taken from holde…

An important thing you may not be aware of is that Bitcoin’s “dilution schedule”, so to speak, is fixed in advance. 88% of “shares” have been issued. This is, in fact, a critical advantage Bitcoin has over a ton of shitcoins - fixed dilution schedule, and no pre-mine/creator subsidy.

Re: Report on Stablecoins [pdf]

#649

Post by the_optimist »

JumpCrisscross wrote: post #69
the_optimist wrote: post #58

Earlier quoted context omitted.

You call it a 0% interest money market fund. You do not call it a bank. A bank does something entirely different: create 'bank loans'. A non-bank does not have the ability to create bank loans.

> A bank does something entirely different: create 'bank loans'. A non-bank does not have the ability to create bank loans. I agree with you, broadly, though I have to comically point out that Tether was absolutely also originating loans.

This might be right (though to my knowledge, it's not what they claim to be doing). To originate a loan, Tether would simply issue and lend their coin (Tether), specifically ignoring dollar backing. Can you provide a discussion of them doing this?

Re: Report on Stablecoins [pdf]

#650

Post by the_optimist »

cinquemb wrote: post #71
the_optimist wrote: post #58

Earlier quoted context omitted.

You call it a 0% interest money market fund. You do not call it a bank. A bank does something entirely different: create 'bank loans'. A non-bank does not have the ability to create bank loans.

> A non-bank does not have the ability to create bank loans. A decentralized derivatives protocol can lend its credit balance (and fractions of its stablecoin balance, if it exists at all at the point when a position is opened) to a decentralized liquidity pool when there is demand by end users to open a position (ex. a user can deposit frax to buy options/forwards/interest rate swaps/etc against a liquidity pool whi…

This sounds like credit, but not credit origination. If new units of the numeraire are created, that is origination akin to a bank loan. If not, that is not origination. I don't know of an English term that describes 'not originated' lending, as everyone sees to use the term 'lending' for both behaviors. What do you mean by 'borrow collateral into existence'?
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