Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Algorithmic stablecoins are provably impossible without continuous funding

fragileequilibrium.substack.com

Post reply on HN
Print view View original

201–210 of 264 posts

Re: Algorithmic stablecoins are provably impossible without continuous funding

#201

Post by ringrocket »

jmyeet wrote: post #37

This doesn't go far enough. The only thing that maintains the value of any asset (or currency) is the collective belief in that asset or currency. Put another way: there is an inescapable component of trust in every asset. Crypto in any form doesn't solve the trust problem other than a very narrow slice because as soon as you interact with anything outside of the blockchain, you're adding trust. Even on the blockchai…

> The only thing that maintains the value of any asset (or currency) is the collective belief in that asset or currency. Put another way: there is an inescapable component of trust in every asset.

This is false in the general case. An asset means a useful or valuable thing, person, or quality. If something is useful to me, such as food, hydration or shelter, trust is irrelevant. In fact, something can have value to me (perhaps even objective value), even if there are no other agents/persons.

Even where there are other agents/humans, no trust in an asset is required in some cases. Suppose we all can independently verify the use and quality of something (we call this measurement). If that thing has some definite utility to us, the value each will assign may differ, but that thing's value is not dependent on the subjective valuation (Say a morsel contains 15 Joules and I can harvest 9 Joules and you 11 Joules, the value we each could assign differs, yours being greater than mine, but is objectively derived, being based not on trust nor subjectivity. Subjective meaning based on or influenced by personal feelings, tastes, or opinions). Granted, we can not preclude the possibility that someone, somewhere providing a subjective value to this thing, merely that somethings have value, potentially to many of us that is objective and intrinsic in and of the thing itself.

Trust in every asset is, indeed, escapable.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#202

Post by jmyeet »

User23 wrote: post #194
jmyeet wrote: post #37

This doesn't go far enough. The only thing that maintains the value of any asset (or currency) is the collective belief in that asset or currency. Put another way: there is an inescapable component of trust in every asset. Crypto in any form doesn't solve the trust problem other than a very narrow slice because as soon as you interact with anything outside of the blockchain, you're adding trust. Even on the blockchai…

> The only thing that maintains the value of any asset (or currency) is the collective belief in that asset or currency. Put another way: there is an inescapable component of trust in every asset. > So what actually makes the US dollar work as a currency is that it is backed by the long dick of the US government. This is a combination of economic, military and even cultural might. What many people call fiat is in fac…

I like the term "violence consensus algorithm".

I agree: ultimately government is a collective decision on who gets to do the violence.

As for Zimbabwe, the primary difference it and the US is reach. More generally speaking, we've seen currencies collapse when people have lost faith in their value and what happens is people instead use a different currency (eg the US dollar) because they have more confidence in its value.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#203

Post by CryptoPunk »

jmyeet wrote: post #37

This doesn't go far enough. The only thing that maintains the value of any asset (or currency) is the collective belief in that asset or currency. Put another way: there is an inescapable component of trust in every asset. Crypto in any form doesn't solve the trust problem other than a very narrow slice because as soon as you interact with anything outside of the blockchain, you're adding trust. Even on the blockchai…

No post body was provided.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#204

Post by bmm6o »

seanhunter wrote: post #53
VintageCool wrote: post #33

Earlier quoted context omitted.

The Laffer Curve argued that revenue from taxation might represent an inverted U shape with tax rate. If you were above the revenue-optimizing tax rate, then lowering the tax rate could increase revenue. But that revenue-optimizing tax rate, which is the subject to much debate, is probably somewhere around 65% to 70%, far higher than the tax rates in the United States. We could surely increase taxes on high income in…

My understanding is every time a "Laffer curve inspired" tax cut has happened in practise, tax revenues have indeed gone down.[1] The thing about the Laffer curve idea that I don't understand is the curve doesn't need to be continuous. Say we accept at a tax rate of 100% you get no marginal benefit from working so no-one will work and the tax take will go to zero, at a tax rate of 100%-epsilon you still get (small) a…

> So it's literally only at a tax rate of 100% that the Laffer concept would make the tax take go to zero.

Yeah, that's the point of the curve. I don't think you've made a convincing argument against continuity.

And the quote seems to misunderstand the curve (I didn't read the article). The curve itself is reasonable, the main debate is where the current tax regime puts you - to the right or left of the peak. The other mistake is that many people using the curve to argue for lower taxes are not really honest debaters. They want lower taxes and use any argument available. They state that we're on the right even though ask evidence suggests the opposite.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#205

Post by smaryjerry »

galaxyLogic wrote: post #150
tlb wrote: post #118

Earlier quoted context omitted.

The collective belief that you own your home is a crucial part of its value. If you come home and find a bunch of people partying in your kitchen, you can tell them to leave, or call the police and they'll drag them out. That's all due to the collective belief that you own your house. Without that collective belief, owning anything is a huge effort to defend it against whoever else it might appeal to.

There's a big difference. Everybody may believe that you own your house. And everybody may believe you own 100 bitcoins. At issue is what is the exchange rate between bitcoins and say US dollars. If that goes to zero then you've lost the value of your bitcoins. You have not lost the ownership of your bitcoins, they have lost their value. Whereas for your house, no matter what its market value would be you still have…

Pretty sure when Detroit went bankrupt they were basically paying people to come back to the city. There are ghost towns for a reason, because homes do lose value, even for the person who can still live there. Bitcoin right now is in the middle of nowhere like these ghost towns that can fail if the one company supporting them fails or the farmers just give up. It’s becoming a bigger city, to continue the analogy, but is still in the gold rush phase, where all the miners have come out looking for something. Maybe the city becomes San franscisco or maybe we find a ghost town in 100 years once everyone realizes the gold ran out.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#206

Post by Iwan-Zotow »

mvolfik wrote: post #177

Sorry for hijacking this thread, but can somebody explain like I'm five, what's the point of algorithmic stablecoins? My understanding of the term 'stablecoin' means that it is a crypto 'proxy' to some fiat currency, typically US dollar, just to avoid the actual conversion between crypto and fiat (because of taxes etc). So why isn't there just a DumbCoin(tm) that simply is 1-to-1 backed by the dollars? You give me a…

It is another fiat currency backed by dollar, not gold. With only fractional reservation.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#207

Post by CryptoPunk »

doctor_eval wrote: post #159
tlb wrote: post #118

Earlier quoted context omitted.

The collective belief that you own your home is a crucial part of its value. If you come home and find a bunch of people partying in your kitchen, you can tell them to leave, or call the police and they'll drag them out. That's all due to the collective belief that you own your house. Without that collective belief, owning anything is a huge effort to defend it against whoever else it might appeal to.

I'm not an expert in this, but I think that it basically starts with the political concept of legitimacy [0] - government, with the consent of the governed - which leads to the monopolisation of force (police, army etc), which provides a concrete means of enforcement for the collective belief of "property". That is, the reason that you can call the cops when strangers take over your kitchen is because we have a very…

No post body was provided.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#208

Post by smaryjerry »

hgomersall wrote: post #62
ur-whale wrote: post #60

Earlier quoted context omitted.

> The only thing that maintains the value of any asset (or currency) is the collective belief in that asset or currency. The only thing that maintains the value of any asset is the demand for it. Where that demand comes from may or may not be belief. Water has value because there is a clear demand for it, not because anyone believes in it. As long as there is someone who wants an asset, it has value. Belief is but a…

Indeed. The demand for most currencies comes from states requiring payment of taxes in said currencies.

This is precisely why bitcoin adoption is not higher. By categorizing bitcoin as a security and not accepting bitcoin as a denomination for taxes or any calculation of taxes due it is effectively an extra unnecessary cog in every single system it is a part of. Any company doing legitimate business has to record every transaction they make in the denomination of their governments chose currency. It goes from a simple “I sold 5 pencils for X dollars” to “I sold this pencil for 1 bitcoin which is equal to X dollars on the date I sold it then made/lost Y dollars by converting back to dollars at a later date in order to pay taxes and buy more pencils, and spent Z dollars to trading fees in doing so.” So really at minimum we’ve gone from a single clear amount, to now having at minimum 3 separate records to make the same transaction. Bitcoin can never be as simple and efficient as an actual currency when you have to convert it anyways at some point.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#209

Post by cuteboy19 »

coding_lobster wrote: post #143
cuteboy19 wrote: post #57

Earlier quoted context omitted.

The "collateral" is a bunch of useless tokens that can flash crash in an instant. It is the same thing as the luna/Terra system but with minting $2 worth of luna for $1 worth of UST. Any depeg event will only be faster as compared to luna

It is not the same because in the case of the coins above a flash crash results in liquidation of the collateral to support the peg. In the case of Luna there was no such mechanism as it relies on people doing the arbitrage required to maintain the peg.

Liquidating luna is the same thing as minting luna. The trigger is the same (price below peg) and the effect is the same (more luna in circulation)

Re: Algorithmic stablecoins are provably impossible without continuous funding

#210

Post by triceratops »

spyder wrote: post #123
neilwilson wrote: post #96

Earlier quoted context omitted.

"So what actually makes the US dollar work as a currency is that it is backed by the long dick of the US government. This is a combination of economic, military and even cultural might." It's the ability to demand and enforce tax payments in that denomination - with the consequence of not doing that being you will lose property and liberty. Obtaining the denomination to settle the tax then becomes the discounted opti…

Yea, and also it's not just tax: "This note is legal tender for all debts public and private"

"All debts public and private" - but only debts denominated in USD, right? If you loan me gold and specify repayment in gold or Canadian dollars or gerbils, I can't just give you a fistful of dollar bills to settle it, can I?
Post reply on HN