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Report on Stablecoins [pdf]

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Re: Report on Stablecoins [pdf]

#461

Post by Acrobatic_Road »

seoaeu wrote: post #382
epinephrinios wrote: post #363

Earlier quoted context omitted.

I can protect my own money, thank you. I do not need a nanny. Anonymity might seem redundant to you and other people who "have nothing to hide". However, in a slightly more dystopian reality -e.g. when we are forced to use CBDCs- the government might choose to block you from using your hard earned money because you posted a criticism of the president on twitter.

> the government might choose to block you from using your hard earned money because you posted a criticism of the president on twitter Um, I don't really see how cryptocurrencies are going to help you much when that same government just tosses you in jail instead. In fact, there are governments in our present reality that will throw people in jail for saying the wrong thing on twitter, so that really isn't an outrag…

I'm sure the government would love to throw Edward Snowden in jail, but he is out of their reach. They would love to shut down Wikileaks and Sci-Hub too. On the other hand, governments can very easily weaponize financial services to deny people the ability to send individuals and organizations money - which is how Wikileaks found itself digitally embargoed by Visa, PayPal and Mastercard. Not so with cryptocurrencies. Cryptocurrencies can also provide anonymity to financial donors who would otherwise be targeted themselves for sending money to a party like Wikileaks.

Re: Report on Stablecoins [pdf]

#462

Post by midev »

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…

> They failed, by definition

That's not what "by definition" means...

This article is nonsense, and typical of intellectually dishonest right-wingers. They always claim that it was actually regulation the whole time that caused the problems! Wow! Yet we can look at the regulations the author cites, and what were ultimately the reasons for the end of wildcat banks, and see those were obviously not the cause.

Regardless, the lessons learned are still applicable today. Whether wildcat banks were common or not doesn't change that most cryptocurrencies mirror the failed wildcat banks of the past.

Re: Report on Stablecoins [pdf]

#463

Post by midev »

epinephrinios wrote: post #363
mminer237 wrote: post #263

Earlier quoted context omitted.

The only practical differences in the tech is that it wastes more power, has no insurance, has no fraud remediation, and has no safeguard against volatility. I guess the potential anonymity too, but that's only really a practical benefit if making an illegal transaction. The only time I can ever see a cryptocurrency being worth it is if you do not have any central authority you can trust. If we ever get to the point…

I can protect my own money, thank you. I do not need a nanny. Anonymity might seem redundant to you and other people who "have nothing to hide". However, in a slightly more dystopian reality -e.g. when we are forced to use CBDCs- the government might choose to block you from using your hard earned money because you posted a criticism of the president on twitter.

> I can protect my own money, thank you. I do not need a nanny

I love when people out themselves as having never worked on anything significant. Yeah, sure, for your pocket change, I'm sure you can reasonably protect it. For any significant transaction, I want the ability to reclaim my money if the other side turns out to be fraudulent.

Re: Report on Stablecoins [pdf]

#464

Post by kirse »

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/

Interesting thoughts, I like the miner analysis, esp. since a lot of these companies have moved from OTC to NQ listed recently. I keep a watchlist just to observe how they react to BTC pricing, and pondering some of your thesis it's got me revisiting the thought that miners might be a great target for a "short the VIX" style strategy. There's also the new "BITO" ETF which is most certainly being used by some big brain quants to build some asset basket that nets them a near zero-risk long-term win. Wish I had more financial brainpower to put to it.

Re: Report on Stablecoins [pdf]

#465

Post by hparadiz »

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…

What you described is the opposite of "stable" so I'm highly concerned by the terminology being used here.

Re: Report on Stablecoins [pdf]

#466

Post by arcticbull »

jkhdigital wrote: post #426
arcticbull wrote: post #223

Earlier quoted context omitted.

It's a strictly worse monetary system by any measure. It's massively more expensive to transact, it's unbelievably inefficient - requiring as much power as Thailand and generating as much e-waste as the Netherlands to scribble 2-3 tx/sec into a ledger. That's 60 days of power for the average US household and 1 iPad of e-waste per transaction . [1] [edit](97% of all mining hardware will be thrown away without ever win…

> 97% of all mining hardware will be thrown away without ever winning a single block reward And fewer than 50% of Thoroughbred horses ever win a single race. This is a silly clickbaity statistic and you know it. Come on, you're better than this arcticbull ;-)

Is that actually a real statistic about horses? That's fascinating. I wouldn't build a currency on it though ;)

Step right up to Horsecoin, fastest horse gets the block!

Re: Report on Stablecoins [pdf]

#467

Post by baby »

mminer237 wrote: post #263
spir wrote: post #182

Earlier quoted context omitted.

Crypto "expert" here. We will have a catastrophic crash, it's normal and natural. But, the tech is here to stay and is 100x better than existing solutions. Crypto is changing the world, one crash at a time :)

The only practical differences in the tech is that it wastes more power, has no insurance, has no fraud remediation, and has no safeguard against volatility. I guess the potential anonymity too, but that's only really a practical benefit if making an illegal transaction. The only time I can ever see a cryptocurrency being worth it is if you do not have any central authority you can trust. If we ever get to the point…

You’re misguided if you think it consumes more power, unless you’re referring to legacy proof of work?

> has no insurance

What do you mean by that? Insurances are services not protocols

> no safeguard against volatility

That’s a weird thing to say in a thread about stablecoins

Re: Report on Stablecoins [pdf]

#468

Post by cs702 »

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 economists" predicted the transition to a non-convertible dollar would surely lead to monetary and economic disaster... but so far, they've been wrong: Things have actually worked remarkably well for half a century.

Could Bitfinex pull off something like that? I'm not sure, but I wouldn't rule it out 100%.

[a] https://www.federalreservehistory.org/essays/gold-convertibi...

Re: Report on Stablecoins [pdf]

#469

Post by dragontamer »

TylerE wrote: post #429
dragontamer wrote: post #244

Earlier quoted context omitted.

The stock market won't collapse in the same way because stocks have earnings and dividends (which is what the value is largely based upon). Sure: securities can go up, or down, in price almost arbitrarily. But they largely can't go below zero (aka: bankruptcy law protects against that), and they can't really go below the expected profits of the company (because shareholders are entitled to those profits. Worst-comes-…

Very few stocks actually pay dividends.

Because its more tax-efficient to reinvest the gains back into the company in most cases.

But if the stock ever crashed to say: the value of the expected dividend... it would make more sense to pay out the dividend rather than invest.

Lets say a company's stock price is $40, and they make $2 per stock of profit one year. They can give out the dividend... or... they can reinvest the money into the company (and theoretically: if the stock market reacts correctly, it would raise the price of the stock to $42).

In contrast: if the stock market fails to react like this, eventually the company will be say: $2 per share. They'll still be making $2 in profits each year however (assuming the fundamentals haven't changed). At this point, it makes sense to pay out a dividend of $2, if their stock price doesn't react.

After all: might as well double your money each year at that point. (Take those $2 dividend, then double your number of shares in the company, then receive double the money next year).

Re: Report on Stablecoins [pdf]

#470

Post by baby »

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 doubt that the solution is based on proof of work. Most modern cryptocurrencies are proof of stake.
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