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Algorithmic stablecoins are provably impossible without continuous funding

fragileequilibrium.substack.com

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Re: Algorithmic stablecoins are provably impossible without continuous funding

#91

Post by qeternity »

notch656a wrote: post #86
gigatexal wrote: post #68

So a pyramid scheme. The coins need more and more suckers to sustain it and fails when that supply dries up.

USD has the same issue. The dollars continually get "used up" and need reprinted. Transferring electronic money burns energy and labor, and costs labor at the treasury and fed to mantain. If stablecoins are a pyramid scheme, the USD is too. Virtually every currency is negative-sum, destroying value every time they are spent.

> USD has the same issue. The dollars continually get "used up" and need reprinted.

…

> Virtually every currency is negative-sum, destroying value every time they are spent.

What?! This is not even remotely close to accurate.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#92

Post by crawfordcomeaux »

Ntrails wrote: post #87
pid-1 wrote: post #46

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. Put another way: there is an inescapable component of trust in every asset Most non currency assets are cash flow generating financial instruments. If analysts don't believe a company is worth a dime, it can show them wrong by being profitable and paying dividends. Edit: I think my point is - even…

I cannot remember where I read this, but it was a view that basically the mere concept of a "company" is a collective fiction that we all believe in. As are nations, laws, etc etc. The idea that "tesla" is an entity one can interact with. That this "tesla" thing has value in and of itself. They're derived from beliefs in a system. Which could evapourate and render the idea of value meaningless. I don't think this is…

> I don't think this is very useful, since "yeah but without society there are no companies, money is nothing" doesn't take us very far!

This reminds me there always exists a path between the current society & a completely different one, and a short path to something completely different is to start from scratch.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#93

Post by 9notorp »

Ntrails wrote: post #87
pid-1 wrote: post #46

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. Put another way: there is an inescapable component of trust in every asset Most non currency assets are cash flow generating financial instruments. If analysts don't believe a company is worth a dime, it can show them wrong by being profitable and paying dividends. Edit: I think my point is - even…

I cannot remember where I read this, but it was a view that basically the mere concept of a "company" is a collective fiction that we all believe in. As are nations, laws, etc etc. The idea that "tesla" is an entity one can interact with. That this "tesla" thing has value in and of itself. They're derived from beliefs in a system. Which could evapourate and render the idea of value meaningless. I don't think this is…

>I cannot remember where I read this, but it was a view that basically the mere concept of a "company" is a collective fiction

I think I read something similar in Sapiens.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#94

Post by tim333 »

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…

My house is valuable to me even if there isn't a collective belief in it. Most financial assets are backed to some extent by real assets.

I'm happy enough to put value in USD or imaginary-coin if I can swap my holdings in them for a nice house/car/jet. You don't really need "economic, military and even cultural might" - just for the currency to be accepted somewhere where you can buy real assets and for the supply to be limited so it doesn't inflate to nothingness.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#95

Post by baq »

tim333 wrote: post #94
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…

My house is valuable to me even if there isn't a collective belief in it. Most financial assets are backed to some extent by real assets. I'm happy enough to put value in USD or imaginary-coin if I can swap my holdings in them for a nice house/car/jet. You don't really need "economic, military and even cultural might" - just for the currency to be accepted somewhere where you can buy real assets and for the supply to…

the point is your belief is not relevant, it's the belief of the counterpart to any transaction that may involve your house ("the market").

Re: Algorithmic stablecoins are provably impossible without continuous funding

#96

Post by neilwilson »

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…

"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 option, since the other option is far more expensive.

That alone makes the currency worth holding, since you can always get rid of it to somebody with a tax bill to pay.

As we have seen with Russia that power extends wherever the denomination is used. The US government has 'taxed' Russia anything it holds denominated in US dollars - completely unilaterally and wherever it was held.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#97

Post by simonh »

Ntrails wrote: post #87
pid-1 wrote: post #46

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. Put another way: there is an inescapable component of trust in every asset Most non currency assets are cash flow generating financial instruments. If analysts don't believe a company is worth a dime, it can show them wrong by being profitable and paying dividends. Edit: I think my point is - even…

I cannot remember where I read this, but it was a view that basically the mere concept of a "company" is a collective fiction that we all believe in. As are nations, laws, etc etc. The idea that "tesla" is an entity one can interact with. That this "tesla" thing has value in and of itself. They're derived from beliefs in a system. Which could evapourate and render the idea of value meaningless. I don't think this is…

So the other way to say this is that companies are just as real as anything else in our society.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#98

Post by neilwilson »

mcs5280 wrote: post #7

Not a crypto fan but I'm beginning to see that our entire economy is proving impossible without continuous manipulation by the fed

The Fed is just the agent of Treasury (as Bernanke pointed out in testimony[0]) , and Treasury does what Congress tells it to do.

Which leads to the inevitable conclusion - the US dollar is a simple public monopoly, and therefore monopoly rules apply.

[0]: https://www.c-span.org/video/?c4454549/user-clip-bernanke-ag...

Re: Algorithmic stablecoins are provably impossible without continuous funding

#99

Post by pa7x1 »

bombcar wrote: post #88
pa7x1 wrote: post #80

Earlier quoted context omitted.

> eg it's been estimated that over half the Ethereum are owned by less than 10 entities You throw this kind of claim without providing proof. Unfortunately, it's a claim I have seen made before (e.g. https://www.financemagnates.com/cryptocurrency/news/top-10-e... ) and it doesn't hold any level of scrutiny. Although you embellish it and exaggerate it even further. This kind of number typically assumes that a smart co…

Why restrict it to circulating supply? Is there some other type of ETH that isn’t circulating?

Whenever you do a transaction on the Ethereum network part of the fees (the base fee) are destroyed, this amount goes nowhere not even a special locked account. It just disappears, it's "burnt" as it's commonly referred.

This means that you cannot look simply at total ETH issued from the genesis block as you will be overestimating the amount of ETH in circulation by the total amount of ETH destroyed through base fee burning. Currently around 2.4M ETH has been destroyed in this manner.

The figure I gave above (~120M) includes all other ETH. I.e. All ETH that exists. Including ETH that perhaps has been forever lost due lost keys or sent to wrong addresses or addresses that nobody has the keys for (e.g. https://etherscan.io/address/0x00000000000000000000000000000... or https://etherscan.io/address/0x00000000000000000000000000000...)

So for all intents and purposes circulating supply is total supply.

Re: Algorithmic stablecoins are provably impossible without continuous funding

#100

Post by koalala »

ozim wrote: post #58
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…

Gold standard fetishist forget that if there is a food shortage even tons of gold won't help them. In scenario where financial system collapses only real currency is skill - if you can make food from something available locally or be helpful like being a medic. Why would I trade a chicken that I can eat for piece of gold when I can trade chicken for sewing my wounds after being bitten by a stray dog.

My grandfather who lived through the Dutch famine in world war 2 did fine buying food with gold while people were eating flower bulbs and grass, so in that case at least it worked.
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