Price of algorithmic stablecoin UST drops 2% below dollar peg
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Price of algorithmic stablecoin UST drops 2% below dollar peg
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Re: Price of algorithmic stablecoin UST drops 2% below dollar peg
#2Such is the risk of algorithmic stablecoins. The only ones that seem to work well have actual full collateral backing them (either some cryptocurrency, or actual dollars in a bank.)
Re: Price of algorithmic stablecoin UST drops 2% below dollar peg
#3Such is the risk of algorithmic stablecoins. The only ones that seem to work well have actual full collateral backing them (either some cryptocurrency, or actual dollars in a bank.)
DAI has worked pretty well though
Re: Price of algorithmic stablecoin UST drops 2% below dollar peg
#4Such is the risk of algorithmic stablecoins. The only ones that seem to work well have actual full collateral backing them (either some cryptocurrency, or actual dollars in a bank.)
DAI has worked pretty well though
Yeah, exactly. DAI is fully collateralized. I guess what I mean is non-fully-backed algostables like ust and frax
Re: Price of algorithmic stablecoin UST drops 2% below dollar peg
#5Re: Price of algorithmic stablecoin UST drops 2% below dollar peg
#6Such is the risk of algorithmic stablecoins. The only ones that seem to work well have actual full collateral backing them (either some cryptocurrency, or actual dollars in a bank.)
I don't understand how you can use cryptocurrency as backing for a stable coin. Just as a matter of definition, if your stable coin is meant to be worth $1USD then your backing fluctuates with the price of the crypto that backs your stable coin. And to make matters worse, when BTC drops in value that's likely because there's a net outflow from BTC back into fiat, which is going to occur at the exact time that people want to redeem their USDT for their actual USD. So at the time that you're most in need of liquid collateral, you're least well collateralized. The only way I see this working is if you're not net long crypto, which I guess is possible but gives you heaps of market risk.
Re: Price of algorithmic stablecoin UST drops 2% below dollar peg
#7official twitter update from terra https://twitter.com/terra_money/status/1523749536379793408
Re: Price of algorithmic stablecoin UST drops 2% below dollar peg
#8Such is the risk of algorithmic stablecoins. The only ones that seem to work well have actual full collateral backing them (either some cryptocurrency, or actual dollars in a bank.)
I don't understand how you can use cryptocurrency as backing for a stable coin. Just as a matter of definition, if your stable coin is meant to be worth $1USD then your backing fluctuates with the price of the crypto that backs your stable coin. And to make matters worse, when BTC drops in value that's likely because there's a net outflow from BTC back into fiat, which is going to occur at the exact time that people…
How is backing for stablecoins not regulated to kingdom come yet? Seems so asinine?
Re: Price of algorithmic stablecoin UST drops 2% below dollar peg
#9Such is the risk of algorithmic stablecoins. The only ones that seem to work well have actual full collateral backing them (either some cryptocurrency, or actual dollars in a bank.)
I don't understand how you can use cryptocurrency as backing for a stable coin. Just as a matter of definition, if your stable coin is meant to be worth $1USD then your backing fluctuates with the price of the crypto that backs your stable coin. And to make matters worse, when BTC drops in value that's likely because there's a net outflow from BTC back into fiat, which is going to occur at the exact time that people…
See for example : https://docs.synthetix.io/synopsis
Basically you mint only a fraction of your collateral (typically 15%), so even a huge downturn of the price won't leave anybody hanging, and you provide a set of incentives for the owners of the collateral to adjust their staking depending on the price you are trying to follow.
It's not too complex, and seems to me way better than trusting tether and Co.
Re: Price of algorithmic stablecoin UST drops 2% below dollar peg
#10Earlier quoted context omitted.
I don't understand how you can use cryptocurrency as backing for a stable coin. Just as a matter of definition, if your stable coin is meant to be worth $1USD then your backing fluctuates with the price of the crypto that backs your stable coin. And to make matters worse, when BTC drops in value that's likely because there's a net outflow from BTC back into fiat, which is going to occur at the exact time that people…
See for example : https://docs.synthetix.io/synopsis Basically you mint only a fraction of your collateral (typically 15%), so even a huge downturn of the price won't leave anybody hanging, and you provide a set of incentives for the owners of the collateral to adjust their staking depending on the price you are trying to follow. It's not too complex, and seems to me way better than trusting tether and Co.
Ok, so fundamentally it's heavily discounting the collateral. I guess that makes it safer, but doesn't that mean you need way more collateral to support it and therefore you're paying a really high cost of capital?
I can support $1Bn of stablecoin if I have $1Bn of USD in reserve, but to support $1Bn of stablecoin in this case I'd need $6.7Bn of BTC in reserve. Sounds expensive surely?