Another stablecoin loses peg – DEI team working to restore the peg
finbold.com
finbold.com
Good luck with that.
Who else is reminded of the story of George Soros "[making] $1.5 billion in just a single month [in late 1992] by betting [that] the British pound and several other European currencies were priced too richly against the German deutsche mark"[0] ?
[0] https://www.forbes.com/sites/steveschaefer/2015/07/07/forbes...
"The team behind cryptocurrency X has halted a primary use of the tokens."
Hmm...
"What do you mean the bank is out of money?"
Yes I realize that sometimes referendums give sub-optimal results (i.e. brexit), but I'd much rather live in a truly representative democracy that occasionally gets it wrong than a republic that doesn't represent the people's wishes at all.
Absolutely not, lol.
The world is way, way too complicated for every individual to have a meaningful and informed opinion about every particular topic. That's why we delegate to experts in the field. There's no way I want some corn farmer in Iowa voting on monetary policy. Most people here haven't the faintest idea how monetary policy works. The comments here are horrifying, and this is a pretty elite group to begin with.
Similarly there's no way I want some city-slicker who's never held a hoe to vote on farm policy.
That's before we even start in on civil rights.
It's a flawed, backwards idea best left in the dustbin of history. It just doesn't stand up to scrutiny. Specialization is good. Delegation is productive.
I don't think "be done with it" on abortion is remotely possible. The two sides are completely intractable. In my long life I've never heard anyone be persuaded by the other side.
Besides, overturning RvW will not federally prohibit abortion. It will leave it up to the states, which will decide democratically.
This satisfies nobody.
For example, here in Washington State, there is no chance that abortion will be outlawed by the State. But that hasn't stopped major demonstrations protesting the Supreme Court.
If 50%+1 of voters becomes the metric to hit, it will almost certainly be achieved. Looking at California's ballot referendums, it's clear that it's no impossible task to get voters to approve something against their best interest or ostensibly against their stated political values and beliefs.
See: The ballot initiative exempting commercial property from Prop 13 that failed: (https://ballotpedia.org/California_Proposition_15,_Tax_on_Co...), and the initiative to overturn California's law requiring ride share drivers to be classified as employees that passed: (https://ballotpedia.org/California_Proposition_22,_App-Based...).
Also, just wanted to point out that you said you'd rather live in a "representative democracy" when talking about direct democracy. Representative democracy is another term for a republic.
Everyone likes to talk about will of the people. Well here is news. Different people have different desires, in different regions of the country majority wants to do different things. Only way to keep lid on this without the whole thing blowing up is to have representation of the this and slow the process down as much as possible, quick changes are the most disruptive/dangerous.
A. Hitler Mustache
B. KKK Hood
Do you think everyone should have to vote on that?
Makes em easy to dupe...
Is "plutocratizing" a word? Because that's what most of them are actually doing -- granting power to whoever has purchased (or rented!) the largest number of tokens.
As if procedural hacks were not enough (leveraged seizure of stake sufficient to exploit anyone...?),
who could possibly both be smart enough to write a contract, yet dumb enough to entrust it with their own money?
Trick question. That's the crypto koan of rue. The answer is no one. The rest is an exercise a lot of students are learning the hard way.
Have you ever seen a road? Do you think everyone got an equal say and vote if and how that road was built? Cities that operate well and are not total disasters to live in, have governments that can improve infrastructure without having to include everyone's opinions equally. Obviously I think that is unfair, especially if I am the person who doesn't want brighter street lights on my street, but I don't want my city to end up like San Francisco where apartments cost 2 Million dollars and are surrounded by tent cities and taxes are super high.
In any system I'm not obligated to participate in, I prefer benevolent dictatorships. If I disagree with the dictator, I can take my business elsewhere.
We don't want to study history. It's boring. The immersive experience of doing the historical re-enactment is much more intense, and something you can talk about for years to come. Eventually to the next batch of people who want to learn things the hard way, until it's happened so often that you turn into that old person you swore you'd never be when you were that age.
These aren't games though. Learning things the hard way can mean death, chronic illness or crippling debt that affects the entire rest of your life. School needs history lessons, and more of them, but there's also quality vs quantity (how do you make history interesting to kids who think this is just an old story and not a parable?)
The first principle is that you must not fool yourself, and you are the easiest person to fool.
There are certainly many scammers out there, but also some people who believe their own marketing material. But the thing is that once you start picking apart one infinite growth pyramid, then you start seeing them everywhere, and eventually respectable people start trying to draw lines and claim that the bullshit on this side of the line is obvious and bad, but the bullshit on the other side is okay because reasons (reason #1: we can keep this running for at least another 100-200 years at which point I will be long dead)
You might be right, but the only thing they were ever useful for, was money laundering.
So, I don't think that drawing a greater distinction between the first wave of money-laundering crypto, vs the current wave of Ponzi crypto, is really a defense of either.
And little did I know that others were laundering their money through me when they donated to my websites' bitcoin addresses.
I guess everything that isn't some incorporated third party transfering the money for you must be money laundering. Corporate persons transfer money. Human persons launder. Got it.
I can use a handgun for hunting, but that doesn't mean its primary use-case is hunting.
This is a stablecoin which has a centralized management team that can halt and control activity on the blockchain, which is fundamentally different from a bitcoin or monero which is a truly decentralized system with no controlling organization that can change anything without slow bulding, mass consent of all participants in the network, and is anyway naturally very stable because of its simplicity and extremely conservative and risk averse development process.
It's more like an Englishman yelling out that they're a Scotsman as they ransack the public square. It's not a fallacy to point out that they're simply not a Scotsman.
The fact that there isn't a formal name for the era of "pre-finance-bro crypto" or "first wave crypto" doesn't mean it's has anything to do with the scotts. The parent's language might be a little ambiguous but that's to be expected when trying to describe yet unnamed things and their meaning is clear enough.
Willfully misunderstanding someone's words to create a logical flaw that isn't there should be its own fallacy.
What constitutes these eras? And why do you bring that up when it was about a class of products not being "an actual cryptocurrency". I would have thought there are properties to the product that make it belong to the class, not merely when it was created.To me these unnamed things and their meaning you talk about are absolutely not clear enough.
I believe you two have a point. But it doesn't come across...
PS: I would argue in 2015 "crypto" was mostly known as abbreviation for cryptography and had nothing to do with decentralized public ledgers.
NTS would be something like
* "All things people are calling cryptocurrencies made after 2015 are just finance-bro scams."
* "But what about TotallyLegitCoin, it's not a scam."
* "But that's not really a cryptocurrency."
Typically happens when the market's scary.
I was under the impression that providers being able to "temporarily disable withdrawals" [due to lack of liquidity, political pressure, or indeed any other reason] is one of the key things that crypto didn't suffer from?
Is it possible (just for example) to exchange fiat for crypto, or crypto for fiat, or indeed one crypto for another, without having to involve an "off-chain"* counterparty which comes with no guarantees?
In the fiat world it would appear one can do an exchange "old school" by going to a physical bank branch and exchanging [physical] fiat for fiat (USD to EUR or whatever) and not have to worry that the transaction is going to be halted half way through due to "temporary restrictions" leaving you unable to access your capital.
* I'm not sure I properly understand this phrase as you've used it
The commenter didn't even take a stand on crypto vs fiat. The market isn't scary. The stock market also halts trades when things get rough.
That said, I agree that this should be a point to debate not downvote.
Note the red explanation marks that indicate how the data is inaccurate.
https://www.coingecko.com/en/coins/dei-token has a better estimate.
At peak, DEI was only around $100 million or so. Compared to roughly $20 billion for UST.
You could also look at the volume. UST frequently had $500 million of volume each day. DEI only had a couple million at best. (Volume is of course also a flawed metric and can be faked, but the lack of effort in faking volume is a signal in and of itself.)
With UST, the issuer controlled the blockchain and shut it down completely.
The issuer didn't control Terra. The Terra blockchain is unable to come to connesus about creating a new block if 33% of the staked Luna goes offline. You just have to get the largest validators to agree to go offline and it will stop.
> None of the things called “real world currencies” meet today this very simple set of criteria.
—-
I dont own crypto but Im able to see the hypocrisy in our current global financial system.
But where would be the money in that?
But that won't be enough money for these people, of course
>The wording on the Circle website changed from the previous "backed by US dollars" to "backed by fully reserved assets" by June 2021.
>USDC reserves are regularly attested (but not audited) by Grant Thornton, LLP
This is the same bullshit that Tether has repeatedly pulled.
We’re truly living like it’s 1929.
1. purely algorithmic stable coins (on-chain), such as UST. Voodoo, if you ask me. Can be decentralised.
2. (over)collateralised stable coins (on-chain), such as DAI (not DEI, which is at issue here). Collateralised by other crypto, smart contracts, and what have you. Can still be decentralised.
3. collateralised stable coins (off-chain), such as USDC or (allegedly) USDT. Those are collateralised by good old USD (or treasuries or commercial paper). Those need a central authority that holds on to the USD (or whatever form the collateral takes). So, makes sense that they have TOS.
Tether freezes $150 million in USDT https://cointelegraph.com/news/tether-freezes-150-million-in...
Circle Confirms Freezing $100K in USDC at Law Enforcement's Request https://www.coindesk.com/markets/2020/07/08/circle-confirms-...
The point of stablecoins is to have something that's the same value as a dollar, but which can interface with ("all the wonderful magic of") smartcontracts.
One way to achieve that is to have a big trusted organization honor redemption on demand. (GUSD and, I think but don't quote me, USDC.)
Another way is for an org to consistently honor enough redemptions (but not on an on-demand basis) that it trades at par (USDT, for now).
Another (dubious, increasingly unreliable) way is for some cryptocurrency to automatically buy the stablecoin when it falls below par (TerraUSD/UST with LUNA, already failed).[1]
Yet another is to issue the stablecoin only in return for a significant collateral buffer (with other cryptocurrencies) and force sellbacks when the collateral gets too close to critical (DAI and, I think, FEI, not to be confused with the DEI in this story).
[1] TerraUSD's platform had the Ponzi-esque Anchor paying 20% returns, but is stabilizing mechanism did not (attempt to) depend on this in any direct sense.
Of course, some might call fractional reserve banking a scam as well but what these algorithmic stablecoins are doing isn't the same thing as the credit creation by private banks. It's more like they tried to create a "decentralized" central bank. I put that in quotations because the ones I know aren't actually decentralized either, they just use such buzzwords to trick traders.
Not all stablecoins work that way. There are more reputable ones like DAI or USDC. Actually the first stablecoins were all collateralized, the shananigans started in 2017 during the last bubble and now there are even more of these scammy projects because the market has grown so much. Adoption brings in a lot of newbies with money, and that in turn attracts charlatans of course. You can get a feel for what level of education the general public has when even in a tech forum most people don't understand anything about the economics and mechanisms of all these projects.
...which makes you wonder: why the cryptographic overhead at all? Oh wait... Because places want to be banks, without adhering to the regulations thereof...
"Fractional reserve."
Obviously, as we've seen, algo stables are subject to their own engineered ponzinomics, but I don't think redemption is "the entire point", or even a cognizable concept.
> One IRON token is always redeemable for $1 worth of collateral, which on IRON is a mixture of TITAN and the Circle and Coinbase-created stablecoin USDC.
[0] https://thedefiant.io/iron-finance-implodes-after-bank-run/
Algorithmic stablecoins don't work
Overcollateralized algo stables such as DAI are much more sustainable. They require substatially more of a user's unrelated capital (whitelisted assets not based on the stablecoin's issuing protocol such as eth or wbtc which also have relatively deep liquidity available on the market) to be locked up and held as collateral to mint the stablecoin. And that makes drawing down the supply much smoother when times get rough as folks with their capital locked up will repay their debt on their own or have the market do it for them in a liquidation of locked capital. This repayment is what burns the supply and keeps the stable from falling far below peg. In fact historically, DAI's problem was that it would go way over peg during drawdowns because damand for DAI to stave off or participate in liquidations would push the usd price of dai way up.
It is highly capital inefficient model, as it takes roughly at least $1.50 of the other asset to mint $1.00 worth of stablecoin, and users will usually go for a much higher ratio to prevent the liquidation threshold from kicking in. And this capital inefficiency really kneecaps growth since you can't mint anywhere near as much of the stablecoin, but it also means the protocol and thus the stablecoin is much more robust in downturns.
Now it still has real risks because the protocol still depends on lively and accurate oracles to watch and report the collateral values, and that liquidations execute properly when collateral values fall enough to trigger them. But those risks are much more manageable compared to the risks undercollateralized stablecoins present.
is the incentive that "currently it trades below 1.0, so I buy it, then redeem it for 1.0" which should drive the price up, right?
where does the money come from to finance this arbitrage? is there a redemption pool that shrinks every time someone executes this cycle?
They’re illegal, but in reality the system is just broken
Source?
Imagine we're all back in early September 2008, and one of us were to post that Lehman Brothers was suffering unprecedented losses due to the subprime mortgage crisis.
Would you count that as organizing a bank run?
> in reality the system is just broken
Indeed. Yet another system which only reveals just how broken it is when you apply enough pressure.
Nothing to see here, move along
Doesn’t seem like this would be possible? When the peg fails, wouldn’t all the people holding the coin flood the redemption process, immediately draining it of all USD?
Or put it this way: those traders buying the coin for 80 cents and then redeeming it for a dollar…who are they buying it from and why wouldn’t they redeem it? They just left 20 cents on the table. I feel like I’m missing something.
"But what about -" -- then it's not a stablecoin.
So when the crypto market crashes, some get exposed as a lie, which causes the crypto market to crash...
I suspect you're wrong, unless by collateralized you mean they store other cryptocurrencies of questionable value as their collateral. In that case sure they're probably just overflowing with funds, until they actually need to use them during a crash.
It's a very different system from UST. The backing is made up from collateral from borrowers. If the price goes too far down, their position is liquidated, with borrowers losing their collateral to maintain the peg.
So the funds are all accounted for, and there's an active system to convert the funds to stabilize the peg. By design Dai will still be $1 when there's only $100 left of crypto backing the peg.
It’s just that actually backing your PLNC 1:1 with actual Złoty[0] you can actually retrieve, leaves very little room for the people behind the coin to get rich.
The Liquity stablecoin actually works that way, they don't even have an own web app.
If I wasn’t fully occupied with rsync.net I would love to run some kind of utility exchange/market/bank service …
… and I’m not involved or invested in crypto in any capacity.
Thus a true backed stablecoin where the operators have proper incentives.
And that's how you get sketchy companies in Bermuda holding $100 billion in Schrodinger's assets, as well as other oddities like mining companies holding billions in assets because an ETF holding billions in assets would be illegal.
In real life there's no stablecoin. Even fully backed deposits can be traded at some other amount than 1:1, for whatever reason. Totally depends on whether you actually think the exchange can be done, and there are various reasons it might not.
That's not to mention that, as what's happening with DEI, the developers could do something like halt redemption making your holdings suddenly illiquid at the pegged price.
DAI seems safe given how over-collateralized it is. But a drop of 60+% in the collateral basket used by DAI is not inconceivable. In particular what happens if USDC's custodian is found to be untrustworthy? And the value of non-pegged cryptocurrencies tend to be strongly correlated, so a mix of crypto assets is not a diverse as one would hope.
Dai has survived a 94% drop in the value of its backing collateral in 2018, and it maintained the peg well. It would, however, be a problem if the drop was _instant_ and sustained. But it should be able to handle the speed of the drop we saw in Luna.
Your point is taken regarding trading types of trust with respect to bugs or backdoors. There is certainly a level of trust required there.
Frankly, it seems to me stablecoins are a market pipedream.
https://tether.to/en/legal/#:~:text=Tether%20reserves%20the,...
But what's the sudden obsession on HN with collateralization of blockchain assets?
Algorithmic pegs are far more interesting and democratic. That scammers have discovered they can push ponzinomics out the door as well does not change this.
The dream collateralized stablecoin, audited in some transparent way, is still vulnerable to a good old fashioned heist.
The gatekeeping of all projects that don't see the bank vault as the holy grail of community economics feels unbecoming of HN to me. This is creativity and science at work.
Again, I understand that, in addition to sincere efforts to find an algorithmic solution, we get ponzi scum peddling their things. I don't understand why people buy those, and that's an element of human nature we can hopefully overcome as this process goes on.
But you're watching collateralized coins fail, and your response is, "the only valid approach is collateralization!" ?
What approaches? Do you know of a known approach that isn't flawed in some way?
Until proven otherwise, you can't create a stable coin with "pure mathematics".
The most interesting stable coin is DAI. It's not particularly profitable, and it's stable and it will be stable no matter what.
I think your point is broadly sound, though. But it's not an argument against algorithmic pegs; it's an argument against stablecoins _in principle_. And on that point, I agree.
USDT (tether) vs UST (terra), and now DAI vs the DEI.
DAI kept its peg from ETH $1440 -> $50 last time and is battle-tested + over-collateralized. Why don't people use that?
Traditional money transferring companies all exited Belarus (PayPal, Western Union, etc.) Now we exploring ability to send some kind of crypto, either bitcoin or stablecoin, in Belarus as a last ditch effort to send over some $1s...
Have you looked at the Stellar Project? They've got a lot of remittance systems running on it that may suit you. Algorand is also a low-cost alternative, if you're looking to frequently send small amounts (assuming your mother has access to a fiat off-ramp like Binance).
I have plenty of clients that only want to use SEPA (europe and some european country colonies), because they're familiar with it and for some specifically because its not dollar centric. People fear the US will try to establish jurisdiction over them or inconvenience their ability to transact now or in the future, whether that is unfounded or not. (They're not legal experts, they just have chain letters forwarded around whatsapp)
I'm sure you only want to use things that are familiar as well and would scoff at any client trying to do commerce in a system that isn't common to you.
WISE (Transferwise) has extremely arbitrary limits, holdups, freezes, opaque issues, and a ridiculous terms of service if you've ever looked. Revolut is the same way.
Western Union is expensive, and cumbersome.
Paypal is a worse version of WISE, and is known for its international issues and patch work of countries it services. Let alone arbitrary freezes.
Crypto is fast, exposure to any crypto is as short or as long as you want (worth saying because its a common imagined issue people have with using crypto because they think it'll change value alot over the time period they need it. its a very simple understanding). And people can convert it to something more liquid in their local economy with their local offramps. For many years I've basically used crypto to circumvent using international wires, the same transaction becoming a domestic wire and therefore less room for error and less arbitrary scrutiny. There are probably zero statistics on this. Client overseas pays me, I wire to USD domestically same day.
> you can be locked out of your money quote easily.
But I am curious, do you have examples that show that this is really the corner case I should be worried about?
Meanwhile people get "locked out" or just lose their crypto far more regularly. Lost passwords, crashed drives, hacked online wallets, rug pulls, crashing values, fake "pegs", misplaced decimals during transactions, etc. 20% if bitcoin is forever inaccessible, and that percent will only go up, never down.
The "you can be locked out of your fiat" cohort are the climate deniers of the financial world "If the earth is warming why was there a record low temperature somewhere yesterday?". "Your fiat isn't safe - just look how those donations to the truckers in Canada were reversed!"
Entire countries have had access to a currency completely pulled. Not just the US wants to use USD.
Plenty of people can lose access to their money, not just alleged domestic terrorists (and isn't alleged is a scary word?).
"Corralito" is unfortunately a common use word.
Sanctions are literally "your money no longer exists". Or it does, but we refuse to allow you to transact with it. Financial access is a hugely powerful diplomatic/political tool.
> Deus Finance reacted by halting the redemption process in order to try and stabilize the coin.
Crypto transactions aren't processed in real time. Most networks can only handle, what, less than 10 transactions per second? Even when you start adding additional layers there is only so much you can do.
Realtime transactions with traditional currencies are a solved problem. The UK has had this for years in their banking system, the US will have it by the end of 2023 (FedNOW network).
There's function in the stablecoins in terms of crypto trading, but of course there's risk that your always pegged stablecoin isn't.
It's truly online without any government being able to confiscate it (if you play it smart).
It all depends on the use-case.
Anyway: You will lose either by the tax agencies finding out (when you actually try to buy stuff) or this way.
And what gives the US dollar its value is really the long dick of the US government.
What we're seeing here once again if Crypto Andys learn exactly why the financial system is the way it is.
An algorithmic stablecoin is ridiculous. Collateral helps but it all boils down to trust. Consider this quote:
> Deus Finance reacted by halting the redemption process in order to try and stabilize the coin.
This is exactly the sort of intervention a central bank performs when managing a currency. So what exactly are we gaining with crypto?
Presumably if you have enough assets backing it, then if people start mass selling you can just buy back the currency for the price it’s pegged at.
> Deus Finance reacted by halting the redemption process in order to try and stabilize the coin
The Aristocrats!
(Glad I invested with them instead of buying UST myself as I got out early in the de-peg at 1:1. Thanks to investors for funding that and for the 15% APY while the good times lasted.)
Tether is the big stablecoin, about $76B now (down from $83B). They've consistently lied about how much real capitalization they have backing it. When it collapses it will probably bring most of the cryptocurrency market with them.
Tether broke its peg last week, but recovered. That was a shock.
The risk for Tether is that, while people may not be dumping Tether, they're not likely to put new money into it. A slow outflow will eventually drain the partial reserves.
>"Deus Finance uses DEUS and DEI tokens for their DeFi protocol, where minting 1 DEI requires $1 of collateral. When redeeming, for instance, one DEI, users would get 80% of the value in USDC and 20% in DEUS if USDC was used as collateral for the creation of DEI in the first place."
I've read this same passage 5 times now and I still don't understand it as this sounds very circular. Shouldn't you be able to redeem a stable coin for $1 in whatever currency it is pegged to? Could someone explain how this works?
If you invest 1$, you will pay fees and gas for it. If you try to redeem you will pay fees and gas for another two coins. (Even if they are pegged)
If you redeem those tho coins you pay fees.
Furthermore USDC aren't $s (and are backed by a company that is loosing value) and deus aren't dollars.
Only the issuer and exchanges gain via fees and emissions.
Now conversion without fees or gas is 0.5 to 1.
To my understanding (I am not a crypto expert, just a casual observer) Stablecoins basically collateralize a certain percentage of the outstanding coin in order to provide the "peg"... so maybe 1:10 coins is backed by USD, Btc, real estate, or whatever... and then the exchange rate is set and as long as everyone plays along, it works. If an actor starts redeeming a significant percentage of coin for collateral, then there is less and less collateral to prop up the coin. Same effect if that collateral loses value.
It is also my opinion that most crypto "has value" only because it is relatively liquid and can be "cashed out" to USD via an exchange or stablecoin. When people start to recognize the stablecoin scam, the price of all crypto will collapse because the liquidity and USD exchange will disappear in an instant.
edit: same thing happened with the USD when it lost the gold backing (and too much redemption led to the decoupling, not enough collateral). In the crypto world, I would say that BTC is the gold equivalent that provides the collateral and legitimacy, so maybe a temporary panic will provide a good BTC buying opportunity? We will see.
Past performance doesn't guarantee future rewards. This same sentence could be said for Terra/UST up until sometimes last week.
Afaik the two differences between DAI and UST is 1. DAI is backed by Eth instead of Luna, and 2. DAI is ideally backed to 200%, although the requirements have been adjusted downwards (so < 200%).
So explain to me what's backing DAI except for hopes and prayers of cryptobros worldwide that Ethereum is gonna change the world someday, very soon (and probably around when it moves over to Eth 2.0 sometimes in the next 18 months, this time for sure!)
My thoughts are that the MakerDAO (DAI) community existed too early and didn't have other backing options, so gravitated towards centralized collateral for their decentralized stablecoin, despite the irony.
There are newer communities of stablecoins with a similar design to DAI that chose different decentralized collateral options, and are functioning just as well.
None of them are perfect though, usually some baggage with the founding team, or a shitty governance platform. But they're working okay.
My only point here is let's just criticize the accurate thing.
Generating yield by staking is a literal ponzi scheme. Generating yield by loaning means taking on default risk so your stablecoin is no longer stable in that you can lose principal.
The regulators are asleep at the wheel. All the people posting "Yoooooooo! 20% yield on my stablecoin. Living large!" on Instagram will be the first to demand that the government "do something" when their life savings evaporates overnight.
> ...Btc, real estate, or whatever
USDC is over-collateralized by cash and US government securities. There is a difference between centralized (at least) 1:1 tokens backed by dollars, and "decentralized" algo-stablecoins that use convoluted exchange mechanisms and often lose their peg.
You can deposit USDC at Coinbase, circle, other exchanges and get cash easily.
I'm still a bit of a skeptic though when it comes to anything other than Bitcoin and tend to believe that it's all just a liquidity game and if you can maintain the illusion of USD liquidity, you will keep the ball rolling and rake in a lot of money. Ultimately they do it so they can exchange their coin for USD, or maybe buy real estate, etc.
These two sentences appear to contradict each other...
The reason I say it is because currency pegs in practice never last forever, they all fail eventually... even the USD. My criticism is not toward the crypto space or any coin in particular but rather the idea of maintaining a long term stable peg.
In general I'm rather bullish on the long term prospects of crypto currencies.
Any "stablecoin" not based on 100% hard asset redemption is a financial perpetual motion machine in proportion to how much of its market cap is not backed by hard assets. It can work for a while but it is fundamentally unstable and fundamentally guaranteed to collapse after a certain point. Knowing "too much" about the cryptocurrency mechanics and this algorithm and that detail of how they redeem and all the other mechanical details really reminds me of people who put forth very complicated mechanical perpetual motion machines and basically meet all objections about how perpetual motion is not possible by pointing at their machine and saying (in essense) "But look how complicated that is! You can't prove it doesn't work, it's too complicated!"
But I don't have to. I don't need to learn the details of the exact obscure magnetic effect you're using or delve deeply into your exotic dark-matter-catalyzed fusion or theory about how your machine captures zero point energy or take out my crystals to examine your machine's chi. All I need to see is that energy is conserved and/or your machine is not actually putting out any power across long terms.
Stablecoins are not possible in the long term. I don't need to know the exact financial machinations of this or that stablecoin to know that. They are fundamentally castles in the sky.
The other problem "stablecoins" have is that there is very little incentive for anyone to create a coin that is actually hard-backed by 100% assets. In that situation, all the backer is doing is signing up to lose the assets once the market burps, the stablecoin appreciates even a bit, and everyone redeems them. There's this fundamental mismatch between incentives, a fundamental inability to peg one asset to another by fiat, a number of fundamental impossibilities, really.
I find myself wondering if it comes back to the fundamental misapprehension shared by so many crypto advocates that money's value is just completely arbitrary, and easily changed. If so, why not just arbitrarily declare that this stable coin is worth one dollar? We shouldn't even need any backing to that claim at all, since money's value is so arbitrary, so 10% backing in dollars and 30% backing in other cryptocurrencies should be more than enough, right? Well, even if money's value is an "opinion", it turns out the collective opinion of millions of people and numerous governments still provides the system rather a lot of mass, and it doesn't move around easily as they think and isn't as arbitrary as they think. Certainly it isn't infinitely strong; I'm rather a dollar skeptic myself lately. But there's a big difference between the concepts of a completely arbitrary value of low mass and any value with the mass of millions or billions of people and governments behind it.
One classic example is when the US dollar was pegged to gold, and then the fiat dollar was inflated until the banking system collapsed, resulting in the Great Depression.
Earlier examples are every attempt at bimetalism.
a) you don’t trust the people behind the first one (or the country they’re based in, etc)
b) the underlying technology of the new coin is more appealing (tx/s, smart contracts, fees, etc)
That said, this is all Wild West and trusting any of these vendors to actually do what they say seems very risky.
If you’re 80% collateralized and 1% is fu money, there’s no defense against going to 78% collateralized if the code allows it.
"stablecoin loses peg" is an absolute proof that it wasn't a stablecoin any more than tranches of CDOs made high-quality bonds out of junk.
https://www.gemini.com/cryptopedia/gusd-stablecoin-gemini-do...
In the end, it's statistics (assuming that 10 out of 100 similarly sized debts default, the expected value for such a CDO is 90% of the face value of all its debts) and the assumption there will not be any major market issues such as a bank run, a pandemic or war that suddenly increase the risk of debts going bad - or in this case, the stablecoin running out of the liquidity it needs to maintain the peg.
CDOs and all forms of coins are essentially bets.
Stablecoins ought to be exceedingly boring and non-sexy. The key requirement ought to be "obvious, abundant and solid collateral", and nothing else should matter.
Etc., we have a classic bank run.
That's not maintaining its peg. That being said, it has been stable at that price for several days now, but let's see what the next few weeks hold.
> Tether charges a 0.1% fee for withdrawals up to a maximum of $1,000, which means Tether is redeemable at $0.99 for up to $1 million, and then $1 above $1million in terms of money in the bank.
> Tether charges a 0.1% fee for withdrawals up to a maximum of $1,000, which means Tether is redeemable at $0.99 for up to $1 million, and then $1 above $1million in terms of money in the bank.
Plus a $100k minimum to withdraw and a $150 fee for KYC.
There are more than enough red flags with Tether already !
The problem is that this coin won't give you $1 - assuming they're allowing redemption at all, it will give you .80c worth of coinbase's USDC and .20c worth of DEUS tokens. If you believe DEUS is going to crash, that means the value of DEI is 80c maximum through USDC.
Coinbase is of course is dire straits as its stock has plummeted from ~$360 (it's all time high) in early november to $130 in early may and is currently sitting at around $70, so while it isn't a coin, the future of USDC is tied to coinbase and the future of USDC is unknown especially if its parent company is floundering and stock is down to ~20% of its high in november and down ~73% YTD. I would describe their situation as "volatile".
DEUS had already lost more than 50% of its value between the beginning of April ($1100) and the beginning of May ($420 ha!), and its continuing on its way down ($200 currently).
So not sure how they can maintain a peg when 20% of that peg is in 'currency' that is in free fall, and the other 80% is tied to coinbase whose stock is in freefall this year. They never had any currency backing it at all - it was always coinbase's USDC and DEUS which is the 'luna' of DEI's 'terra'.
None. But I guess it sounds good to pretend to be doing something useful!
Has anyone here already done this analysis?
What I mean is when these cryptos have problems or are hacked, regular people are the ones who stand to lose everything in most cases.
You can believe that people are dumb for “falling for the scam” in the first place and deserve it, but if you really believe that then I feel sorry for you.
It’s pretty obvious and has been for quite some time that the ultimate goal here is for a central bank digital currency (CBDC), and stories like this as well as the UST collapse play right into that hand.
I guess what I’m saying is be careful what you wish for. A government/central bank issued digital currency will be far worse for privacy and security than any of these insignificant stablecoins. Imagine the government deciding when and where you are allowed to access your money or what you are allowed to spend it on and what items or stores you are allowed to shop for/in.
I feel like it is even possible that Wall Street is BEHIND the collapse of these stablecoins. They couldn’t pay for better press to help convince the public that a CBDC is necessary for the future. I suspect the CBDCs are already ready to go, but their last step is convincing the public they need one. The push for a cashless society has been going on for a number of years now and seems amplified lately.
If "regular people" are losing money, it's because "regular people" have been duped and regulators have been duped. It's sad they're losing money, but it's also entirely predictable.
But do you know what? After years of being told I'm just a jealous idiot who doesn't understand cryptocurrency or blockchains by the oh-so-smart 'investors' in this space, I'm going to enjoy a bit of shadenfreude here, whatever you think of that.
If the whole space collapses I will celebrate - hopefully fewer regular people will be duped in future.
I'm not really sure why you would say this. If anything, I would say that stories like these point much more strongly towards an entirely crypto-less future. Who is going to trust the crypto ecosystem as a whole after all these collapses?
> I feel like it is even possible that Wall Street is BEHIND the collapse of these stablecoins. They couldn’t pay for better press to help convince the public that a CBDC is necessary for the future. I suspect the CBDCs are already ready to go, but their last step is convincing the public they need one.
And now you're swerving into full-on conspiracy theory speculation territory. Get a grip, man!
Will blockchains fix these problems and mitigate the worst facets of human nature? Maybe, but I have no reason to believe they will right now and every argument that they will is rooted in a faith based statement about the inevitability of technilogical progress. A faith I don't subscribe to and therefore is unconvincing to me.
Not sure how that will work when they power the coin of the realm for malware, human exploitation, etc.
This is where I'm confused. What are the actual advantages that cryptocurrency provides that are superior to the Fed and similar central banks? So far, in practice, they seem to lack quite a lot, in terms of actual security. And, in terms of privacy, I don't understand how crypto provides any real-world advantages to most people that banks don't provide, unless you want to operate outside the law. What am I missing here?
Politicians can arbitrarily write blank checks to 'bail out' as many banks every year as they want, printing as much money as needed, but mostly that money goes to themselves and all their friends. They then lie about having done that, and if you press them on it they'll gaslight you to tell you that was all normal.
As a result, all the world's evil, all the world's scams, they all just kinda bubble upwards. People pay off the debt from one stupid scam by borrowing more money. That money eventually comes from idk someone's 401K fund, which is 'too big to fail', more money gets printed, a bailout happens, and off we all go again.
They shuffle the problems around the world so you don't see them. A problem in California would be a disaster, but if you can successfully shuffle the problem around the world to idk Syria, or uhh Ukraine this year isn't it, then you can simply drop a thermobaric weapon on them and then just carry on again.
As long as there's a lunatic somewhere with his grubby thieving little hand on the money printer, furiously cranking out new dollars or rubles or whatever, then there's always more money to pay off the lies.
Some people think it'd be nice if they could knock that shit off. It's kinda fucking up the world economy. Also some people may have perished.
A form of money that works for everyone should be (a) freely tradable online, (b) backed by a real-world asset such as energy, (c) fair and randomly distributed in terms of inflation, not given to one madman, (d) open source and fully auditable, (e) voted upon by all parties so no one majority can seize power.
We have this now, for this first time in our history, because of the Internet. It'd be nice to finally make use of it for something worthwhile.
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"How is that obvious, or maybe — to whom?
I think the whole CBDC idea as more like governments trying to pile on to the “blockchain” trend. We already have plenty of digitalization of our finances and it seems to be working ok, and while I’m sure there are some closet totalitarians who’d love to have a database of all transactions, I don’t think CBDC is the way they’re going to (try to) get there.
No. Central bank digital currencies need not be implemented with inefficient blockchain technology. Privacy is a big issue, but the solution to that is not a public blockchain. CBDC could be huge in actually disintermediating many banks.
Note that in some societies (eg Sweden) most transactions are already cashless, so the whole issue of privacy is orthogonal to CBDC.
I am generally pro-crypto, but I cheer when bad cryptocurrencies fail. And there are is a lot of bad right now...
Press F to pay respects.
In fact, along side USDC and BUSD, DAI is (or at least has been) trading at a slight premium the last couple of days.
Really? Isn't that the mechanism as intended? Why is anyone still selling to them at .64 if there's really an arb?
Deus Finance reacted by halting the redemption process
What is decentralized about those projects if a central team can turn off a major element of the protocol or is needed to perform open market operations as with UST?
FWIW, there doesn't appear to be any 'real world' exchange that handles DEI.
88,867,859.101631 DEI
https://ftmscan.com/token/0xDE12c7959E1a72bbe8a5f7A1dc8f8EeF...
>there doesn't appear to be any 'real world' exchange that handles DEI.
SpookySwap is the largest DEX on Fantom.