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 price of Etherium drops more than 1/3. Etherium dropped by half back in May 2021, but recovered. DAI could have crashed at that time if it faced a net outflow. It didn't, though.
The real question is what happens in the next recession.
> Can Tether survive a net outflow? Probably not. They don't have the collateral.
Luckily for Paolo & friends, their terms of service clearly state that they do not ever have to offer redemptions of USDT for dollars. Or even whatever IOUs and bits of string they may or may not have in reserve.
Out of all the stable coins its the most likely to withstand a "run" because they do not have to pay you if you ask. In fact if you're a US person, you're not eligible at all. If you're not a US person, it's at their discretion to deem you a "customer." Even if they do that, they can delay your withdrawal arbitrarily. Even if they don't do that, they can pay you out with whatever is actually in their backing. [1]
What would get destroyed in a run is every other crypto, as folks desperately try and exchange their USDT for something they can sell at a fiat-backed exchange. The Crypto-USDT pairs will quickly go no-bid, and as people rush for the narrow exits at fiat exchanges, prices will plummet.
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 bonds are junk but they visit the ratings agency and they're not downgrading. [1]
That same thing will happen if crypto has a major run. The exchanges already conveniently "go down" when Bitcoin dumps even now. Every single time, it's become a running joke. If we had a serious Tether blow-up or BTC move that would rock the boat, everything would get locked down and you'd have no way to buy back your Tether short for pennies on the dollar. When tril/billions are on the line, ain't no way you're getting your millions, especially in this unregulated wild west.
I don't get it. If everyone starts selling their Tether (because they're afraid of it not being able to maintain the peg), even if they can't sell the Tether back to the company, won't that crater the Tether price- possibly to zero- effectively killing the currency?
Like, this happens with currencies that are pegged to the dollar. The government that's supposed to be maintaining the peg starts to run out of dollars and starts limiting dollar redemptions. People turn to the black market to obtain dollars. The price of a dollar (in that currency) goes up. The value of the currency (again in dollars) drops. Now the peg is broken.
Tether the company could walk into the sunset with whatever they're holding- they can just honor "friends and family" withdrawals, but that doesn't prevent the coin going to zero for everyone else. It actually makes it even worse for the currency: suppose it's collateralized at 50%. Tether could honor withdrawals at 50 cents on the dollar, force every holder to take a 50% haircut. The price might settle to something less than $1 but more than $0 and continue on.
But if they abscond with the money instead, the currency will have even more reason to drop to nil.
History has shown that this does not happen in crypto. Even for coins like Bitconnect and Confido that plainly turned out to be scams, there were still buyers long after the news was revealed. People like to bet on dead cat bounces, or some kind of news after the fact that redeems the coin.
You guys seriously seem to think that run risk exists more in the cryptosphere than fiatland. With the exception of shitcoins, I think the risk is more of a run on fiat...
When you start using something like BTC as your unit of account and stop measuring your net worth with a shrinking fiat yardstick you'll realise this.
Fiat onramps will become less and less necessary. We'll hold everything in crypto and buy a bit of fiat from time to time when some backward merchant or hyperinflated backwater country requires it...
Risk is that a tether run causes all of crypto to collapse, not just USDT. How many actual dollars are in the system? Everything real has been exfiltrated through electricity bills, taxes and early adopters selling, the entire crypto economy is a hollow shell, leveraged on retail deposits.
Exactly. Ultimately cryptocurrencies are a negative-sum game in that they take in real money and just move that money around, while spending some on overhead.
In contrast, imagine investing in, say, a new fast-food franchise joint. They money you put in there is used to acquire assets that are used to produce goods that people will pay to consume. If it's a well-run business, the value of the outputs will be more than the value of the inputs, making it a positive-sum effort.
I always love looking at “market cap” for these things. As if every coin there could actually be sold for the price listed making it worth hypothetical billions.
Even a small cash out will cut the value to pieces.
I want to preface this by saying I don't own crypto and I think its often full of scams (eg. squid coin). But it has some real potential and isn't always as bad as it seems.
Tether is a real risk, I agree.
> Everything real has been exfiltrated through electricity bills, taxes and early adopters selling, the entire crypto economy is a hollow shell, leveraged on retail deposits.
Yeah, but that's not untrue for banks. Conceptually, a bank's job is to store money for depositors. That has a real cost, so theoretically you should have to pay for banking service. We know that banks make that money back from lending the money with interest (profiting off interest). This lending behavior is theoretically possible for individuals to do while skipping banks, but it is not practical at scale. So, basically depositors "pay" with opportunity cost - and since the world fiat currencies have inflation, this is essentially paying the devalued difference of money.
Crypto is similar... it costs real money to maintain the deposits - aka POW to secure the ledger. Instead of lenders' interest paying the cost, it is paid by deflation by depositor by more currency being circulated. Not too different than fiat-at-banks.
Crypto also is potentially more egalitarian since anyone can mine (at a small scale at least) to potentially make some small income, and certain complex financial actions can be done for "free-ish" in contracts (conditional swaps/lending, escrow, multi-sig transactions).
This is a possibility of course, but the second claim is something that would really need some proof. It's sure fun to say, but did you calculate it or do you just want it to be true?
> Dai is really a derivative of Etherium. Dai is backed by Etherium at 150%. So value in Dai is at risk if the price of Etherium drops more than 1/3. Etherium dropped by half back in May 2021, but recovered. DAI could have crashed at that time if it faced a net outflow. It didn't, though.
DAI didn't collapse because the drop in Ethereum value wasn't sudden. As the price falls, bots are allowed to liquidate your debt and keep the overall collateral ratio healthy.
150% is the minimum amount of collateral. If the USD value of your locked eth falls below that 150% threshold relative to your DAI denominated debt, a liquidator will pay off your debt and take your collateral.
So, a conservatively managed Maker CDP's regularly are collateralized to the tune of 300% if not more.
Tether can survive a net outflow because Tethers aren't redeemable in that way. If you show up with 1M USDT, they won't give you $1M USD.
It'll have to collapse on exchanges with more sellers than buyers, and to determine how that happens you need to actually understand what specific mechanism underlies how the peg is maintained.
I suspect Tether is all crypto-backed debt issuance which is denominated in real $USD which gives the counterparty incentive to maintain the peg on exchanges.
It'll likely fall apart when crypto falls apart and exchanges have already failed and those counterparties have already gone broke. Tether imploding will probably come after crypto is in the middle of a collapse and be more of a symptom and an accelerant. I doubt that Tether detonating will be the first sign of trouble.
> Tether can survive a net outflow because Tethers aren't redeemable in that way
I think it's worth distinguishing here between Tether the company and Tether the coin. Tether the company isn't automatically destroyed by a net outflow for the reasons you mention, but if they are indeed not fully backed, a net outflow could certainly break the peg and kill the coin as we know it.
Tether will collapse the same way that Squid Game Coin collapsed - extremely quickly.
Assuming a power distribution of coins across accounts, it's likely that 99% of tether accounts don't meet the 100,000 $USDT threshold to cash out. If you have a coin, where 99% of people/accounts aren't allowed to cash out that reeks of scam.
You can come up with tons of smoke to disguise it, and the whole "well you have to sell on another exchange, but prices there will be propped up due to 'arbitrage'" disguises and delays things nicely. But fundamentally it is propped up because people can't get out directly. There is no fair price discovery right now on Tether w.r.t. USD.
There is a very important aspect of opposite pressure.
If DAI price ever loses peg and goes to eg 0.90 anyone with open positions immediately starts buying a shitton of them and closing their position, because they just got a 10% discount on paying off their debt, sending the peg back.
If the price ever goes to 1.10, anyone with free capital around immediately starts minting new coins and floods the market with them, because they just got an instant 10% bump on the size of minted capital, sending the peg back.
> The real question is what happens in the next recession.
Well, there was a recession just last year and the stock market / BTC market went crazy.
The real question is what happens in the next market downturn (specifically the cryptocoin market downturn, since these "stablecoins" look like they're "stable" only because of assumptions underlying the cryptocoin markets). The cryptocoin markets don't necessarily match up with the general economy.
> Well, there was a recession just last year and the stock market / BTC market went crazy.
Ultimately this is because central banks are in the driver's seat for asset prices these days. It's been trending that way since the Greenspan Put in the 90's. The economic fundamentals matter, but not as much as the monetary policy backdrop; after all, if there's more cash chasing the same number of shares, it can't help but drive up stock prices. Similarly, low borrowing rates reduce the equity risk premium, drive up growth valuations, etc.
So really, the real test for crypto is when the monetary policy regime shifts. But to be honest with you, I don't see that happening. Maybe inflation finally forces the issue -- but then there's the fact that inflation will drive flight to alternative assets anyway.
Is Dai similar to Gemini's GUSD stable coin? It too is backed by Etherium. I think Gemini is paying 8 or 9% APR for holding. Where is that money coming from? Are they loaning out for a higher rate than that?
>Dai is a stablecoin cryptocurrency which aims to keep its value as close to one United States dollar (USD) as possible through an automated system of smart contracts on the Ethereum blockchain. [...] Dai is created from an overcollateralized loan[.]
If you are referring to Gemini Earn, they take your GUSD (or other currency) and take a spread then lend it to Genesis, who takes a spread and then lends it to big institutions. None of this is insured.
Some of it is likely them promoting the use of their stablecoin (paying out of pocket) while a lot of it probably comes from lending it out at higher rates. It is VERY easy to make more than 8-9% on stablecoins.
I thought dai would continuously be bought and used to liquidate positions as the price drops.
I.e. if someone mints 100 dai with 150 worth of ETH and the price of ETH drops then anyone can acquire dai and use that dai to access the collateral.
Through that mechanism the supply of dai should contract not the spot price. The bigger worry is that they allow minting Dai from USDC which could freeze their assets
If a recession is bad enough some will panic and pull it all out.
The reality is that crypto is not essential—it’s convenient and has potential but it’s value is backed by what? Other financial assets are backed by stuff like voting rights in a company or a physical asset.
Hence: people will dump crypto first.
I suppose Ethereum is different because it is backed by the functionality provided by the distributed Turing machine and all applications which rely on that. So the folks who wouldn’t pull their money out would be product owners who rely on the blockchain as a revenue stream.
My question would be who holds the price up high? Institutions or the broader public holdings of ETH?
Oxygen, heat, water, food. In that order. At least crypto is 'backed' by math. I expect the currency to dump will be related to who, and not what, is backing each asset class.
Correct, OP seems to be referring to single-collateral DAI aka SAI, which is deprecated. The current DAI is backed by a basket of assets.
IMO, the basket is too heavily weighted towards centralized stablecoins like USDC. I rotated some of my MKR holdings to Terra/Luna, which may have a better peg mechanism (although it is similar to Titan, which exploded).
But many coins seem to move in concert (just based on casual observation). Additionally diversifying in traditional equities has the benefit of being exposed to multiple industries - lets say farms and chip manufacturers - that don't depend on the same commodities as inputs and don't sell products into the same markets. Crypto doesn't have this property - besides requiring an input of energy, they're not involved in any kind of production at all. So what does diversifying even mean for that kind of asset? In a recession, why would there be any reason to think that ETH would behave differently than BTC?
If there's a run on a stable coin then so what? Systematically important financial institutions don't have very much exposure so there wouldn't be a significant impact on the real economy.
This is why I'm excited about Djed (https://djed.xyz). Input Output Global (creator of Cardano) has been researching stable coins and drafted a pretty extensive white paper on their solution (https://eprint.iacr.org/2021/1069.pdf). The white paper also include a mentions for how they will prevent bank runs.
One of the problems this class of mechanisms runs into, in the real world, is that--particularly in times of crisis--liquidity and prices are discontinuous.
Djed doesn't seem to be vulnerable to the former. (Reserve coin holders transparently give up liquidity for their yield. Though, as the paper admits, reserve coin holders are subject to run mechanics.) It would be to the latter.
I worry there target release date of 2042 seems extremely aggressive for them based on past performance and some of there research might not be relevant by the time it comes out.
The thing that is working slightly in the background to ensure net outflows don't happen is during time of downward volatility, stablecoins is what the prudent crypto investor is transitioning into and stores his wealth until they are ready to buy again.
Titan/Iron is (was?) an algorithmic undercollateralized stablecoin pair. Iron was the $1 one actually. This is not a meaningful comparison to fully collateralized coins like USDC or Tether.
They may have their own issues, but the certainly don't have Iron's
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%.
Is there a way to find out what was the market cap of those two? Searched coingecko and a few other places and came empty handed (they just list "price" but no historical market cap or outstanding coins)
Just a correction: there have been far more stable coin crashes, there was a time not so long ago when every week one of them crashed. There’s dozens, or more likely hundreds, of stablecoins out there.
DAI is backed by vaults of various crypto assets. Because there already was a crunch of DAI a few years ago, the USDC was added to the mix. A fiat collaterized stablecoin.
OP doesn't realize that DAI has sailed through falls in ETH value of far more than 50% (I think the worst was over 90% in 2018)
OP, despite his obvious great intelligence, doesn't realize that another, stronger question about DAI would be the potentially-worrying linkage to USDC etc to provide stability (though critics should note that even before that stability module, PSM, was introduced it had never deviated by more than 1%, AFAIK)
Seeing that this is, despite all those errors and omissions, the top comment here, is extremely dispiriting
You mean what happens when economy does well enough that it starts overheating which forces an exit from the liquidity trap and turns real interest rates positive? I guess we'll find out soon.
> To address risks to stablecoin users and guard against stablecoin runs, legislation should require stablecoin issuers to be insured depository institutions, which are subject to appropriate supervision and regulation, at the depository institution and the holding company level.
> To address concerns about payment system risk, in addition to the requirements for stablecoin issuers, legislation should require custodial wallet providers4 to be subject to appropriate federal oversight. Congress should also provide the federal supervisor of a stablecoin issuer with the authority to require any entity that performs activities that are critical to the functioning of the stablecoin arrangement to meet appropriate risk-management standards.
> To address additional concerns about systemic risk and concentration of economic power, legislation should require stablecoin issuers to comply with activities restrictions that limit affiliation with commercial entities. Supervisors should have authority to implement standards to promote interoperability among stablecoins. In addition, Congress may wish to consider other standards for custodial wallet providers, such as limits on affiliation with commercial entities or on use of users’ transaction data.
AKA StableCoin operators should be banks. (Stable Coins will be bank notes)?
What do you call an institution that takes deposits and lends them out, such as by buying ""commercial paper"" that Tether repeatedly talks about? A bank. (Or possibly a money market fund)
You call it a 0% interest money market fund. You do not call it a bank. A bank does something entirely different: create 'bank loans'. A non-bank does not have the ability to create bank loans.
Tether was invented to provide bitfinex with banking services after the banks refused to deal with them. Not super surprising that regulators are treating this banking replacement as a bank.
Interesting to read this with an eye on the authors' mindset. Their understanding of stablecoins seems largely centered on Tether (and to a lesser extent, BUSD/USDC). A lot of their understanding is incorrect when applied to algorithmic stablecoins like Dai, eg. there is no central issuing authority; Dai is minted in exchange for Ethereum (and other cryptocurrencies), not fiat currencies; the effect of a run on Dai is unlikely to spill over into the mainstream financial system; a "custodial wallet" in DeFi is not a company but just an Ethereum address, i.e. a hash of a public/private keypair.
Overall I get the sense that the government is still people/organization centric and cannot wrap its head around a future where reality is determined by computer code and people are bit players in the script.
"""Stablecoins that are purportedly convertible for an underlying fiat currency are distinct from a smaller subset of stablecoin arrangements that use other means to attempt to stabilize the price of the instrument (sometimes referred to as “synthetic” or “algorithmic” stablecoins) or are convertible for other assets. Because of their more widespread adoption, this discussion focuses on stablecoins that are convertible for fiat currency."""
Ah, interesting. Dai is mentioned several times within the body of the report, though, so it's implied that it's covered within the scope of the report.
I'm sure that the distinction will be lost on whatever press cycle or legislative output this report generates.
Perhaps I'm oversimplifying your comment, but it seems like a very good thing that the government continues to be people/organization centric and doesn't embrace a future where "reality is determined by computer code and people are a bit players". We should hope our democratic institutions continue to operate this way.
You have a valid point, and to some extent government should continue to be people centric. But there is value in replacing a some of the system in place by code.
IMO, a lot of ambiguous laws and polices create different outcomes for similar inputs, and that should not be the case of legal systems and institutions. Money is perhaps the first of the government aspects to be easier to express in decentralized code, but I won't be surprised to see this as only the beginning of a trend. Think autonomous cars replacing drivers and other interesting similar developments.
I'm value-neutral in this comment thread, I'm just describing a.) how things are and b.) how the authors of this report are making assumptions about how things are. I can see plusses and minuses for both people-centric and code-centric approaches.
I get that it's pretty natural that people would consider it a bad thing for people to hand over power to computer code. It makes perfect sense if you consider yourself not as a person but as a collection of electrical impulses floating around in your brain, though. Computers are the same thing, they just transmit those electrical impulses millions of times faster.
One is that they broke down stablecoins into the following activities:
* Governance
* Management of Reserve Assets
* Custody of Reserve Assets
* Settlement
* Distribution
Just because one, more, or all of those functions are managed by smart contracts does not mean that the others cannot be regulated. Regulation may be the requirement to have regular contract audits for example and, in the case of Dai, the Maker Foundation would be responsible for adhering to those regulations.
Second, I don't think the writers of this paper perceive nearly as large of a risk from algorithmic stablecoins as they do institutions which claim to maintain asset backing in the normal financial system. The former have the transparency of the chain as a backing, and that transparency makes the currency peg safer. The latter have no transparency and regularly seek to obscure, which makes them extremely dangerous as they grow in scope.
DAI has a market cap of ~$6.5b and the transactions happen on chain. USDT has a market cap of ~$70.3b and has 0 transparency. It is clear where regulation should be focused.
> a future where reality is determined by computer code and people are but players in the script.
Corporations are "things" in a legal sense - but they're still managed by people, created by people and owned by people. DEFI contracts and orgs are still made by people, and sometimes also managed by people. You can probably be held liable and tied to your misbehaving contract.
The 9th Circuit ruled that source code is protected under the First Amendment in the Bernstein case, which legalized the export of cryptography. If you just publish the contract and don't have any ongoing administration, I would think that gives you a pretty strong legal defense.
> Overall I get the sense that the government is still people/organization centric and cannot wrap its head around a future where reality is determined by computer code and people are bit players in the script.
Conversely, people in government tend to view crypto folks as senselessly computer-centric and unable to view macroeconomics as the result of human interaction.
There is no such thing as value without exchange. That's a definitional thing. Coins themselves are just numbers.
Exchange value only matters when there's trade. My view of crypto is "wrong in the right direction" because it currently addresses macroeconomic coordination via mimicry of traditional finance. The technologies it uses to achieve decentralized coordination do matter, though. Automated consensus on a large scale is meaningful. But it needs a post-trade, natural-systems view of the world to really make sense.
DAI is not considered an algorithmic stablecoin, but an asset backed stablecoin. Algorithmic stablecoins like FEI do not seem to work as well as asset backed stablecoins.
> a future where reality is determined by computer code and people are bit players in the script.
As opposed to a reality determined by physics? Perhaps you're referencing AI overlords? I suggest that you may not understand the purpose of states. Even algorithms are the expressions of people.
Perhaps you can explain what you meant in a way that I'll more easily understand?
It is the government's job to translate abstract concepts to be people centric, simply because the world itself is people centric. Digital bits have no power unless they is a shared recognition of that power, same as a written contract, a book of laws, an election or anything else.
Except it doesn't. On Ethereum and other blockchains, that computer code runs everywhere, and every IP address is a gossip protocol that may have originated an undetermined number of hops backwards.
The lifecycle of an autonomous program (colloquially called smart contract) is that it is deployed by an address of a human being or that human being's server, and then the address' first transaction to the autonomous program is to delete the address' administrative capabilities of that program. Autonomous programs live on every validating node of that blockchain, and those validating nodes have no knowledge of the behavior of those programs. The deployment feature publishes the code on all validating nodes, no different than any other transaction. All future behavior of the autonomous program comes from individual users who do not control it.
So for what grandparent poster was referring to, stablecoins collateralized by digital assets, all the collateral is provided by users and all the stablecoins issued were caused by users providing collateral. Those users clearly do not run the autonomous program, no different than a depositor at a bank is not responsible for the bank when they ask for a loan from the bank. There is nobody to sanction, and there is no way to disable the autonomous program that accepts collateral and issues collateralized stablecoin loans.
Also, within EVMs (a type of development platform, growing category of blockchains), the users do not have a record of an IP address (although the node they connect to can record it, to mitigate that the user can run a relaying node from their personal computer. relaying nodes forward to validating nodes. no nodes in an EVM have knowledge of other nodes IP address and no nodes are even aware of which node saw a transaction first). And regarding the tracing of their onchain address, a user can provide collateral from a virgin address funded by other autonomous programs like Tornado which sufficiently mix funds. The programs and the regulators are not capable of factoring in our opinion about that.
This is specifically referring to non-algorithmic stablecoins.
"Stablecoins that are purportedly convertible for an underlying fiat currency are distinct from a smaller subset of stablecoin arrangements that use other means to attempt to stabilize the price of the instrument (sometimes referred to as “synthetic” or “algorithmic” stablecoins) or are convertible for other assets. Because of their more widespread adoption, this discussion focuses on stablecoins that are convertible for fiat currency."
This is a very good point. The risk profile of centralized stablecoins like Tether and USDC is way, way different from something algorithmically controlled like DAI.
This shouldn’t be surprising. Permissionless systems often innovate orders of magnitude faster than permissioned systems.
So many of these threads are filled with comments of the form “well why do we actually need a blockchain for that? Can’t we just do the thing with centralized databases?”
But the point is after 50 years the centralized databases haven’t built those systems. Smart contracts, and instant finality transfers, and a public identity tied to private keys could all exist on ACH. Yet they only happened when blockchains came along.
Blockchains aren’t a technical innovation, they’re a sociological innovation. They remove the responsibility of a centralized administrator if shit hits the fan. Visa won’t allow smart contracts in its network, because it has too much to lose. In Ethereum if the DAO breaks there’s no one to sue. Result smart contracts exist in Ethereum but not Visa.
Same story holds true with the Internet. Do we really need a decentralized network designed to withstand a nuclear war? Surely a single telco network could just as easily serve up websites. Except it never did. The Internet won because it was permissionless and therefore innovation occurred much more rapidly.
For a stable coin to actually be worth $1, there has to always be someone ready to give me $1 for 1 stable coin. I see no guarantee of that over time for DAI. No different than other stable coins.
> Legislation should address the risks outlined in this report by establishing an appropriate federal prudential framework for payment stablecoin arrangements.29 In particular, with respect to stablecoin issuers, legislation should provide for supervision on a consolidated basis; prudential standards; and, potentially, access to appropriate components of the federal safety net. To accomplish these objectives, legislation should limit stablecoin issuance, and related activities of redemption and maintenance of reserve assets, to entities that are insured depository institutions.
> The standards to which these [insured depository] institutions are subject include capital and liquidity standards that are designed to address safety and soundness and, for the largest banking organizations, also include enhanced prudential standards that address financial stability concerns. Under the Federal Deposit Insurance Act, insured depository institutions also are subject to a special resolution regime that enables the orderly resolution of failed insured depository institutions by, among other mechanisms, protecting customers’ insured deposits, and according priority to deposit claims over those of general creditors, and limits any potential negative systemic impacts in the event of bank failure.
I suspect that we're going to very quickly (by legislative standards) find out which stablecoins are backed by real currency and which are "backed by real currency." I'm betting short-term there'll be some issues with liquidity, especially on smaller exchanges. But longer-term, having the gaps filled in by stabler stablecoins can't hurt.
I'm not so sure. There's a type of person who would deem the US Government having a privileged role in coin governance as a legitimacy-reducing factor for that coin, and that type of person is over-represented in crypto circles.
Also there's a possibility that whatever coins decide to comply end up spending their reserves on humans-in-the-loop to ensure compliance, thereby giving an advantage to the noncompliant coins.
Something analogous to this happened where I'm from: We voted to legalize recreational cannabis, but most people still use the black market because regulatory burdens put the legal shops at too great of a disadvantage to be competitive.
Historically, we've had major bubbles and crashes in all kinds of financial markets, from stocks and bonds, to property and dotcom stocks. Is there any reason to believe that cryptocurrency is more stable and we won't have a catastrophic crash?
In theory, cryptocurrency should be more resilient through greater transparency; anyone can inspect a smart contract and see how it works, what collateral it holds.
In practice, non-algorithmic stablecoins like Tether have very little transparency. I hope in the long run the market will gravitate towards algorithmic stablecoins like DAI.
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 where you can't trust the courts to somewhat reasonably protect your money, then I think we have worse problems. Especially since you wouldn't have any physical protection from the legal system.
I feel like if you look at the last 20 years and don't fall on knees at the Church of Fiat, then you have no idea what you're talking about. Crypto doesn't solve any urgent problems and is contributing to climate change as a bonus. Who is making use of crypto right now except crypto speculators and money launderers?
"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 actually really weird we can't settle payments in seconds already.
All traditional methods use gatekeepers that control the flow of money. If you can't do what you want with your money is it really yours? The Trustless nature of BTC involves a seeming waste of energy, but you get a lot in return (like ownership of your money).
> The Trustless nature of BTC involves a seeming waste of energy, but you get a lot in return (like ownership of your money).
You get that too with proof of stake. Bitcoin really only has the branding of being the first mover, and as such as a strong chance of remaining the digital gold (not a digital currency that’s fast and easy to transact)
Sure, but my point was not really about trust. My point is that speed is easier to achieve without Blockchain than with it. It's strange that the centralised solution is slower.
I’m under the impression that we are starting with decentralized ledgers with traditional banking. The problem solved by blockchain is the synchronization/balance of payments between the ledgers by just making everyone track the same unified ledger.
From a Coinbase exec: "Tether is a ticking time bomb. Whenever it goes off, it'll be a 70-80% market correction for 2-3 years"
Crypto continues to help nobody and achieve nothing in the real world. This administration has been criminally slow in shutting it down, lobby is strong.
No there won’t be a big long term correction from Tether because there are dozens of other stable coins now for people to temporarily sell into. There’s also the ability to short crypto and buy puts on crypto. All of that provides ways for speculators, investors, middle class savers, and early technology adopters to stay in the game.
You’re like a doomsday predictor that will never see a doomsday happen.
No real value? The AAVE crypto platform alone already holds more value ($23B) than the entire market cap of Ecuador’s stock market ($11B). The AAVE platform is literally more valuable than a country.
AAVE is just one of many applications built on the Ethereum network. It speaks nothing of Uniswap, Maker, Yearn, Balancer, USDC, Compound, and many others.
The Quito stock exchange consists of over 300 companies in farming, forestry, power generation, medical care etc. They have physical and human capital and earn profits from their paying customers, whether or not people want to buy stocks which offer them a share of this profit
The AAVE platform consists of individuals lending recently printed tokens to each other to buy other recently printed tokens in what is essentially a zero sum game with no connection to the real world unless they can convince outsiders to pay even more money for some of the tokens.
The fact the latter is notionally valued at higher than the former pretty much underlines the OP's point about the lack of "real value" underpinning the whole thing...
Market psychology is hard to predict. Going from one coin to another in a state of crisis is like people dumping their X stocks to buy Y stocks, because X is crashing. Or selling their housing real-estate portfolio to buy some other class of real-estate.
Casual "investors" sell their portfolios for hard cash when markets start crashing, which in turn induces others to sell. And if you're sufficiently leveraged, you're forced to sell - no mater how much belief you have in your investments.
> Crypto continues to help nobody and achieve nothing in the real world
Crypto posts on HN seem to be a hotbed for these sorts of hyperbolic, wholly unsubstantiated and objectively false comments. I wish i understood what the motivation was for these sorts of replies.
Please show me a real world use case that's better than the status quo and is not speculation or gambling. It's been over 12 years and I'm still looking.
Cryptoclowns can't use the it's too early excuse anymore.
But they choose to listen to a handful of man children running around promising world peace via a distributed database.
> Crypto continues to help nobody and achieve nothing in the real world
It's kind of surprising how little progress has been made.
It is absolutely possible to use privacy-respecting low-fee tokens to purchase ebooks, purchase "no advertisement" article reads, or subscribe to periodicals.
Even something like Taler is better than Visa and Mastercard. I would love to know why lwn.net, ars, or the register don't try. I would absolutely pay $0.25-$2.00 per read for the ~50 articles I read per month on these websites.
Micropayments for tech readers seems like a good place to start. Tech readers use ad blockers, but are also willing to try new tools with janky UX.
I believe the case for micropayments was shot down back in 2002 when Scott McCloud first proposed it as an option for webcomic authors in his comic post "I Can't Stop Thinking" (the original no longer exists at his site, but various rebuttals [1] are still around)
Basically, people hate microtransactions. They hate the very idea of paying per article. They don't want to do it.
Ars, among many other sites, offers yearly subscriptions with various benefits (such as no ads) and that business model has worked well for them for many years.
I run a globally, distributed company funded solely operated based on smart contracts and cryptocurrency/equity. We got 50 investors from around the world. Most of hackernews is exclusively focused on the United States, which is a very limited point of view. Try travel and see other parts of the world and you might understand it better.
"70-80% market correction for 2-3 years" is a contradiction. A correction brings asset prices back in line with their true values. That a coinbase exec thinks the cryptocurrency is 3-5x overvalued is wild, but if that is true I don't see any particular reason to expect the prices to go back within a few years.
Readit News
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 price of Etherium drops more than 1/3. Etherium dropped by half back in May 2021, but recovered. DAI could have crashed at that time if it faced a net outflow. It didn't, though.
The real question is what happens in the next recession.
Luckily for Paolo & friends, their terms of service clearly state that they do not ever have to offer redemptions of USDT for dollars. Or even whatever IOUs and bits of string they may or may not have in reserve.
Out of all the stable coins its the most likely to withstand a "run" because they do not have to pay you if you ask. In fact if you're a US person, you're not eligible at all. If you're not a US person, it's at their discretion to deem you a "customer." Even if they do that, they can delay your withdrawal arbitrarily. Even if they don't do that, they can pay you out with whatever is actually in their backing. [1]
What would get destroyed in a run is every other crypto, as folks desperately try and exchange their USDT for something they can sell at a fiat-backed exchange. The Crypto-USDT pairs will quickly go no-bid, and as people rush for the narrow exits at fiat exchanges, prices will plummet.
[1] tether.to/legal
That same thing will happen if crypto has a major run. The exchanges already conveniently "go down" when Bitcoin dumps even now. Every single time, it's become a running joke. If we had a serious Tether blow-up or BTC move that would rock the boat, everything would get locked down and you'd have no way to buy back your Tether short for pennies on the dollar. When tril/billions are on the line, ain't no way you're getting your millions, especially in this unregulated wild west.
[1] https://www.youtube.com/watch?v=9xZx1lf2tvs
Like, this happens with currencies that are pegged to the dollar. The government that's supposed to be maintaining the peg starts to run out of dollars and starts limiting dollar redemptions. People turn to the black market to obtain dollars. The price of a dollar (in that currency) goes up. The value of the currency (again in dollars) drops. Now the peg is broken.
Tether the company could walk into the sunset with whatever they're holding- they can just honor "friends and family" withdrawals, but that doesn't prevent the coin going to zero for everyone else. It actually makes it even worse for the currency: suppose it's collateralized at 50%. Tether could honor withdrawals at 50 cents on the dollar, force every holder to take a 50% haircut. The price might settle to something less than $1 but more than $0 and continue on.
But if they abscond with the money instead, the currency will have even more reason to drop to nil.
History has shown that this does not happen in crypto. Even for coins like Bitconnect and Confido that plainly turned out to be scams, there were still buyers long after the news was revealed. People like to bet on dead cat bounces, or some kind of news after the fact that redeems the coin.
I think what you mean is the Crypto-USDT pairs will go no offer (i.e. no USDT bid) as people turn to dump crypto against a fiat leg.
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When you start using something like BTC as your unit of account and stop measuring your net worth with a shrinking fiat yardstick you'll realise this.
Fiat onramps will become less and less necessary. We'll hold everything in crypto and buy a bit of fiat from time to time when some backward merchant or hyperinflated backwater country requires it...
In contrast, imagine investing in, say, a new fast-food franchise joint. They money you put in there is used to acquire assets that are used to produce goods that people will pay to consume. If it's a well-run business, the value of the outputs will be more than the value of the inputs, making it a positive-sum effort.
Even a small cash out will cut the value to pieces.
Tether is a real risk, I agree.
> Everything real has been exfiltrated through electricity bills, taxes and early adopters selling, the entire crypto economy is a hollow shell, leveraged on retail deposits.
Yeah, but that's not untrue for banks. Conceptually, a bank's job is to store money for depositors. That has a real cost, so theoretically you should have to pay for banking service. We know that banks make that money back from lending the money with interest (profiting off interest). This lending behavior is theoretically possible for individuals to do while skipping banks, but it is not practical at scale. So, basically depositors "pay" with opportunity cost - and since the world fiat currencies have inflation, this is essentially paying the devalued difference of money.
Crypto is similar... it costs real money to maintain the deposits - aka POW to secure the ledger. Instead of lenders' interest paying the cost, it is paid by deflation by depositor by more currency being circulated. Not too different than fiat-at-banks.
Crypto also is potentially more egalitarian since anyone can mine (at a small scale at least) to potentially make some small income, and certain complex financial actions can be done for "free-ish" in contracts (conditional swaps/lending, escrow, multi-sig transactions).
DAI didn't collapse because the drop in Ethereum value wasn't sudden. As the price falls, bots are allowed to liquidate your debt and keep the overall collateral ratio healthy.
So, a conservatively managed Maker CDP's regularly are collateralized to the tune of 300% if not more.
https://daistats.com/
It'll have to collapse on exchanges with more sellers than buyers, and to determine how that happens you need to actually understand what specific mechanism underlies how the peg is maintained.
I suspect Tether is all crypto-backed debt issuance which is denominated in real $USD which gives the counterparty incentive to maintain the peg on exchanges.
It'll likely fall apart when crypto falls apart and exchanges have already failed and those counterparties have already gone broke. Tether imploding will probably come after crypto is in the middle of a collapse and be more of a symptom and an accelerant. I doubt that Tether detonating will be the first sign of trouble.
I think it's worth distinguishing here between Tether the company and Tether the coin. Tether the company isn't automatically destroyed by a net outflow for the reasons you mention, but if they are indeed not fully backed, a net outflow could certainly break the peg and kill the coin as we know it.
Assuming a power distribution of coins across accounts, it's likely that 99% of tether accounts don't meet the 100,000 $USDT threshold to cash out. If you have a coin, where 99% of people/accounts aren't allowed to cash out that reeks of scam.
You can come up with tons of smoke to disguise it, and the whole "well you have to sell on another exchange, but prices there will be propped up due to 'arbitrage'" disguises and delays things nicely. But fundamentally it is propped up because people can't get out directly. There is no fair price discovery right now on Tether w.r.t. USD.
If DAI price ever loses peg and goes to eg 0.90 anyone with open positions immediately starts buying a shitton of them and closing their position, because they just got a 10% discount on paying off their debt, sending the peg back.
If the price ever goes to 1.10, anyone with free capital around immediately starts minting new coins and floods the market with them, because they just got an instant 10% bump on the size of minted capital, sending the peg back.
If it starts falling to $.99 then $.98 then $.95 then $.90.. you have to decide if it’s really a dip or the end.
Well, there was a recession just last year and the stock market / BTC market went crazy.
The real question is what happens in the next market downturn (specifically the cryptocoin market downturn, since these "stablecoins" look like they're "stable" only because of assumptions underlying the cryptocoin markets). The cryptocoin markets don't necessarily match up with the general economy.
Ultimately this is because central banks are in the driver's seat for asset prices these days. It's been trending that way since the Greenspan Put in the 90's. The economic fundamentals matter, but not as much as the monetary policy backdrop; after all, if there's more cash chasing the same number of shares, it can't help but drive up stock prices. Similarly, low borrowing rates reduce the equity risk premium, drive up growth valuations, etc.
So really, the real test for crypto is when the monetary policy regime shifts. But to be honest with you, I don't see that happening. Maybe inflation finally forces the issue -- but then there's the fact that inflation will drive flight to alternative assets anyway.
Probably because the govt/Fed is printing more money.
It's happened a few times before and they're fine
>Dai is a stablecoin cryptocurrency which aims to keep its value as close to one United States dollar (USD) as possible through an automated system of smart contracts on the Ethereum blockchain. [...] Dai is created from an overcollateralized loan[.]
https://support.gemini.com/hc/en-us/articles/360056367771-Ar...
I.e. if someone mints 100 dai with 150 worth of ETH and the price of ETH drops then anyone can acquire dai and use that dai to access the collateral.
Through that mechanism the supply of dai should contract not the spot price. The bigger worry is that they allow minting Dai from USDC which could freeze their assets
The reality is that crypto is not essential—it’s convenient and has potential but it’s value is backed by what? Other financial assets are backed by stuff like voting rights in a company or a physical asset.
Hence: people will dump crypto first.
I suppose Ethereum is different because it is backed by the functionality provided by the distributed Turing machine and all applications which rely on that. So the folks who wouldn’t pull their money out would be product owners who rely on the blockchain as a revenue stream.
My question would be who holds the price up high? Institutions or the broader public holdings of ETH?
Oxygen, heat, water, food. In that order. At least crypto is 'backed' by math. I expect the currency to dump will be related to who, and not what, is backing each asset class.
IMO, the basket is too heavily weighted towards centralized stablecoins like USDC. I rotated some of my MKR holdings to Terra/Luna, which may have a better peg mechanism (although it is similar to Titan, which exploded).
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Djed doesn't seem to be vulnerable to the former. (Reserve coin holders transparently give up liquidity for their yield. Though, as the paper admits, reserve coin holders are subject to run mechanics.) It would be to the latter.
Still, fascinating stuff.
I worry there target release date of 2042 seems extremely aggressive for them based on past performance and some of there research might not be relevant by the time it comes out.
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A massive inflow of capital to crypto, bitcoin in particular.
They may have their own issues, but the certainly don't have Iron's
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...
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https://news.ycombinator.com/item?id=9988438
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I kind of preferred the algorithmix approach !
What you want is a thick equity cushion.
Dai is now backed by a lot more tokens than just Ether, and 150% is really the minimum to avoid liquidation (145% now).
https://daistats.com
OP doesn't realize that DAI has sailed through falls in ETH value of far more than 50% (I think the worst was over 90% in 2018)
OP, despite his obvious great intelligence, doesn't realize that another, stronger question about DAI would be the potentially-worrying linkage to USDC etc to provide stability (though critics should note that even before that stability module, PSM, was introduced it had never deviated by more than 1%, AFAIK)
Seeing that this is, despite all those errors and omissions, the top comment here, is extremely dispiriting
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> To address concerns about payment system risk, in addition to the requirements for stablecoin issuers, legislation should require custodial wallet providers4 to be subject to appropriate federal oversight. Congress should also provide the federal supervisor of a stablecoin issuer with the authority to require any entity that performs activities that are critical to the functioning of the stablecoin arrangement to meet appropriate risk-management standards.
> To address additional concerns about systemic risk and concentration of economic power, legislation should require stablecoin issuers to comply with activities restrictions that limit affiliation with commercial entities. Supervisors should have authority to implement standards to promote interoperability among stablecoins. In addition, Congress may wish to consider other standards for custodial wallet providers, such as limits on affiliation with commercial entities or on use of users’ transaction data.
AKA StableCoin operators should be banks. (Stable Coins will be bank notes)?
https://en.wikipedia.org/wiki/Wildcat_banking
Spoiler alert: there's a reason we had 150 years without wildcat banks.
https://www.alt-m.org/2021/07/06/the-fable-of-the-cats/
What do you call an institution that takes deposits and lends them out, such as by buying ""commercial paper"" that Tether repeatedly talks about? A bank. (Or possibly a money market fund)
> Stable Coins will be bank notes.
Exactly.
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Overall I get the sense that the government is still people/organization centric and cannot wrap its head around a future where reality is determined by computer code and people are bit players in the script.
"""Stablecoins that are purportedly convertible for an underlying fiat currency are distinct from a smaller subset of stablecoin arrangements that use other means to attempt to stabilize the price of the instrument (sometimes referred to as “synthetic” or “algorithmic” stablecoins) or are convertible for other assets. Because of their more widespread adoption, this discussion focuses on stablecoins that are convertible for fiat currency."""
I'm sure that the distinction will be lost on whatever press cycle or legislative output this report generates.
IMO, a lot of ambiguous laws and polices create different outcomes for similar inputs, and that should not be the case of legal systems and institutions. Money is perhaps the first of the government aspects to be easier to express in decentralized code, but I won't be surprised to see this as only the beginning of a trend. Think autonomous cars replacing drivers and other interesting similar developments.
I get that it's pretty natural that people would consider it a bad thing for people to hand over power to computer code. It makes perfect sense if you consider yourself not as a person but as a collection of electrical impulses floating around in your brain, though. Computers are the same thing, they just transmit those electrical impulses millions of times faster.
One is that they broke down stablecoins into the following activities:
* Governance
* Management of Reserve Assets
* Custody of Reserve Assets
* Settlement
* Distribution
Just because one, more, or all of those functions are managed by smart contracts does not mean that the others cannot be regulated. Regulation may be the requirement to have regular contract audits for example and, in the case of Dai, the Maker Foundation would be responsible for adhering to those regulations.
Second, I don't think the writers of this paper perceive nearly as large of a risk from algorithmic stablecoins as they do institutions which claim to maintain asset backing in the normal financial system. The former have the transparency of the chain as a backing, and that transparency makes the currency peg safer. The latter have no transparency and regularly seek to obscure, which makes them extremely dangerous as they grow in scope.
DAI has a market cap of ~$6.5b and the transactions happen on chain. USDT has a market cap of ~$70.3b and has 0 transparency. It is clear where regulation should be focused.
Its not fiat-stable, which is probably their focus. fiat-stable coins are basically crypto bank notes:
https://en.wikipedia.org/wiki/Banknote
Also,
> a future where reality is determined by computer code and people are but players in the script.
Corporations are "things" in a legal sense - but they're still managed by people, created by people and owned by people. DEFI contracts and orgs are still made by people, and sometimes also managed by people. You can probably be held liable and tied to your misbehaving contract.
Conversely, people in government tend to view crypto folks as senselessly computer-centric and unable to view macroeconomics as the result of human interaction.
There is no such thing as value without exchange. That's a definitional thing. Coins themselves are just numbers.
The internet and computers, despite being very complicated tools, are still just made by humans to serve humans.
I suggest you ask yourself which humans want the outcome you described and why.
As opposed to a reality determined by physics? Perhaps you're referencing AI overlords? I suggest that you may not understand the purpose of states. Even algorithms are the expressions of people.
Perhaps you can explain what you meant in a way that I'll more easily understand?
When you put it like that, it does sound a bit creepy.
So for what grandparent poster was referring to, stablecoins collateralized by digital assets, all the collateral is provided by users and all the stablecoins issued were caused by users providing collateral. Those users clearly do not run the autonomous program, no different than a depositor at a bank is not responsible for the bank when they ask for a loan from the bank. There is nobody to sanction, and there is no way to disable the autonomous program that accepts collateral and issues collateralized stablecoin loans.
Also, within EVMs (a type of development platform, growing category of blockchains), the users do not have a record of an IP address (although the node they connect to can record it, to mitigate that the user can run a relaying node from their personal computer. relaying nodes forward to validating nodes. no nodes in an EVM have knowledge of other nodes IP address and no nodes are even aware of which node saw a transaction first). And regarding the tracing of their onchain address, a user can provide collateral from a virgin address funded by other autonomous programs like Tornado which sufficiently mix funds. The programs and the regulators are not capable of factoring in our opinion about that.
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"Stablecoins that are purportedly convertible for an underlying fiat currency are distinct from a smaller subset of stablecoin arrangements that use other means to attempt to stabilize the price of the instrument (sometimes referred to as “synthetic” or “algorithmic” stablecoins) or are convertible for other assets. Because of their more widespread adoption, this discussion focuses on stablecoins that are convertible for fiat currency."
So many of these threads are filled with comments of the form “well why do we actually need a blockchain for that? Can’t we just do the thing with centralized databases?”
But the point is after 50 years the centralized databases haven’t built those systems. Smart contracts, and instant finality transfers, and a public identity tied to private keys could all exist on ACH. Yet they only happened when blockchains came along.
Blockchains aren’t a technical innovation, they’re a sociological innovation. They remove the responsibility of a centralized administrator if shit hits the fan. Visa won’t allow smart contracts in its network, because it has too much to lose. In Ethereum if the DAO breaks there’s no one to sue. Result smart contracts exist in Ethereum but not Visa.
Same story holds true with the Internet. Do we really need a decentralized network designed to withstand a nuclear war? Surely a single telco network could just as easily serve up websites. Except it never did. The Internet won because it was permissionless and therefore innovation occurred much more rapidly.
For a stable coin to actually be worth $1, there has to always be someone ready to give me $1 for 1 stable coin. I see no guarantee of that over time for DAI. No different than other stable coins.
> Legislation should address the risks outlined in this report by establishing an appropriate federal prudential framework for payment stablecoin arrangements.29 In particular, with respect to stablecoin issuers, legislation should provide for supervision on a consolidated basis; prudential standards; and, potentially, access to appropriate components of the federal safety net. To accomplish these objectives, legislation should limit stablecoin issuance, and related activities of redemption and maintenance of reserve assets, to entities that are insured depository institutions.
> The standards to which these [insured depository] institutions are subject include capital and liquidity standards that are designed to address safety and soundness and, for the largest banking organizations, also include enhanced prudential standards that address financial stability concerns. Under the Federal Deposit Insurance Act, insured depository institutions also are subject to a special resolution regime that enables the orderly resolution of failed insured depository institutions by, among other mechanisms, protecting customers’ insured deposits, and according priority to deposit claims over those of general creditors, and limits any potential negative systemic impacts in the event of bank failure.
I suspect that we're going to very quickly (by legislative standards) find out which stablecoins are backed by real currency and which are "backed by real currency." I'm betting short-term there'll be some issues with liquidity, especially on smaller exchanges. But longer-term, having the gaps filled in by stabler stablecoins can't hurt.
Also there's a possibility that whatever coins decide to comply end up spending their reserves on humans-in-the-loop to ensure compliance, thereby giving an advantage to the noncompliant coins.
Something analogous to this happened where I'm from: We voted to legalize recreational cannabis, but most people still use the black market because regulatory burdens put the legal shops at too great of a disadvantage to be competitive.
Where the hell could it go if it gets an official stamp of approval by the US government?
In practice, non-algorithmic stablecoins like Tether have very little transparency. I hope in the long run the market will gravitate towards algorithmic stablecoins like DAI.
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 where you can't trust the courts to somewhat reasonably protect your money, then I think we have worse problems. Especially since you wouldn't have any physical protection from the legal system.
And after ten years, there isn't one actual application of cryptocurrencies except for speculation and crime.
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 actually really weird we can't settle payments in seconds already.
You get that too with proof of stake. Bitcoin really only has the branding of being the first mover, and as such as a strong chance of remaining the digital gold (not a digital currency that’s fast and easy to transact)
Crypto continues to help nobody and achieve nothing in the real world. This administration has been criminally slow in shutting it down, lobby is strong.
You’re like a doomsday predictor that will never see a doomsday happen.
No real value? The AAVE crypto platform alone already holds more value ($23B) than the entire market cap of Ecuador’s stock market ($11B). The AAVE platform is literally more valuable than a country.
AAVE is just one of many applications built on the Ethereum network. It speaks nothing of Uniswap, Maker, Yearn, Balancer, USDC, Compound, and many others.
Bitcoin alone secures over 1 Trillion dollars.
The AAVE platform consists of individuals lending recently printed tokens to each other to buy other recently printed tokens in what is essentially a zero sum game with no connection to the real world unless they can convince outsiders to pay even more money for some of the tokens.
The fact the latter is notionally valued at higher than the former pretty much underlines the OP's point about the lack of "real value" underpinning the whole thing...
Casual "investors" sell their portfolios for hard cash when markets start crashing, which in turn induces others to sell. And if you're sufficiently leveraged, you're forced to sell - no mater how much belief you have in your investments.
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Crypto posts on HN seem to be a hotbed for these sorts of hyperbolic, wholly unsubstantiated and objectively false comments. I wish i understood what the motivation was for these sorts of replies.
Cryptoclowns can't use the it's too early excuse anymore.
But they choose to listen to a handful of man children running around promising world peace via a distributed database.
It's kind of surprising how little progress has been made.
It is absolutely possible to use privacy-respecting low-fee tokens to purchase ebooks, purchase "no advertisement" article reads, or subscribe to periodicals.
Even something like Taler is better than Visa and Mastercard. I would love to know why lwn.net, ars, or the register don't try. I would absolutely pay $0.25-$2.00 per read for the ~50 articles I read per month on these websites.
Micropayments for tech readers seems like a good place to start. Tech readers use ad blockers, but are also willing to try new tools with janky UX.
Basically, people hate microtransactions. They hate the very idea of paying per article. They don't want to do it.
Ars, among many other sites, offers yearly subscriptions with various benefits (such as no ads) and that business model has worked well for them for many years.
[1] https://www.penny-arcade.com/comic/2001/06/22/magic-its-what...
Explains the constant bullshit you see on this forum whenever crypto is mentioned.