Hacker News Reader

Comment by awrence | Hacker News Reader

I contend it's not. There are two main features which proper (decentralized) cryptocurrencies are supposed to offer.

The first is censorship resistance. And I can assure you that however in the world you set up something backed by a fiat, its controlling government can step in and seize your collateral if and when it pleases and then you're screwed. But you can certainly come up with all sorts of fancy legal speak and marketing pitches to argue otherwise which makerdao is basically doing.

The second is protection from currency manipulation and stable coins solve nothing on that front, but let's assume for the sake of argumentation that people interested in stable coins are aware of that.

View on HN

> And I can assure you that however in the world you set up something backed by a fiat, its controlling government can step in and seize your collateral if and when it pleases and then you're screwed.

hmm -- the collateral in this case is ether. So, unless you feel the US govt can step in and seize all ether in the world, this statement seems unlikely to be true.

>hmm -- the collateral in this case is ether.

What happens if eth tanks in value? Now you'll have $0.10 of eth backing $1 worth of stablecoin. Also, if it's backed by eth, who has custody? If it's the controlling entity, they can refuse to redeem your stablecoin for eth.

MakerDao has complex mechanics that I probably would fail to explain accurately, so if you're interested in this, I'd suggest googling. That said:

1. ETH has tanked in value by basically that large of a drop since DAI has been in existence, and it's held its peg. Recently, I believe some of the parameters that control DAI's stability did cause people some concern given how high they went, but so far, DAI has been remarkably resilient.

2. I believe the ETH is locked in smart contracts, so nobody has custody (although it may be vulnerable to bugs). Not 100% sure though.

3. DAI is moving to a multi-collateral model, so it can be backed by ETH, BTC, other stable coins that are backed by fiat in various jurisdictions, other coins that are backed by gold reserves, etc. That seems like it will make the model much more resistant to the attack that was suggested above -- i.e. that a single government could interfere.

And what happens if USD collapses then? What you are asking (if ETH collapses in value) is beyond the question of whether DAI is a proper stablecoin or not.

Reply on news.ycombinator.com