The point of stable coins is to have a working capital system that is compatible with the rest of the crypto ecosystem. The reason is that most services in crypto aren't natively compatible with fiat due to fragmented legal & regulatory environments. Stablecoins are instant transfers to anywhere in the world. It's why a lot of countries are trying to build regulatory frameworks for stablecoins.
Two caveats: (1) USDC actually can earn a lot more in a coinbase earn account or vault than your dollars in your bank account, so lot's of people are saving with stable coins via higher interest rates -- I just wouldn't call it "investing".
(2) Some stable coins are pegged to a value that isn't real fiat money. Some good thoughts here: https://twitter.com/balajis/status/1422993084002934788
Still a scam imo.
That is a legal opinion not a technical one, and it's far from clear that the enforcement of KYC will be kept off coins forever.
It's a pretty good use case if you ask me haha.
You can currently get 8.88% APY return on lending stablecoins on Celsius[0]. It's also much easier to borrow and use in incredibly risky contracts, yield farming, etc
Stablecoins let you engage in much more risk than USD without the volatility of crypto prices.
But in the mean time you can get an 8% return.
There's a number of companies offering something similar, like Celsius and Blockfi and a few others. Do your own research, and no need to go near it if not comfortable with it.
Things could go either way from here on out, perhaps crypto is the future and 8.88% interest for stablecoins will be the standard; or perhaps it'll all come crashing down and all cryptos go poof in a few years. Who knows? Point being, when a new paradigm comes along, it usually seems strange and uncomfortable enough to feel suspicious. Maybe it's legit, maybe not, there's a chance for either case.
Celsius is a British company and is also HQ'd in the US now.
Banks doing C&I lending to modest risk (but still not "rated bond issuer") companies are charging mid-single-digit rates. Those banks are generally paying depositors way under 1%.
There do exist loan portfolios legitimately producing these kind of yields, but they are not trivial to produce. Actively managed and monitored specialized portfolios -- where you would really want to diligence the track record and underwriting/origination methodology of the lender.
Don't get me wrong: dislocations do happen and arbitrages do open up, sometimes for far longer than you might think. But fundamentally, if this is non-Ponzi finance, someone must be using those funds for a productive enterprise that yields enough to cover the cost of capital. What is that in stablecoin lending??
(Source: I am an investor and former operator in specialty lending company, having sourced/raised capital in > 100 debt and equity deals.)
Then you can transfer them to other exchanges and buy crypto there. Works the other way too. You can optimize your trading and withdrawal fees this way. So very mediocre utility.
The only entity the stable coins are most wonderful deal is the the one that emits them. They basically have money printing machine for the crypto-economy. And if the project tanks they are left with hard money in hand and everybody else ends up with now worthless stablecoin, because the only source of it's value and utility was the stability.
Some stable coins like DAI have bit more indirect mechanisms of attaching their price to dollar. This seem to work and managed to keep DAI value stable without any manual intervention while ETH price (which is involved in control mechanisms) swung wildly.
An example often cited for El Salvador, where a US worker A sends money to a family member B at home. If A uses banks and dollars, B may need to travel to a bank (long trip on a bus through areas not very friendly to strangers), pay sizeable cross-border commission, evade gangs looking for people withdrawing money, etc. With crypto, they could receive it at home. Businesses buying and selling things that accept crypto need to have significant amount in crypto to handle transactions. Neither of those parties wants BTC with its wild swings; they just want a "crypto dollar" that they can exchange, if and when needed, for a real one, so they build a position in it. My 2c.
I understand the advantages of USDT, like making crossborder transactions faster/cheaper.
However the often cited example but not 100% accurate because it ignores some of the features of the Salvadoran financial system.
There is a a system of "financial agents/correspnondents". There is no need to visit a branch of the bank to receive a remmittance if it is under US$ 500. That can be done in a Supermarket, pharmacy or the main tienda in town. It can even be done with an app (like the one used by the largest credit union).
This is the map of one of just one of the networks, this network owned by cooperatives owned by its users, like a credit union, and not a private company like a bank or multinational bank.: https://www.fedecredito.com.sv/puntos-de-atencion
> With crypto, they could receive it at home.
Remmittances can be received using finantial apps too. The largest private bank in El Salvador has a simple bank account. It can be opened with a selfie, a photo of the ID card. Other banks also offer this simple bank accounts.
Currently the transaction costs via the normal remmittance system, are lower, than by using the only three bitcoin atms in the country. Twitter users reported that recently when the bitcoin price reached $40,000, the only Bitcoin ATM in San Salvador ran out of cash. And that the only way to contact their technical support was via Whatsapp message to a phone number based in another country, Colombia.
> having USDT (as opposed to the U.S. dollar) removes transaction costs and delays that impair trade execution within the crypto market.
My algorithms constantly watch USDT/USD price at 3 exchanges which are independent from Tether Inc, and if USDT drops below $0.95 at one of them, they stop issuing orders selling to USDT.
All trades on DeFi that go from 'fiat' to crypto go through stablecoins.
If you want a cut of the fees paid by speculators then you are probably interested in stablecoins because that's how you market make in these markets.
[1] https://www.bloomberg.com/opinion/articles/2021-08-11/crypto...
> This is better than any bank in the universe.
"If it sounds too good to be true..."
Most of the defi world is a scam, however, stablecoin<->stablecoin liquidity pools are handling millions of dollars and paying the liquidity providers handsomely at 0.1%. It is then that you understand who exactly is making big money in this space :-)
I'm not saying there is no risk -- indeed, there is considerable risk and no FDIC insurance; BUT, the game is far more complex than looks on the surface.
Bernie Madoff's ponzi scheme survived for decades before it was revealed to be "too good to be true".
If those defi contracts collapse, your savings that got loaned out to them are gone. You're not getting that APR, and you're out the principal too.
and the reason you wouldn’t just deposit actual dollars on the exchange is to avoid regulations and laws related to actually depositing dollars
So you are better positioned and can act faster on a broader universe of assets, than a large portion of the crypto space.
Given some additional maturity to the markets, I see this as being THE forex markets of the future.
Example: You earn $1000/month. Cost of living is $500/month, labour tax is $500/month. By using cryptocurrency you can skip tax and save up $500/month, in legit employment (labour law, worker rights protection) you save up $0/month, you work for free, hand to mouth.
If your employer is obligated to withhold taxes from you per pay period, then they can do that and still pay you the rest in stablecoins.
If your employer is not obligated to withhold taxes because you are a contractor, then not having taxes withheld has nothing to do with earning fiat or earning stablecoins.
If you are trying to avoid the record of payment by earning stablecoins, this is neither an efficient way to do it nor is it legal.