Or in other words, they'd like the benefits of regulation without the costs of regulation. Which I certainly appreciate. As a child my plan for adulthood was desserts all the time, no vegetables ever.
But no regulatory oversight, and no chance for the common folk to prosecute or get their money back if they default.
I am one of the resident crypto apologists here on HN, but there is no way that we should even try to accept what the big exchanges are doing. The whole point of crypto is to have systems that do not depend on "too big to fail" institutions, why are we suddenly trying to find excuses for their BS?
And yet most stable coins have maintained their peg for years now, despite many of them having gone through 2 large bear markets. If 80%-90% down and still pegged doesn't disprove "impossible to do on the downside" I don't know what could.
Clarification: I do think Tether is not fully backed and is likely to depeg some day, but the assertion that it's "impossible to do on the downside" is clearly not true even for Tether. And it's very clearly not impossible to keep a peg if the peg is fully backed, which may be the case for some coins (without naming specifics). DAI, backed by verifiable collateral, has also done extremely well through 2 bear markets.
Which is a good reason to get out. Stablecoins have only two stable points, 1 and 0. When they crash, they go all the way. Look at what happened with the stablecoins that already crashed.
I'm not claiming this is perfect, but it's pretty different.
Just because that weapon hasn't been pointed at some group of US citizens yet doesn't mean it can't in the future.
Up to a point.
The only reasons for these coins to exist are:
1. Avoid proper financial controls and regulations imposed on real currencies and operate illegally. 2. To separate fools from their USD and replace it with USDT or whatever.
The obvious other reason is to use them on the blockchain. You cannot use USD on the blockchain.
Maybe you don't think there's anything of value on the blockchain and that's why you don't see a use for it. I don't want to get into an argument over whether blockchain tech has a use case or a future in this comment chain, but for the sake of understanding what stable coins could be used for just grant the following:
- There is some use for ETH out there that doesn't involve avoiding financial controls and regulations or separating fools from their USD
If you will grant that, then it's easy to see why here would be a use for USDC or similar. ETH price fluctuates. If you need to be able to utilize Ethereum, it's helpful to have value on it. If you don't want that value to fluctuate, you can hold it in USDC and convert to ETH when you want to use it. Plain and simple, this is the first application for stable coins.
If you will not grant that there is a use case for ETH then there's no point in having a discussion about stable coins anyway. That's a separate discussion that needs to be had first.
I do not grant this, because Ethereum has been around for 7 years and no such uses have materialized yet.
Believe it or not, if you want to invest in gold, the only option isn't buying and storing physical gold in your home. That might even be a dangerous idea.
Stocks are certificates which claim partial ownership of a company. But how can owning a piece of paper be like owning a part of a company? What is a company anyway but an abstraction over the concept of group liabilities, assets, contracts, and actions? Or do you think companies only exist to allow people to break laws under another identity?
Thanks for the usual collection of talking points from 2017 that nobody uses in the real world. There is no utility to these blockchain tokens except to scam others.
if you wanna question whether smart contracts are useful or not feel free, I sure do, but drop the smarminess when the answer to your question lies within the first paragraph.
They are a terrible idea whose time came and went around 2017.
It’s more accurate to say that you are “proclaiming”, which is perfectly fine, but doesn’t make for great conversation
Other countries may not even be allowed to transfer from their bank overseas (I think China in most cases). Some countries have local currency that is devaluating, and banks that are less reliable than a mattress. Some countries have restrictions on the way that money can be stored or retrieved that basically mean that money deposited in the bank can not practically be withdrawn.
For some, the stablecoin is simply a more convenient bank that the one in the city, and in many cases they anyways don't have reportable income.
Other reasons exists for a stablecoin besides criminal activity, especially for people that live in poorer states - and these people are harder hit by losing their cash than would be someone who is in crypto for the ride. It is disingenuous to think its all crypto kiddies.
That is not essential to what futures do. The essence of a future, is that it is a trade that is agreed upon today, but which settles in the future. I sell my corn to you at a price we agree on today for delivery in 3 months. That allows producers and consumers of commodities to reduce risk, while speculators can increase their risk.
Also -- weird but interesting -- the https://en.wikipedia.org/wiki/Onion_Futures_Act bans trading futures contracts on onions (and motion picture box office receipts). Not sure if that would apply to onion seed.
By the way, the concept of a "stablecoin" (defined as a currency located in a separate financial system than its home) isn't new - you can buy eurodollar futures which are futures on dollars that are physically located in Europe. Ironically, you can also buy euroeuro futures contracts which are for euros located in the US: the euro- prefix on a currency just means "not delivered inside sovereign borders, although the European eurodollar is by far the most important of these.
I understand your reasoning, and you're correct in this case (assuming your numeraire is USD). However, if your numeraire is something like a GDP-weighted basket of USD, EUR, JPY, and CNH, it's possible for a USD-pegged asset to be less volatile than USD (since your unit of account isn't USD).
Presumably, your USD-pegged asset would drop in relation to the USD in a risk-off scenario and rise in a risk-on scenario, so in that case it would seem that your tracking error would tend to be correlated to the non-USD components of your numeraire basket. So, if macro risk-on/risk-off are the primary drivers of your pegged asset's tracking error, it would seem that your pegged asset would tend to have less volatility than USD if a GDP-weighted basket of major currencies is your unit of account.
When you put USD backed stablecoin on exchange you're trusting
1) Exchange won't fail
2) Backers won't fail
3) US gov won't fail
Any single one fail and you're fucked. America decided dollars should float in the 70s, and most of the world followed. IMO sooner or later crypto will end up all floating because pegging relies on centralized points of failure and eventually people will tire of getting wiped out.
Except that a bunch of countries in Europe went back to pegged currency with the Euro[1]. Part of the reason the 2008 crisis hit countries like Italy, Greece, and Ireland so hard.
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1. Yes - the Euro is not technically pegged; but effectively, it's the same thing. Each individual country in the Eurozone can't engage in independent monetary policy.
There is an enormous difference, though: internal mobility/identity.
Germans tend to strongly prefer living in Germany. Greeks tend to strongly prefer living in Greece.
People in Oregon and New Hampshire tend not to have very strong affection for their state.
Which means that, if one area is economically depressed at the same time that another area is booming, the problem tends to sort itself out as people move from the struggling area and to the prosperous one.
In Europe, that just doesn't happen to nearly the same extent.
No, but people in the South have an affinity for the South and people in coastal cities have an affinity for those, too.
This sounds like the opinion of a European who has never actually lived in the US. People are much more married to their states than it seems that you'd believe.
While someone from (say) Connecticut might not think much of moving to Maine, they would probably feel different about moving to Iowa, Washington, or Alabama.
Here's one of the various maps I've seen of US cultural regions: [0]
It seems to be accurate for the areas I know anything about; I can't speak for it in other places.
[0] https://preview.redd.it/ntsqzyp8uq531.png?auto=webp&s=afb643...
A lot of these states have backdoor ways of keeping out culturally incompatible folks from moving state to state by making mere victimless possession of certain items disproportionately linked to certain American cultures into felonies.
Did you miss the article last week on HN where 60% of American adults live within 10 miles of where they grew up? People in the US absolutely have a strong affinity for their states. Just as in the EU, they may choose to leave for better opportunities however.
This is not new in the 17th century Dutch VOC ships were crewed by destitute Swedes and Germans. Mobility in Europe is high which is why you can get excellent baklava and spaghetti as far as Helsinki. This is why the European Union makes sense.
https://worldpopulationreview.com/us-cities/portland-or-popu...
If you look at where people migrate from,
https://depts.washington.edu/moving1/Oregon.shtml
California and Washington are the major sources (of course!) but (1) California is not PNW, and (2) places other than CA/WA contribute many more migrants.
What makes the US dollar work in practice is the active role the federal government takes to internally rebalance the economy through taxation and spending, particularly with defense spending and social programs like Social Security, Medicare, and the FDIC. People in wealthier states (including myself) like to complain that we get a bad deal because we get less back from the federal government than we pay in but that's a crucial feature of the system that keeps it from getting too unbalanced.
Additionally, in the US the federal government (for all practical purposes) is not required to maintain a balanced budget while the state governments are. This constrains the ability of state governments to issue too much debt while still providing a relief valve for emergency spending needed during economic downturns or other crisis (such as the COVID-19 pandemic).
I expect that sooner rather than later the countries that have adopted the Euro will evolve a similar system, shifting the bulk of the costs of their social programs (pensions, unemployment insurance, medical care, banking insurance, etc.) to the EU itself and giving the EU the power to tax and borrow as needed to maintain those programs. It will be a hard sell to Europe's wealthier economies, since it would be a major transfer of their wealth to Europe's poorer economies, but I suspect a future crisis will force their hands if the alternative is the dissolution of the EU (Brexit has shown everyone how badly leaving the EU can hurt).
That seems pretty silly on its face, but I suppose I've been persuaded of stranger things with a good argument.
> I mean, the US Dollar is a "pegged" currency under that definition too.
Yes and no. My point about pegging a currency really is about organizations that tax, borrow, and spend a currency they control. So the US Government has nothing to worry about in that regard. But all of the sub divisions definitely do - various states, counties, and cities regularly flirt with bankruptcy from time to time.
> I expect that sooner rather than later the countries that have adopted the Euro will evolve a similar system, shifting the bulk of the costs of their social programs (pensions, unemployment insurance, medical care, banking insurance, etc.) to the EU itself and giving the EU the power to tax and borrow as needed to maintain those programs. It will be a hard sell to Europe's wealthier economies, since it would be a major transfer of their wealth to Europe's poorer economies, but I suspect a future crisis will force their hands if the alternative is the dissolution of the EU (Brexit has shown everyone how badly leaving the EU can hurt).
I think, that will be a difficult decision point for the EU. I'm just not convinced that enough members want the "United States of Europe". National identity is much stronger in Europe than it ever was in the American Colonies pre-Constitution.
I'll take the Euro over any cryptocurrency any day, thanks.
On a PPP adjusted basis Italy/Spain/Portugal are no richer than they were 20 years ago. They can no longer devalue their currency like they used to when they ran into trouble.
On March 15th, the Fed lowered the fractional reserve requirement to 0%. Yet, since that day banks have been hoarding cash like never before. pic.twitter.com/jpYF4Ypzjq — Mati Greenspan (tweets ≠ financial advice) (@MatiGreenspan) April 13, 2020
So, a bank can lend out what ever it wants. This is why inflation is high all over the world and the currency milkshake theory is playing out.
"Here's a simplified version: All currencies are doomed because they're not actually valuable. The dollar is slightly better because it's the favorite child. When the Fed stops making more dollars — the frothy “milkshake” — demand for existing dollars goes up.Jul 19, 2022" -- Bloomberg
USDC doesn't sound tenable.