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In this thread cryptocurrency community will rediscover banking and money. We have stablecoins or tethers (manny attempts to create something people want) - pe

In this thread cryptocurrency community will rediscover banking and money. We have stablecoins or tethers (manny attempts to create something people want) - people want some form of money for peer to peer value transfer, that will allow arbitrage between exchanges and connection to "real world" as almost nobody is pricing their services in ethereum/bitcoin. Let's say we have 3 competing stablecoins and Gresham's law will apply = people will be moving to "best" coin and leaving others holding bad ones. Imagine that you have 2 banks - one with good reputation and large reserves and second one - almost without them, yet both will be issuing private money redeemable for each other. So how come one can attract customers to his specific stablecoins solution? By offering interest rate - a stablecoin that pays dividend will be better than stablecoin without it. It's complicated - ideologically stablecoins are similar to economical perpetuum mobile devices, yet the first are impossible due to laws of physics and second one may work because economy depends on human behaviour and humans may act irrationally.

erikpukinskis 9y ago
A stablecoin isn't a store of value. It's an instrument for holding pretend Fiat. It's a way for holders to pretend they are the Fed, and say "Now I have USD! You can have it. Just sell it back to someone else eventually because it's pretend." It's an index basically, not an actual commodity. (Except of course in the sense that Everything Is A Commodity in the crypto world.)
- MicahZoltu 9y ago
  Eh, I wouldn't quite call it an index. While I agree that it isn't _actually_ 1USD (or whatever it is pegged to), it is backed by other assets (in the case of DAI today, it is backed by ETH) and the system is setup such that there should always be more ETH backing the DAI than necessary to make everyone whole.

erikpukinskis 9y ago

A stablecoin isn't a store of value. It's an instrument for holding pretend Fiat. It's a way for holders to pretend they are the Fed, and say "Now I have USD! You can have it. Just sell it back to someone else eventually because it's pretend." It's an index basically, not an actual commodity. (Except of course in the sense that Everything Is A Commodity in the crypto world.)

MicahZoltu 9y ago
Eh, I wouldn't quite call it an index. While I agree that it isn't _actually_ 1USD (or whatever it is pegged to), it is backed by other assets (in the case of DAI today, it is backed by ETH) and the system is setup such that there should always be more ETH backing the DAI than necessary to make everyone whole.