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Long list of problems with stablecoins, but a very big one is the backing itself. To name a few of the problems this will mechanically bring about: 1) counter
by ur-whale 8y ago
Long list of problems with stablecoins, but a very big one is the backing itself.
To name a few of the problems this will mechanically bring about:
1) counter-party risk: that money will need to be stored at some institution. However small, custody carries a risk, which means the peg will drift.
2)Even assuming the audit mechanism is bulletproof (unlikely) and the custodians risk is spread on a 1000 different institutions ... what are you going to do with that huge stash of backing USD sitting idle in your coinbase/circle bank accounts? How long do you think it's going to take for someone to realize that the money can be "put to work"? Or that actually holding the full amount is a very unnecesary thing to do. Or that banks hate carrying huge idle USD deposits and will likely try to charge you for it?
There goes the peg.
Unless of course, like Tether did get away with for quite a long time, you're smart enough to let the world behave you actually have the USD backing the coin.