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Stablecoin Basis is closing down
- aiCeivi9 8y ago> Basis is designed to keep prices stable by algorithmically adjusting supply. When demand is rising, the blockchain will create more Basis. The expanded supply is designed to bring the Basis price back down. When demand is falling, the blockchain will buy back Basis. So exactly how counties do/did with their foreign currency reserves. Hint - it can and did end up blowing up in spectacular way.
- arethuza 8y agoOut of interest, what do they use to "buy back Basis"?
- deleted 8y ago[deleted]
- Dylan16807 8y agoBonds are auctioned off that can be converted 1:1 to coins the next time the supply increases.
- thedufer 8y agoThey auction off a sort of binary future that either converts to Basis in a future event when they're increasing the supply, or expires worthless if no such event occurs in a set amount of time (5 years, I think).
- thanatos_dem 8y ago> Hint - it can and did end up blowing up in spectacular way. Very true. See George Soros and the Bank of England for a famous example.
- halestock 8y agohttps://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp https://www.investopedia.com/ask/answers/08/george-soros-ban...
- chrisco255 8y agoMaker DAI is superior in every way to Basis, and it's been in production for over a year at this point...surviving all the wild price swings along the way.
- wtvanhest 8y agoDo you know what the use case for holding stable coins is? I haven't figured out why anyone we ould need them.
- wmf 8y agoAnything other than speculation benefits from stable value.
- chrisco255 8y agoYeah, for transactional use cases. We could place stable DAI in a smart contract and be sure that it's value was going to not change (except minimally) against the dollar. We also get all the benefits of block chain infrastructure (borderless, cheap for even large amounts, etc). We can program DAI in a way that isn't possible with USD.
- gojomo 8y agoPeople who'd want to spend cryptocurrency might want cryptocurrency's advantages, without its volatility. People who want to invest/speculate in cryptocurrency will often want some proportion of their portfolio value to be as stable as USD. But, actually holding true USD at exchanges/banks could be more complicated, requiring interfacing with legacy banking systems & regulations. A stablecoin allows USD value to be handled at exchanges (and transferred) in manners almost wholly analogous to other cryptocurrencies.
- lawn 8y agoExcept these stable coins doesn't solve the core problem cryptocurrencies do: uncensorable transactions. Tether for example has the ability to freeze addresses. They can also freely manipulate the coin supply (a necessary feature for stable coins) which goes against the decentralized idea of cryptocurrencies.
- gammateam 8y agoAin't no lie, DAI DAI DAIiiii
- nivertech 8y agoWhat they’re calling “bonds” are actually callable binary futures. They either pay you 1 basis when called or they expire worthless, if Basis economy will stagnate/contract for 5 years in the row. Additionally they rely on unregulated crypto “exchanges” to make secondary markets in these futures. I think the reason they’re calling them “bonds” is because binary futures and prediction markets are illegal in US (falling under CFTC jurisdiction). Similar problem will apply if they were real bonds - then they're falling under the jurisdiction of the SEC and will have to be registered with them or get an exemption from registration. EDIT: For those who think that MakerDAO is better than Basis protocol, it's not that Maker got CFTC license to operate a Swap Execution Facility (SEF)[1]. 1. https://en.wikipedia.org/wiki/Swap_Execution_Facility https://en.wikipedia.org/wiki/Swap_Execution_Facility
- m3kw9 8y agoPeople are struggling to understand even Bitcoins.
- barrow-rider 8y agoNot sure why this is getting downvoted. Parent is right, most folks don't get it, even technical ones. Most people aren't in STEM, aren't making north of six-figures doing tech, and aren't super literate when it comes to even basic technology, like their car or IR TV remote. This Christmas, buy everyone in your family and all of your friends $100 worth of BTC. I'd bet my hat that you'd have to explain how it works, in a practical-how-to-trade-this sense, to virtually all of them, save for those in STEM. And even if they learned how it works, what's your aunt going to spent the BTC on? Can't take it to Applebee's, or Wal-Mart, or Bed Bath & Beyond, or pay a mortgage or a parking fine.
- jandrese 8y agoBy the time you explained it to them they would only have $50 worth of Bitcoin.
- 8y ago
- ThrustVectoring 8y agoThere's a real fundamental problem with stablecoins: any system that effectively allows decentralized peer-to-peer transmission of money is going to fail one or more anti-money-laundering laws. Stablecoins are fundamentally illegal operations under US law.
- EGreg 8y agoThat would be true of any cryptocurrency, not just stablecoins. There are money transmitter laws in the US and elsewhere. I think under $10K you don’t need to do KYC.
- JumpCrisscross 8y ago> Cash is perfectly legal and so is any cash like instrument With Bitcoin, you can squish around as to whether it’s a commodity or currency and argue as to the actual dollar amount transmitted. With a stable coin, you’re explicitly transmitting U.S. dollars in kind. That’s the AML difference
- EGreg 8y agoThe existence of volatility around an exact dollar amount does not make it not transmitting money, does it?
- JumpCrisscross 8y agoIt’s marketed as a 1:1 equivalent for the regulated hard currency. It may be doing a bad job at that, but it’s essentially a bearer security for U.S. dollars. This case law has been long decided in respect of far cleverer schemes.
- EGreg 8y agoI asked about Bitcoin!
- EGreg 8y agoWhenever your network promises to maintain a peg to some other currency, you are opening yourself to arbitrage by others taking advantage of your guarantees, knowing you’re committed to certain actions. That’s why a peg is never 100% certain. That’s how George Soros broke the bank of England. But unlike England, an autonomous network would simply continue to lose money and go bankrupt. Right? Any ways around it? https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp https://www.investopedia.com/ask/answers/08/george-soros-ban...
- kakarot 8y agoI guess the important thing is that now we have one data point.
- snarf21 8y agoYou are absolutely right. There are countries that have pegged their currency to the US dollar. Like you said, it is not sustainable. The only solution is to do what it is conjectured Tether did and that is just print more and more to hold the peg but obviously that has other issues.
- gus_massa 8y agoOne possibility is to hard fork the chain and convince everybody that the forked version is the real version, including the users and exchanges. (Something like the "fix" for "The DAO" in Etherum.) In the hard fork you can change slightly the algorithm, or make a haircut (like the usual solutions of countries in these situations). The old unforked version of the coin will continue to drop to 0, and will try algorithmically desperately to sell worthless bonds to try to raise the price, but nobody sane would buy them. I'm not sure if this is legal or moral, but I would not be surprised if something similar appears in the future.
- deleted 8y ago[deleted]
- empath75 8y agohttps://prestonbyrne.com/2017/10/13/basecoin-bitshares-2-electric-boogaloo/amp/?__twitter_impression=true https://prestonbyrne.com/2017/10/13/basecoin-bitshares-2-ele... The worst idea in cryptocurrency.
- PeterisP 8y agoThat link is a quite good explanation of the core arguments.
- jackmaney 8y agoLOL "stablecoin"
- jcfrei 8y agoI've had an idea floating around to generate a stable coin for a while now and would love to get some feedback: The idea is simply that everyone can mine new "tokens" (for lack of a better word) by running a proof-of-work algorithm and broadcasting the solution to the network (just like the block mining in Bitcoin). In every new block all verified token generations are payed out to the respective addresses. In the long term the value of these tokens would be limited on the upside to the cost of the PoW algorithm. The difficulty of this PoW algorithm would remain constant - unlike the BTC PoW algorithm which adjusts with the hash rate. Two issues: 1) This scheme would only work with a PoS algorithm for block creation, because in a PoW system the security depends on the block reward (which would be low in this system). 2) There's not really a lower bound for the price of this token - the intrinsic value depends on it's usability for payments.
- 0xname 8y agoSounds sort of similar to 0xbitcoin in that it's possible for anyone to mine tokens, but that project currently raises the difficulty (like Bitcoin). I'm assuming that a few changes to the difficulty scaling could make a proof-of-concept of sorts as a mineable ERC20 token. In this case, the security of the system relies on the security of the Ethereum network though, which shifts the concerns but also means that people still need gas to send transactions - which might be difficult for user adoption.
- snissn 8y agoYeah! We've actually talked about something similar on the 0xBitcoin discord! I'm @mikers on there if you'd like some help getting your "stable coin" off the ground.
- scottlocklin 8y agoThere's nothing there that would make the coin stable in price versus a fiat currency; you just described the platonic ideal bitcoin type thing where the mining participation is particularly democratic.
- 8y ago
- danielvf 8y agoBasis was something special. Its algorithm was such that if it ever stopped growing at a sufficient rate, it would explode to zero. And this would remain true no matter how much Basis had previously grown. Every gain against a dollar by Basis was erased, either by paying off previous bets, or by paying “dividends”, and would not count for future price resiliency. If the market cap was 3 trillion and basis was used by 500 million people, and it needed to issue “bonds” to hold the peg, then the doom clock would start ticking again afresh. In order for Basis to hold the price, you placed bets, not only that that the price would go back, but that the market cap would grow enough beyond a parity price to pay off every bet ahead of you in line. If the price just returned to parity, you still got nothing. So the more outstanding bets, the bigger the risk of placing a new bet. And this risk grew at a power ratio the farther behind the currency got. Basis could do nothing but explode.
- SlowRobotAhead 8y agoCrypto futures gambling with a near guarantee you’ll lose your money?
- ChuckMcM 8y agoIt is the embodiment of the slot machine with a 93% payout.
- danielvf 8y agoDon’t even get me started on the whitepaper... “The critical insight is that as long as traders expect Basis price to correct [and grow] in the long-term...” which makes a prerequisite out of what they need to demonstrate. And then there’s the part where they prove that their algorithm works by pretending that their currency behaves like USD does. Of course if your currency behaves like one of the most successful fiat currencies of all time, backed by the most powerful government in the world, then everything will be okay. If my hypothetical elderly Chihuahua dog had the driving ability and limbs of Micheal Schumacher in his prime, then my Chihuahua could turn in some nice lap times at the Nurburgring. Whitepaper is still up for now. Enjoy. https://www.basis.io/basis_whitepaper_en.pdf https://www.basis.io/basis_whitepaper_en.pdf
- state 8y agoThere's also a statement up on their site: "Unfortunately, having to apply US securities regulation to the system had a serious negative impact on our ability to launch Basis." https://www.basis.io/ https://www.basis.io/
- jandrese 8y agoLOL I'm sorry we can't scam you, apparently there is a law against that.
- microtherion 8y ago"And we would have gotten away with it, too, if it weren't for those meddling kids at the SEC"
- CryptoPunk 8y agoThey provide a point by point explanation of why this would make it difficult: * Due to their status as unregistered securities, bond and share tokens would be subject to transfer restrictions, with Intangible Labs responsible for limiting token ownership to accredited investors in the US for the first year after issuance and for performing eligibility checks on international users. * Enforcing transfer restrictions would require a centralized whitelist, meaning our system would not only lose its censorship resistance, but also that on-chain auctions would have significantly less liquidity. * Having fewer participants in the on-chain auctions adversely affects the stability of Basis, making Basis intrinsically less attractive to users. Additionally, imposing transfer restrictions on bond and share token auctions materially hurts our ability to build the Basis ecosystem. Your snarky comment adds nothing constructive to this discussion, and lowers the quality of discussion on hackernews.
- tim333 8y agoDunno I thought the comment was funny. Humour has value sometimes.
- Animats 8y agoNeither the article nor the Basis site answers the important question: do coin buyers get their money back, and if so, how?
- mrnobody_67 8y agoThis is ultimate proof that so called "smart money" is often lazy and dumb. Plowing $133m into a bad idea based off a white paper, when anybody could have told you it'd inevitably implode based on common logic outlined by others in the comments here....
- QML 8y agoIn other words, really smart people can make really dumb investments.
- kaizendad 8y agoI'm extraordinarily confused as to how this was not an issue handled before Basis got to this point. It's not a secret that regulators would like to have purview over these types of assets, and that regulators have in fact successfully pursued those involved in other cryptocurrencies that turned out to be fraudulent. Of all the risks the Basis founders had to confront -- building a new technology, proving out a new algorithm, getting interest from others, etc. -- understanding at least the threat of regulation seems like among the simplest. What am I missing?
- leppr 8y agoThe issue was handled in their SAFT with a provision that states they would return the funds if they failed to deliver a product. Regulations on new technologies aren't a fixed thing, they were optimistic (someone has to be). Another theory could be that the regulation issue is a pretext. Those big investors that bet heavily on crypto and are now in the red could have insisted to get their money back. Given how low the sentiment about crypto presently is, these investors are in a far better position to make lucrative plays now, than keeping their money in a project that raised near the top of the bubble.
- kaizendad 8y agoI'm more inclined to the latter. Sure, they hedged their bets in their SAFT, but to say "our plan involves not being regulated, and we give up if we are" strikes me as silly. But you're right, maybe they expected a different level of regulation than they were ultimately going to be subjected to, and maybe they just didn't communicate that. Come to think of it, if I were a big bank, skilled in handling regulation, I might absolutely give a bunch of $ to a startup in this space, knowing I'd, at worst, own a big chunk of them, and, at best, prove out the market with someone else's time, then get to launch myself, with my own giant regulations team behind everything. But that's probably paranoid.