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Backed by the issuing companies' heartful statements of best intent.

by john_moscow 6y ago

noxer 6y ago
There are stable coins backed by crypto.
- AlexandrB 6y ago
  What does that mean? How does "crypto" guarantee that someone has the reserves necessary to back the stable coin in circulation? Whenever cryptocurrency interacts with the "real" world, you're trusting someone to verify that the real world state corresponds to the state recorded in the blockchain. I have yet to see a satisfactory solution for this. You're also trusting someone to verify that all this software is free from backdoors and bugs that could be used to commit fraud.
  - noxer 6y ago
    Backed by crypto means for every stablecoin worth 1 USD someone has locked away for example 1.5 USD in crypto. Whoever locked the crypto away and created the stable coin needs to buy it back to unlock the crypto again. If the price of the stabelcoin would drop below 1 USD everyone who created them and sold them would make a profit buying it back lower. This essentially makes the coin stable. I'm not going into further details as you can easily google how this technically works. Also no one said there is no risk you have all kinds of risks including meteorite impact event. Backed stabelcoins simply reduces/decentralizes and shift the risk to code/market dynamics and other stuff rather than a single issuer of a coin. Nothing ever is without a risk. BTW if finding a flaw in the code makes you rich that kinda a very good incentive for people to find flaws. We dont really have anything better than that in your "real world".
    - john_moscow 6y ago
      >Backed by crypto means for every stablecoin worth 1 USD someone has locked away for example 1.5 USD in crypto. In order to do that, someone would need to match every USD coming from you with 0.5 USD from their own pocket.
      - noxer 6y ago
        kind, they dont lose that it just locked away. But yes it must be more than the value to be backed else it could become partially backed if the crypto price goes down to fast. It can be more of less than 150% backed is up to whoever writes the code. But 150% seems reasonable for a volatile assets. You may think no one would do that but its actually a way to bet a price gains of your crypt. By locking away 150% you get 100% in stable coins to invest/spend without losing the volatility (possible gains) of your crypto. So if the price of you crypto goes up you get the whole profit on the locked 150% collateral even if you spend the stabel coin. ofc you need to buy back the stable coins to unlock you crypto but the buy back should always cost the same because its a stable coin. Example with numbers: You lock away 150 USD in ETH You get 100 USD in stable coin to spend Price of ETH goes up 100% (doubles) You can now buy 100 USD stabel coins and unlock 300 USD worth of ETH This is interesting because you have 100 USD that you can use while you wait for the price to go up. You could buy ETH with it which also doubles in price so you have 200 USD worth of ETH You sell 100 USD worth of it to buy back the 100 USD stable coins You now turned 150 USD worth of ETH into 400 USD worth of ETH even trough the price of ETH only doubled. Ofc if the price drops your stable coin will be undercollateralized and someone else can "buy them" and re-collateralize which would make you lose the difference. In other words if you bet on rising prices and it goes down you have to top up to keep the 150% collateral if you cant top up someone else will and you get liquidated. In the end is a zero sum game. Some lose others win but its a net gain because stable coins can can exist that are backed by crypto.
  - atat7024 6y ago
    Liquidity, in a word.
puranjay 6y ago
The second largest is issued by a soon-to-be-public $100B company. I'm sure the backing assets will have to be disclosed to the public.
hanniabu 6y ago
Yet you turn a blind eye to the government

Backed by the issuing companies' heartful statements of best intent.

noxer 6y ago

There are stable coins backed by crypto.

AlexandrB 6y ago
What does that mean? How does "crypto" guarantee that someone has the reserves necessary to back the stable coin in circulation? Whenever cryptocurrency interacts with the "real" world, you're trusting someone to verify that the real world state corresponds to the state recorded in the blockchain. I have yet to see a satisfactory solution for this. You're also trusting someone to verify that all this software is free from backdoors and bugs that could be used to commit fraud.
- noxer 6y ago
  Backed by crypto means for every stablecoin worth 1 USD someone has locked away for example 1.5 USD in crypto. Whoever locked the crypto away and created the stable coin needs to buy it back to unlock the crypto again. If the price of the stabelcoin would drop below 1 USD everyone who created them and sold them would make a profit buying it back lower. This essentially makes the coin stable. I'm not going into further details as you can easily google how this technically works. Also no one said there is no risk you have all kinds of risks including meteorite impact event. Backed stabelcoins simply reduces/decentralizes and shift the risk to code/market dynamics and other stuff rather than a single issuer of a coin. Nothing ever is without a risk. BTW if finding a flaw in the code makes you rich that kinda a very good incentive for people to find flaws. We dont really have anything better than that in your "real world".
  - john_moscow 6y ago
    >Backed by crypto means for every stablecoin worth 1 USD someone has locked away for example 1.5 USD in crypto. In order to do that, someone would need to match every USD coming from you with 0.5 USD from their own pocket.
    - noxer 6y ago
      kind, they dont lose that it just locked away. But yes it must be more than the value to be backed else it could become partially backed if the crypto price goes down to fast. It can be more of less than 150% backed is up to whoever writes the code. But 150% seems reasonable for a volatile assets. You may think no one would do that but its actually a way to bet a price gains of your crypt. By locking away 150% you get 100% in stable coins to invest/spend without losing the volatility (possible gains) of your crypto. So if the price of you crypto goes up you get the whole profit on the locked 150% collateral even if you spend the stabel coin. ofc you need to buy back the stable coins to unlock you crypto but the buy back should always cost the same because its a stable coin. Example with numbers: You lock away 150 USD in ETH You get 100 USD in stable coin to spend Price of ETH goes up 100% (doubles) You can now buy 100 USD stabel coins and unlock 300 USD worth of ETH This is interesting because you have 100 USD that you can use while you wait for the price to go up. You could buy ETH with it which also doubles in price so you have 200 USD worth of ETH You sell 100 USD worth of it to buy back the 100 USD stable coins You now turned 150 USD worth of ETH into 400 USD worth of ETH even trough the price of ETH only doubled. Ofc if the price drops your stable coin will be undercollateralized and someone else can "buy them" and re-collateralize which would make you lose the difference. In other words if you bet on rising prices and it goes down you have to top up to keep the 150% collateral if you cant top up someone else will and you get liquidated. In the end is a zero sum game. Some lose others win but its a net gain because stable coins can can exist that are backed by crypto.
- atat7024 6y ago
  Liquidity, in a word.

puranjay 6y ago

The second largest is issued by a soon-to-be-public $100B company. I'm sure the backing assets will have to be disclosed to the public.

hanniabu 6y ago

Yet you turn a blind eye to the government