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Why does the simplest possible thing - you give me a dollar, I put it into my bank account and give you a token, you give me a token, I give you a dollar from m
by danbruc 5y ago
Why does the simplest possible thing - you give me a dollar, I put it into my bank account and give you a token, you give me a token, I give you a dollar from my bank account back - not work? Why is this extra complexity necessary to maintain a constant exchange rate of one?
If you can get a token for one dollar, no buyer should be willing to pay more than that, if you can sell a token for one dollar, no seller should be willing to sell for less than that. Sure, there will be some imperfections, there will be transaction fees, people might want to buy or sell some tokens faster than wiring money around, but can this really push the price significantly up or down? If, how? Some chain of arbitrage opportunities? Would the price at least stabilize or is there a runaway tendency without active management?
- jtbayly 5y agoOne problem there is that you lock up 100% of the money, which is not ideal for a lot of parties. The other problem is related: you can’t make nearly as much money off your scheme.
- danbruc 5y agoIf your goal is a guaranteed exchange rate of one, then that seems to be almost the only way to do it and therefore ideal to reach that goal. Even in this case there is still some risk that you or your bank goes bankrupt but if you start investing the money of your users you either make some additional money for you - which your users probably do not care about much - or you lose some of their money. You would need an investment with less risk than holding cash in a bank account to improve the service for your users. And there is probably something to be said about negative interest rates which would obviously cause you some trouble.
- beervirus 5y agoThat works fine if you want to be 100% collateralized in cash. Nobody wants to do that because it’s expensive. edit: https://youtube.com/watch?v=PDNZX2nql2Y https://youtube.com/watch?v=PDNZX2nql2Y
- kibwen 5y ago"Ironic. They could save others from fractional reserve banking, but they could not save themselves."
- perl4ever 5y agoI am not a banker, but I believe banks have to have assets to cover all of their deposits, and more, by law. Fractional reserve is about how they have to have a small fraction of liquid stuff to deal with withdrawals. The usual idea of fractional reserve banking people have on the internet is a myth, it would be an insolvent bank, I believe. And banks don't have to have just $1 in assets for every $1 deposited, but they have to have a little more in case some of their loans go bad.
- TimJRobinson 5y agoThat is exactly what USDC is. People were attracted to this because it promised returns for using their stablecoin (IRON) if you put it into liquidity pools that allowed others get IRON.
- user-the-name 5y agoWhat USDC claims to be. It has not been audited, and we do not know for a fact that this is true.
- lmohseni 5y agoI don’t understand why this comment was downvoted. USDC is just as undercollateralized as USDT. Everything you’re reading about USDT also applies tO USDC, just lagged.
- viraptor 5y agoCan you show the proof of that or a good reason existing audits cannot be trusted?
- user-the-name 5y agoNo audits exist, so this is a meaningless question. Attestations exist. They are not the same as an audit, and do not show quite what you seem to think they show.
- lmohseni 5y agoI can’t even find any existing audits. If you know of any or have read any I would be extremely interested.
- chews 5y agoHere are the attestations as of April. https://www.centre.io/usdc-transparency https://www.centre.io/usdc-transparency