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Firstly, Tether is rat poison. Unfortunately, newcomers to the space identify "stable coins" = "tether" or wrongly assume that other stablecoins share similar

Firstly, Tether is rat poison. Unfortunately, newcomers to the space identify "stable coins" = "tether" or wrongly assume that other stablecoins share similar mechanisms. There are many alternatives that operate radically differently in the nascent space. DAI is immensely exciting. Stablecoins like DAI are interesting experiments that could powerfully create new online economies. Blockchains like Ethereum are currently far more transparent than the state-sponsor US monetary system. I hope to live in a society where economic experiments can be executed, new lessons learned, and transparency maintained. If stablecoins are persecuted, the need for cryptographic zero-knowledge proofs will allow these systems to continue with far less transparency. As a different matter, how can society say "2008 bad", which resulted in little economic progress, and then threaten problem solvers from making new solutions? Innovation is a hedge against regulator lethargy.

Marazan 5y ago
Isn't DAI backed by USDC and Tether in part?
- xur17 5y ago
  The debt ceiling for Tether is currently set to 0 [0] for dai. And USDC + other stablecoins do partially back it [1]. [0] https://daistats.com/#/collateral https://daistats.com/#/collateral [1] https://dune.xyz/SebVentures/maker---accounting_1 https://dune.xyz/SebVentures/maker---accounting_1
- njade 5y ago
  You are correct. Last time I checked, more than 50% backed by USDC. Makes no sense as the whole point of censorship resistance is defeated.
  - capableweb 5y ago
    Where/how did you check this? >50% of USDC sounds unreasonably high.
  - shawabawa3 5y ago
    from https://daistats.com/#/overview https://daistats.com/#/overview it's currently ~26% USDC It's also 200% collateralised so USDC could go to zero (or freeze all of the DAI locked USDC) without breaking the peg on DAI
- hanniabu 5y ago
  In part yes, along with many other assets. They've stated they'd like to lesson the use of stables as collateral and are still brainstorming solutions. The ability to add real estate as collateral should be interesting.
xur17 5y ago
> Blockchains like Ethereum are currently far more transparent than the state-sponsor US monetary system. I hope to live in a society where economic experiments can be executed, new lessons learned, and transparency maintained. If stablecoins are persecuted, the need for cryptographic zero-knowledge proofs will allow these systems to continue with far less transparency. This is the part that excites me about Ethereum, and also scares me when I hear talk of "regulation" for the space. By definition, a lot of the projects on Ethereum are a LOT more transparent than the traditional finance world. I can interact with something like DAI, and see exactly what backs it at every second of every day. I have an idea of what would happen if certain assets that backed it dropped too quickly. With most of the traditional finance world, it's all very grey and hidden. I'm told that there is regulation "protecting me", but in a lot of cases that regulation doesn't really accomplish its goal and instead acts as a moat.
- sorbits 5y ago
  > By definition, a lot of the projects on Ethereum are a LOT more transparent than the traditional finance world The important stuff is not transparent. For example, how do you know that Tether is backed by real USD? That Binance isn’t manipulating prices via wash trades? That the promises made about various coins are being upheld? etc. Crypto is reliving the era of https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking > With most of the traditional finance world, it's all very grey and hidden What specifically are you referring to with “traditional finance”?
  - miohtama 5y ago
    > The important stuff is not transparent. For example, how do you know that Tether is backed by real USD? That Binance isn’t manipulating prices via wash trades? That the promises made about various coins are being upheld? etc. You are describing so called centralised finance (CeFi) whereas the most high quality Ethereum projects focus on decentralised finance (DeFi). DeFi tries to break any chains to opaque companies and have all actions happening transparently and auditable on-chain. However ones like Tether murky the waters a lot here.
mdorazio 5y ago
Devil's advocate: 2008 was bad because of regulatory failures (specifically deregulation). Lack of transparency was only part of the problem. So if you want to avoid 2008 in cryptocurrency, the answer would be more regulation, not less.
- grenoire 5y ago
  Right, OP, CDOs were also very innovative when they first got rolled out!
- cwkoss 5y ago
  Was 2008 an issue of lack of regulation or lack of enforcement? I thought it was more about "too big to fail" attitudes preventing enforcement from being fairly applied to the largest participants.
  - LatteLazy 5y ago
    Too big to fair came after 2008. Before then it was assumed that if a large institution did fail it would be orderly and the system could take the shock. That turned out to be wrong when it did happen...
  - jcranmer 5y ago
    It's a little unclear, because (like many things in public policy) there's several putative explanations for what caused the crises, peoples' preconceived notions color which ones they favor, and it's manifestly unclear who is right. And it should be remembered that "everyone" is a perfectly plausible answer. At a broader level, there is most consensus on the idea that the key failure in 2008 was that no one--neither investors nor creditors nor credit-rating agencies nor regulators--correctly understood the risk profiles of the new financial products, and things that were thought to be very safe or at least combined uncorrelated risk profiles suddenly started all taking in unison at the same time.
    - mullingitover 5y ago
      > It's a little unclear, because (like many things in public policy) there's several putative explanations for what caused the crises, peoples' preconceived notions color which ones they favor, and it's manifestly unclear who is right. I thought 2008's cause was perfectly clear: the banks all sold insurance policies on each other (in the form of credit default swaps) that they couldn't fulfill. When one bank went under due to bad bets in the market, this triggered policies that, if fulfilled, would bankrupt the next bank. That in turn bankrupted the next, and so on. People focus on the conditions that bankrupted the first bank, but that was just the final snowflake that happened to trigger the avalanche.
IncRnd 5y ago
> As a different matter, how can society say "2008 bad", which resulted in little economic progress, and then threaten problem solvers from making new solutions? Innovation is a hedge against regulator lethargy. What do you believe caused regulators of financial instruments to be created?
nprz 5y ago
> I hope to live in a society where economic experiments can be executed Totally read experiments as experts
Igelau 5y ago
> Tether is rat poison It would be very useful if we could kill vermin with it.
scotty79 5y ago
Why are stable coins interesting? It's basically a thing guaranteed by single entity that promises that if the price drops they will buy tether at personal loss. It's as safe as any pre-crypto, single company e-currencies. All of which died. The only thing they have going for them is that they managed to place thrmselves as currency of the crypto market.
- yebyen 5y ago
  Stable coins like Tether are not interesting, for precisely the reason you stated. DAI is decentralized, not like Tether. Stable coins with centralized generation are not interesting.
- woile 5y ago
  Because not all depend on a company buying at personal loss. DAI has a complex mechanism (at least to me). To keep itself oscillating around 1usd. https://en.m.wikipedia.org/wiki/Dai_(cryptocurrency) https://en.m.wikipedia.org/wiki/Dai_(cryptocurrency)
  - scotty79 5y ago
    DAI looks interesting. What about Binance USD, USD Coin, Terra USD, TrueUSD, Paxos Standard, Fei Protocol, Liquidity USD, Frax, sUSD, USDX [Kava], mStable USD? How many of those try to do something interesting and how many are just single entity backed coins like Tether?
martindale 5y ago
Stablecoins reinforce dependence on the State, as they further entrench the fiat system that Bitcoin was meant to replace. It seems to me that this, and the rest of the "Decentralized Finance" movement is not intending to replace the current financial system, but rather reinforce it.
noelsusman 5y ago
I don't think financial innovation is the answer to preventing another financial crisis considering that's exactly what caused the 2008 crisis.
jbgt 5y ago
If you think DAI is exciting, check out Liquity : it's entirely managed by smart contracts and economic mechanisms, with no governance managing interest rates like with Maker. One Explainer video with the founder: https://www.youtube.com/watch?v=bXLTE-5BkhA https://www.youtube.com/watch?v=bXLTE-5BkhA I think DeFi is really getting interesting.
- FabHK 5y ago
  A bulletproof algorithmic stable coin like IRON (dropped to $0.70) and SafeDollar (dropped to zero)? https://rekt.news/safedollar-rekt/ https://rekt.news/safedollar-rekt/ https://rekt.news/iron-finance-rekt/ https://rekt.news/iron-finance-rekt/
space_rock 5y ago
Algorithmic stable coins have a terrible history of failing. I wouldn't discredit tether, a simple redeemable token, then promote DAI. Also Ethereum contracts have a bad history. Their first launch they got hacked for $150 million USD and then reversed the pseudo decentralised network to try and get that money back

Marazan 5y ago

Isn't DAI backed by USDC and Tether in part?

xur17 5y ago
The debt ceiling for Tether is currently set to 0 [0] for dai. And USDC + other stablecoins do partially back it [1]. [0] https://daistats.com/#/collateral https://daistats.com/#/collateral [1] https://dune.xyz/SebVentures/maker---accounting_1 https://dune.xyz/SebVentures/maker---accounting_1
njade 5y ago
You are correct. Last time I checked, more than 50% backed by USDC. Makes no sense as the whole point of censorship resistance is defeated.
- capableweb 5y ago
  Where/how did you check this? >50% of USDC sounds unreasonably high.
- shawabawa3 5y ago
  from https://daistats.com/#/overview https://daistats.com/#/overview it's currently ~26% USDC It's also 200% collateralised so USDC could go to zero (or freeze all of the DAI locked USDC) without breaking the peg on DAI
hanniabu 5y ago
In part yes, along with many other assets. They've stated they'd like to lesson the use of stables as collateral and are still brainstorming solutions. The ability to add real estate as collateral should be interesting.

xur17 5y ago

> Blockchains like Ethereum are currently far more transparent than the state-sponsor US monetary system. I hope to live in a society where economic experiments can be executed, new lessons learned, and transparency maintained. If stablecoins are persecuted, the need for cryptographic zero-knowledge proofs will allow these systems to continue with far less transparency. This is the part that excites me about Ethereum, and also scares me when I hear talk of "regulation" for the space. By definition, a lot of the projects on Ethereum are a LOT more transparent than the traditional finance world. I can interact with something like DAI, and see exactly what backs it at every second of every day. I have an idea of what would happen if certain assets that backed it dropped too quickly. With most of the traditional finance world, it's all very grey and hidden. I'm told that there is regulation "protecting me", but in a lot of cases that regulation doesn't really accomplish its goal and instead acts as a moat.

sorbits 5y ago
> By definition, a lot of the projects on Ethereum are a LOT more transparent than the traditional finance world The important stuff is not transparent. For example, how do you know that Tether is backed by real USD? That Binance isn’t manipulating prices via wash trades? That the promises made about various coins are being upheld? etc. Crypto is reliving the era of https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking > With most of the traditional finance world, it's all very grey and hidden What specifically are you referring to with “traditional finance”?
- miohtama 5y ago
  > The important stuff is not transparent. For example, how do you know that Tether is backed by real USD? That Binance isn’t manipulating prices via wash trades? That the promises made about various coins are being upheld? etc. You are describing so called centralised finance (CeFi) whereas the most high quality Ethereum projects focus on decentralised finance (DeFi). DeFi tries to break any chains to opaque companies and have all actions happening transparently and auditable on-chain. However ones like Tether murky the waters a lot here.

mdorazio 5y ago

Devil's advocate: 2008 was bad because of regulatory failures (specifically deregulation). Lack of transparency was only part of the problem. So if you want to avoid 2008 in cryptocurrency, the answer would be more regulation, not less.

grenoire 5y ago
Right, OP, CDOs were also very innovative when they first got rolled out!
cwkoss 5y ago
Was 2008 an issue of lack of regulation or lack of enforcement? I thought it was more about "too big to fail" attitudes preventing enforcement from being fairly applied to the largest participants.
- LatteLazy 5y ago
  Too big to fair came after 2008. Before then it was assumed that if a large institution did fail it would be orderly and the system could take the shock. That turned out to be wrong when it did happen...
- jcranmer 5y ago
  It's a little unclear, because (like many things in public policy) there's several putative explanations for what caused the crises, peoples' preconceived notions color which ones they favor, and it's manifestly unclear who is right. And it should be remembered that "everyone" is a perfectly plausible answer. At a broader level, there is most consensus on the idea that the key failure in 2008 was that no one--neither investors nor creditors nor credit-rating agencies nor regulators--correctly understood the risk profiles of the new financial products, and things that were thought to be very safe or at least combined uncorrelated risk profiles suddenly started all taking in unison at the same time.
  - mullingitover 5y ago
    > It's a little unclear, because (like many things in public policy) there's several putative explanations for what caused the crises, peoples' preconceived notions color which ones they favor, and it's manifestly unclear who is right. I thought 2008's cause was perfectly clear: the banks all sold insurance policies on each other (in the form of credit default swaps) that they couldn't fulfill. When one bank went under due to bad bets in the market, this triggered policies that, if fulfilled, would bankrupt the next bank. That in turn bankrupted the next, and so on. People focus on the conditions that bankrupted the first bank, but that was just the final snowflake that happened to trigger the avalanche.

IncRnd 5y ago

> As a different matter, how can society say "2008 bad", which resulted in little economic progress, and then threaten problem solvers from making new solutions? Innovation is a hedge against regulator lethargy. What do you believe caused regulators of financial instruments to be created?

nprz 5y ago

> I hope to live in a society where economic experiments can be executed Totally read experiments as experts

Igelau 5y ago

> Tether is rat poison It would be very useful if we could kill vermin with it.

scotty79 5y ago

Why are stable coins interesting? It's basically a thing guaranteed by single entity that promises that if the price drops they will buy tether at personal loss. It's as safe as any pre-crypto, single company e-currencies. All of which died. The only thing they have going for them is that they managed to place thrmselves as currency of the crypto market.

yebyen 5y ago
Stable coins like Tether are not interesting, for precisely the reason you stated. DAI is decentralized, not like Tether. Stable coins with centralized generation are not interesting.
woile 5y ago
Because not all depend on a company buying at personal loss. DAI has a complex mechanism (at least to me). To keep itself oscillating around 1usd. https://en.m.wikipedia.org/wiki/Dai_(cryptocurrency) https://en.m.wikipedia.org/wiki/Dai_(cryptocurrency)
- scotty79 5y ago
  DAI looks interesting. What about Binance USD, USD Coin, Terra USD, TrueUSD, Paxos Standard, Fei Protocol, Liquidity USD, Frax, sUSD, USDX [Kava], mStable USD? How many of those try to do something interesting and how many are just single entity backed coins like Tether?

martindale 5y ago

Stablecoins reinforce dependence on the State, as they further entrench the fiat system that Bitcoin was meant to replace. It seems to me that this, and the rest of the "Decentralized Finance" movement is not intending to replace the current financial system, but rather reinforce it.

noelsusman 5y ago

I don't think financial innovation is the answer to preventing another financial crisis considering that's exactly what caused the 2008 crisis.

jbgt 5y ago

If you think DAI is exciting, check out Liquity : it's entirely managed by smart contracts and economic mechanisms, with no governance managing interest rates like with Maker. One Explainer video with the founder: https://www.youtube.com/watch?v=bXLTE-5BkhA https://www.youtube.com/watch?v=bXLTE-5BkhA I think DeFi is really getting interesting.

FabHK 5y ago
A bulletproof algorithmic stable coin like IRON (dropped to $0.70) and SafeDollar (dropped to zero)? https://rekt.news/safedollar-rekt/ https://rekt.news/safedollar-rekt/ https://rekt.news/iron-finance-rekt/ https://rekt.news/iron-finance-rekt/

space_rock 5y ago

Algorithmic stable coins have a terrible history of failing. I wouldn't discredit tether, a simple redeemable token, then promote DAI. Also Ethereum contracts have a bad history. Their first launch they got hacked for $150 million USD and then reversed the pseudo decentralised network to try and get that money back