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A couple months ago I was trying to figure out how they did “stablecoins” across multiple IRL currencies, which of course can fluctuate wildly against each othe

by biztos 4y ago

A couple months ago I was trying to figure out how they did “stablecoins” across multiple IRL currencies, which of course can fluctuate wildly against each other IRL. Their Discord helpfully explained that it’s just incentivized validator-oracles, which IMO is like crack candy for any crypto-Soros[0] out there. Not that I think this is what’s happened, it just stood out that the grand claims didn’t even have any fine print, you had to go actually ask the community, “hey um what about this apparent contradiction?” To their credit the community was super nice and helpful. [0]: I cite him as the world’s (former?) greatest currency speculator, not for his politics.

peteradio 4y ago
Well its not really a peg, more of a pigeon hole and when the pigeon goes in the hole we peg it, its pretty messy to be honest but we aren't really interested in pigeon holes are we? No, we are interested in pegging.
dragontamer 4y ago
These algorithmic stablecoins are just the CDO reinvented. You slice up the risk into different pools and play funny games with the risk. You can therefore build an AAA bond out of subprime mortgage crap, and everything is fine Well, except for 2008 but who was paying attention to that anyway?
- dan-robertson 4y ago
  Dividing things into different senior/junior tranches or grouping together things to reduce uncorrelated risks is not a recent innovation. It’s been important to finance for a long time. I don’t think this has much to do with CDOs.
  - dragontamer 4y ago
    Fair. Still, CDOs are the most recent example where they went wrong on a very large scale, enough to wreck the USA's real estate market in 2008... and then topple down a lot of banks as well.
    - deleted 4y ago
      [deleted]
    - SkyMarshal 4y ago
      And nothing in cryptocurrency is remotely in that same league or that systemically risky… yet. I do worry about down the road, and hope all that hair-brained stablecoin and Ponzi schemes get broken and discredited before then.
      - bb88 4y ago
        2008 was caused by systemic risk. And geniuses in the banks failed to see it. So I guess, I fail to see why I should believe some $RANDOM_INTERNET_COMMENTER could figure out if an asset class has systemic risk.
        deleted 4y ago
        [deleted]
        renewiltord 4y ago
        Ironic, considering the source of quite a bit of profit was pretty much random internet blogger 3
        bb88 4y ago
        Ironic or tragically coincidental? There was a song about that a while back. The people I knew that made money off of it, like actually studied it and bet against the trend and were rewarded handsomely.
        sgt101 4y ago
        Apply Lenin's maxim... the banks made it through 2008; in fact Lehmans were really shocked that they got thrown under the bus. The miscalculation was that the authorities would act irrationally in the crisis and let a broker dealer go under. All the banks had tested this with LTCM and were confident that they would get bailed and could collect on both sides. They were mostly right. The lesson for me is that authorities need to act a bit like an old testament god. Some random smiting would change market behaviour significantly, and for the good.
  - logifail 4y ago
    > grouping together things to reduce uncorrelated risks is not a recent innovation Completely misjudging whether risks are correlated or not is not a recent innovation either.
- t_mann 4y ago
  Algorithmic stablecoins aren't anything like CDO's at all. They're more like a pawn shop acting as a bank.
  - itronitron 4y ago
    >> a pawn shop acting as a bank. I thought that is what CDOs are as well. From Investopedia -> A collateralized debt obligation (CDO) is a complex structured finance product that is backed by a pool of loans and other assets and sold to institutional investors.
    - t_mann 4y ago
      A bank issues money (deposits), and stablecoins try to produce something 'money-like'. CDO tranches promise different rates of return with different riskieness, they never really acted or were meant as money substitutes.
      - dragontamer 4y ago
        No one invests into stablecoins to get crappier versions of USD. They go into UST because they were promised 20% risk free APY from Anchor. CDOs (or really the generation of junior vs senior debt) showed these people how to cut up risks and provide returns for extended periods of time. Much like how CDOs cut up debts and moved risk around in funny ways. But no wealth was actually generated. At least with CDOs the subprime mortgages had high APY, it was just that the risk of widespread default was miscalculated. Furthermore, the senior debt tranches of CDOs had lower returns than the underlying. (3% 'risk free' for example, built out of 5% or 8% subprime mortgages) This Anchor / UST / Luna looks unsustainable. There is no financial instrument that offers 20% risk free returns in today's world.
        jboy55 4y ago
        There was a off hand comment in the Big Short book, about a Money Market fund, Reserve Primary Fund, that announced they couldn't pay back all debits, during the worst of the 2008 crisis. It was, "Money Markets weren't cash -- they paid interest, and thus bore risk, ..." Its interesting to note that Money Markets pay out <1% interest now. When I searched for Money Markets to get the %, I got an Ad for "Donut" touting a 7% APY DeFi. They advertise they put money into StableCoins and earn a return. Customer Quote on the page, "I make so much money on interest, I can pay rent". My god, the collapse will be huge.
- deleted 4y ago
  [deleted]
JacobAldridge 4y ago
"Crypto-Soros" is an excellent reference; I believe some of the Pound's fundamental weakness stemmed from a period of high inflation and low interest rates.
deleted 4y ago
[deleted]

by biztos 4y ago

peteradio 4y ago

Well its not really a peg, more of a pigeon hole and when the pigeon goes in the hole we peg it, its pretty messy to be honest but we aren't really interested in pigeon holes are we? No, we are interested in pegging.

dragontamer 4y ago

These algorithmic stablecoins are just the CDO reinvented. You slice up the risk into different pools and play funny games with the risk. You can therefore build an AAA bond out of subprime mortgage crap, and everything is fine Well, except for 2008 but who was paying attention to that anyway?

dan-robertson 4y ago
Dividing things into different senior/junior tranches or grouping together things to reduce uncorrelated risks is not a recent innovation. It’s been important to finance for a long time. I don’t think this has much to do with CDOs.
- dragontamer 4y ago
  Fair. Still, CDOs are the most recent example where they went wrong on a very large scale, enough to wreck the USA's real estate market in 2008... and then topple down a lot of banks as well.
  - deleted 4y ago
    [deleted]
  - SkyMarshal 4y ago
    And nothing in cryptocurrency is remotely in that same league or that systemically risky… yet. I do worry about down the road, and hope all that hair-brained stablecoin and Ponzi schemes get broken and discredited before then.
    - bb88 4y ago
      2008 was caused by systemic risk. And geniuses in the banks failed to see it. So I guess, I fail to see why I should believe some $RANDOM_INTERNET_COMMENTER could figure out if an asset class has systemic risk.
      - deleted 4y ago
        [deleted]
      - renewiltord 4y ago
        Ironic, considering the source of quite a bit of profit was pretty much random internet blogger 3
        bb88 4y ago
        Ironic or tragically coincidental? There was a song about that a while back. The people I knew that made money off of it, like actually studied it and bet against the trend and were rewarded handsomely.
      - sgt101 4y ago
        Apply Lenin's maxim... the banks made it through 2008; in fact Lehmans were really shocked that they got thrown under the bus. The miscalculation was that the authorities would act irrationally in the crisis and let a broker dealer go under. All the banks had tested this with LTCM and were confident that they would get bailed and could collect on both sides. They were mostly right. The lesson for me is that authorities need to act a bit like an old testament god. Some random smiting would change market behaviour significantly, and for the good.
- logifail 4y ago
  > grouping together things to reduce uncorrelated risks is not a recent innovation Completely misjudging whether risks are correlated or not is not a recent innovation either.
t_mann 4y ago
Algorithmic stablecoins aren't anything like CDO's at all. They're more like a pawn shop acting as a bank.
- itronitron 4y ago
  >> a pawn shop acting as a bank. I thought that is what CDOs are as well. From Investopedia -> A collateralized debt obligation (CDO) is a complex structured finance product that is backed by a pool of loans and other assets and sold to institutional investors.
  - t_mann 4y ago
    A bank issues money (deposits), and stablecoins try to produce something 'money-like'. CDO tranches promise different rates of return with different riskieness, they never really acted or were meant as money substitutes.
    - dragontamer 4y ago
      No one invests into stablecoins to get crappier versions of USD. They go into UST because they were promised 20% risk free APY from Anchor. CDOs (or really the generation of junior vs senior debt) showed these people how to cut up risks and provide returns for extended periods of time. Much like how CDOs cut up debts and moved risk around in funny ways. But no wealth was actually generated. At least with CDOs the subprime mortgages had high APY, it was just that the risk of widespread default was miscalculated. Furthermore, the senior debt tranches of CDOs had lower returns than the underlying. (3% 'risk free' for example, built out of 5% or 8% subprime mortgages) This Anchor / UST / Luna looks unsustainable. There is no financial instrument that offers 20% risk free returns in today's world.
      - jboy55 4y ago
        There was a off hand comment in the Big Short book, about a Money Market fund, Reserve Primary Fund, that announced they couldn't pay back all debits, during the worst of the 2008 crisis. It was, "Money Markets weren't cash -- they paid interest, and thus bore risk, ..." Its interesting to note that Money Markets pay out <1% interest now. When I searched for Money Markets to get the %, I got an Ad for "Donut" touting a 7% APY DeFi. They advertise they put money into StableCoins and earn a return. Customer Quote on the page, "I make so much money on interest, I can pay rent". My god, the collapse will be huge.
deleted 4y ago
[deleted]

JacobAldridge 4y ago

"Crypto-Soros" is an excellent reference; I believe some of the Pound's fundamental weakness stemmed from a period of high inflation and low interest rates.

deleted 4y ago

[deleted]