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I've asked people questions about stablecoins before on other fora, and I get the impression that even if they maintain their peg, they wouldn't be useful to me

I've asked people questions about stablecoins before on other fora, and I get the impression that even if they maintain their peg, they wouldn't be useful to mere mortals as opposed to big crypto exchanges. Just so that others and myself can be absolutely clear, what are USD-pegged stablecoins for? No snarky answers, please. I ask this because: - you can't actually shop in your supermarket using stablecoins - there is more risk to them than holding USD - there is no increase in privacy because blockchains are public ledgers - it's not bankless because the stablecoin issuer is effectively a (poor) bank - it doesn't bypass KYC or AML because a regulator can decide that stablecoins are effectively currency. Also, Bitfinex requires their KYC forms to be filled out before you can withdraw stablecoins, making them no better than fiat, at least within the context of that exchange. If other crypto exchanges are like this, then you are better off converting to fiat every single time. From discussions with people, this appears to be a weird dance that means regulators can't regulate, for some reason.

k__ 4y ago
You gotta keep them in a non-custodial wallet and they're less volatile than non-stablecoins.
- ogogmad 4y ago
  sigh This is the bullshit non-answer I'm used to. > You gotta keep them in a non-custodial wallet Bullshit. That's called a bank. Turn it into cash and stick it in a normal bank.
  - k__ 4y ago
    Why would I want to do that?
    - ogogmad 4y ago
      Stick it in an ordinary bank? Because that's insured, and therefore strictly safer than a "stable" coin. Beats your "non-custodial wallet".
  - mattdesl 4y ago
    non-custodial is the opposite of a bank.
    - ogogmad 4y ago
      No. Being "non-custodial" means you don't have the risk of the exchange going down. But the risk of the stablecoin losing its value is greater than your bank having a bank run. So if you don't want risk, turn it into cash and keep it in your bank. Otherwise, what the hell do you want from "non-custodial"? And why can't I ever get a straight answer.
      - mattdesl 4y ago
        Non-custodial just means you own and control the asset by virtue of being the only person with the private key. A similar analogy is web servers. Most users are fine to run their website on AWS, but some users would like the ability to host their own servers without dependence on a business corporation. The reasons for doing so might be varied, despite the additional burden of maintenance/costs and higher risk of downtime. A system where this option is possible is better than a system where this option is not possible. A specific financial example of where custody might prove problematic even in a developed country (where your currency, government, and banks is not causing you financial hardship) is escheat laws[1]. You purchase a stock, mostly forget about it, and come back several years to find that the state has taken control of it and sold it to generate revenue for itself. Some users might prefer to have non-custodial ownership over that stock, despite the additional maintenance burden. There are other features of ERC20 tokens that you cannot easily achieve with fiat; which may be another reason to hold stablecoins. Obviously if somebody wishes to avoid risk entirely, and they have access to a suitable bank and government, they should stick with a fiat custodial account and not purchase any assets. [1] https://www.npr.org/2022/05/04/1096726920/escheat-show-classic https://www.npr.org/2022/05/04/1096726920/escheat-show-class...
        ogogmad 4y ago
        > A specific financial example of where custody might prove problematic even in a developed country (where your currency, government, and banks is not causing you financial hardship) is escheat laws. Doesn't explain Tether, which does have custody. The market cap of Tether is something truly enormous. I just don't know why and what for. Any explanation of stablecoins will have to explain the use cases and market cap of Tether.
- ogogmad 4y ago
  OK, to summarise: It's for transferring USD between exchanges without cashing out first. Supposedly, cashing out first costs money and takes time, and stablecoins can do between-exchange transfers faster and cheaper. But then why does it use blockchain? Blockchains are really slow, and transaction fees are bloody huge. There's also no privacy on a blockchain. This doesn't need a blockchain to happen. Why does this bullshit use blockchains? It's also for keeping your money in a "non-custodial wallet". But that's basically a motherf---ing bank. Just cash out and stick your money in a bank. It's also for "smart contracts". But BTC barely supports smart contracts.
  - k__ 4y ago
    "Blockchains are really slow, and transaction fees are bloody huge. There's also no privacy on a blockchain." Depends largely on the chain. Your arguments seem like you never had the pleasure in paying international money transfer fees and wait days for it to go through. Could it be that you're living in a rich western country?
mattdesl 4y ago
> what are USD-pegged stablecoins for? No snarky answers, please simply put: mitigating price volatility of the base token. rather than only holding an asset that has huge swings per day, you can hold an asset that has minuscule swings per day. this might be useful for tax purposes, payments & donations, or just to balance your portfolio. unlike fiat this has all the features of ERC20 and self-custody. DAI, USDC and RAI are all fairly interesting and make different choices and trade-offs to stabilize their price. all stablecoins do carry risk though; if you want a risk-free coin then just convert to fiat.
- ogogmad 4y ago
  > simply put: mitigating price volatility of the base token Then cash it out and put it in your bank. OMG. > this might be useful for tax purposes, How?? > payments You can't pay for groceries. > & donations, Your donee won't be able to get groceries. > or just to balance your portfolio. But it pays no dividends, so it's not really part of any portfolio, and it's a poor man's cash. > unlike fiat this has all the features of ERC20 And what are those? And can those be achieved in other ways? > and self-custody. What the hell does this mean? > DAI, USDC and RAI are all fairly interesting Oh, indeed! > and make different choices and trade-offs to stabilize their price. But I still don't know why you need this!!! > all stablecoins do carry risk though; if you want a risk-free coin then just convert to fiat. Oh, absolutely. [addition] I'm coming more from the BTC direction, where smart contracts are very limited. Then I really don't know what stablecoins are for. From an ETH direction, stablecoins might make sense as a way for smart contracts to operate on USD, assuming smart contracts are actually useful for something that can't be done better in other ways.
  - mattdesl 4y ago
    Perhaps one example is Endaoment[1], which automatically converts ETH payments to USDC to mitigate market volatility and ensure beneficiaries receive donations in dollar amounts. This is also good from a tax perspective, as businesses report income based on the USD price of an asset at the time it is received, not based on the price of that asset later when it may be disposed. Also see Stripe USDC payouts[2]. Some users may prefer this to receiving payments in a PayPal account. [1] https://app.endaoment.org/ https://app.endaoment.org/ [2] https://stripe.com/newsroom/news/crypto-payouts https://stripe.com/newsroom/news/crypto-payouts
netheril96 4y ago
The primary reason people buying stable coins is that most crypto exchanges only have trade pairs in crypto against another crypto. The second reason is that some services offer high interest for stable coins. The third reason is to bypass banks. For instance some prostitutes accept USDC as banks do not open accounts for them.
ddrdrck_ 4y ago
In most (all ?) countries except US, you are not taxed for crypto to crypto conversion. However you are taxed when you convert crypto to fiat. For example if you want to secure your bitcoins benefits by converting them to 1M USD, in France you should pay 300k USD (30% flat tax). But if you convert them to 1M UST, or USDT, or USDC, or whatever, then you pay nothing. Note this is not tax evasion. At the end if you want to buy something useful (e.g. a house) with your crypto assets, you will still need to convert them to fiat and to pay taxes. This is just a way of securing volatile crytpo assets.
hogrider 4y ago
Apparently it's literally just for staking. As a south american it would be very hard for me to invest any dollars in stocks or whatever compared to staking these stablecoins in my local exchange. A few taps and they will take my money. The traditional financial system literally won't take my money due to them thinking I'm a drug kingpin or something.

k__ 4y ago

You gotta keep them in a non-custodial wallet and they're less volatile than non-stablecoins.

ogogmad 4y ago
sigh This is the bullshit non-answer I'm used to. > You gotta keep them in a non-custodial wallet Bullshit. That's called a bank. Turn it into cash and stick it in a normal bank.
- k__ 4y ago
  Why would I want to do that?
  - ogogmad 4y ago
    Stick it in an ordinary bank? Because that's insured, and therefore strictly safer than a "stable" coin. Beats your "non-custodial wallet".
- mattdesl 4y ago
  non-custodial is the opposite of a bank.
  - ogogmad 4y ago
    No. Being "non-custodial" means you don't have the risk of the exchange going down. But the risk of the stablecoin losing its value is greater than your bank having a bank run. So if you don't want risk, turn it into cash and keep it in your bank. Otherwise, what the hell do you want from "non-custodial"? And why can't I ever get a straight answer.
    - mattdesl 4y ago
      Non-custodial just means you own and control the asset by virtue of being the only person with the private key. A similar analogy is web servers. Most users are fine to run their website on AWS, but some users would like the ability to host their own servers without dependence on a business corporation. The reasons for doing so might be varied, despite the additional burden of maintenance/costs and higher risk of downtime. A system where this option is possible is better than a system where this option is not possible. A specific financial example of where custody might prove problematic even in a developed country (where your currency, government, and banks is not causing you financial hardship) is escheat laws[1]. You purchase a stock, mostly forget about it, and come back several years to find that the state has taken control of it and sold it to generate revenue for itself. Some users might prefer to have non-custodial ownership over that stock, despite the additional maintenance burden. There are other features of ERC20 tokens that you cannot easily achieve with fiat; which may be another reason to hold stablecoins. Obviously if somebody wishes to avoid risk entirely, and they have access to a suitable bank and government, they should stick with a fiat custodial account and not purchase any assets. [1] https://www.npr.org/2022/05/04/1096726920/escheat-show-classic https://www.npr.org/2022/05/04/1096726920/escheat-show-class...
      - ogogmad 4y ago
        > A specific financial example of where custody might prove problematic even in a developed country (where your currency, government, and banks is not causing you financial hardship) is escheat laws. Doesn't explain Tether, which does have custody. The market cap of Tether is something truly enormous. I just don't know why and what for. Any explanation of stablecoins will have to explain the use cases and market cap of Tether.
ogogmad 4y ago
OK, to summarise: It's for transferring USD between exchanges without cashing out first. Supposedly, cashing out first costs money and takes time, and stablecoins can do between-exchange transfers faster and cheaper. But then why does it use blockchain? Blockchains are really slow, and transaction fees are bloody huge. There's also no privacy on a blockchain. This doesn't need a blockchain to happen. Why does this bullshit use blockchains? It's also for keeping your money in a "non-custodial wallet". But that's basically a motherf---ing bank. Just cash out and stick your money in a bank. It's also for "smart contracts". But BTC barely supports smart contracts.
- k__ 4y ago
  "Blockchains are really slow, and transaction fees are bloody huge. There's also no privacy on a blockchain." Depends largely on the chain. Your arguments seem like you never had the pleasure in paying international money transfer fees and wait days for it to go through. Could it be that you're living in a rich western country?

mattdesl 4y ago

> what are USD-pegged stablecoins for? No snarky answers, please simply put: mitigating price volatility of the base token. rather than only holding an asset that has huge swings per day, you can hold an asset that has minuscule swings per day. this might be useful for tax purposes, payments & donations, or just to balance your portfolio. unlike fiat this has all the features of ERC20 and self-custody. DAI, USDC and RAI are all fairly interesting and make different choices and trade-offs to stabilize their price. all stablecoins do carry risk though; if you want a risk-free coin then just convert to fiat.

ogogmad 4y ago
> simply put: mitigating price volatility of the base token Then cash it out and put it in your bank. OMG. > this might be useful for tax purposes, How?? > payments You can't pay for groceries. > & donations, Your donee won't be able to get groceries. > or just to balance your portfolio. But it pays no dividends, so it's not really part of any portfolio, and it's a poor man's cash. > unlike fiat this has all the features of ERC20 And what are those? And can those be achieved in other ways? > and self-custody. What the hell does this mean? > DAI, USDC and RAI are all fairly interesting Oh, indeed! > and make different choices and trade-offs to stabilize their price. But I still don't know why you need this!!! > all stablecoins do carry risk though; if you want a risk-free coin then just convert to fiat. Oh, absolutely. [addition] I'm coming more from the BTC direction, where smart contracts are very limited. Then I really don't know what stablecoins are for. From an ETH direction, stablecoins might make sense as a way for smart contracts to operate on USD, assuming smart contracts are actually useful for something that can't be done better in other ways.
- mattdesl 4y ago
  Perhaps one example is Endaoment[1], which automatically converts ETH payments to USDC to mitigate market volatility and ensure beneficiaries receive donations in dollar amounts. This is also good from a tax perspective, as businesses report income based on the USD price of an asset at the time it is received, not based on the price of that asset later when it may be disposed. Also see Stripe USDC payouts[2]. Some users may prefer this to receiving payments in a PayPal account. [1] https://app.endaoment.org/ https://app.endaoment.org/ [2] https://stripe.com/newsroom/news/crypto-payouts https://stripe.com/newsroom/news/crypto-payouts

netheril96 4y ago

The primary reason people buying stable coins is that most crypto exchanges only have trade pairs in crypto against another crypto. The second reason is that some services offer high interest for stable coins. The third reason is to bypass banks. For instance some prostitutes accept USDC as banks do not open accounts for them.

ddrdrck_ 4y ago

In most (all ?) countries except US, you are not taxed for crypto to crypto conversion. However you are taxed when you convert crypto to fiat. For example if you want to secure your bitcoins benefits by converting them to 1M USD, in France you should pay 300k USD (30% flat tax). But if you convert them to 1M UST, or USDT, or USDC, or whatever, then you pay nothing. Note this is not tax evasion. At the end if you want to buy something useful (e.g. a house) with your crypto assets, you will still need to convert them to fiat and to pay taxes. This is just a way of securing volatile crytpo assets.

hogrider 4y ago

Apparently it's literally just for staking. As a south american it would be very hard for me to invest any dollars in stocks or whatever compared to staking these stablecoins in my local exchange. A few taps and they will take my money. The traditional financial system literally won't take my money due to them thinking I'm a drug kingpin or something.