17 ms·

UST “Stablecoin” at $.43

181 points by irjustin 4y ago

tluyben2 4y ago
There are 100s of people popping up in reddit and twitter who seem to be suicidal over this (Luna+UST). Sad but there are people who put bizarre amounts of money they worked hard for (or borrowed) into this...
timcavel 4y ago
codefreeordie 4y ago
Turns out, just because something stays stable during peaceful times doesn't mean it's stable at all. And, indeed, looking at the mechanism by which UST was supposedly guaranteed to remain stable, it's clear that this day was inevitable.
- TedShiller 4y ago
  Hence Unstablecoin
joebob42 4y ago
does this explosion impact the broader crypto marker particularly? I know some of these platforms are interconnected in weird ways but don't know much about it. And is there any sensible world where it stabilizes at some value other than 0 or 1?
- JellyYelly 4y ago
  > does this explosion impact the broader crypto marker particularly? Yes, if a lot of btc is bought in this stable coin, and the stable coin is printed, to buy btc in order to pump up the btc price then if that stable coin loses its peg, it cannot be used to pump btc anymore. When Tether finally dies it'll take down btc and the whole industry with it
  - londons_explore 4y ago
    This particular crash doesn't seem to have impacted btc prices though. Although BTC has been trending downwards with most of the rest of the financial markets this week.
    - zydex 4y ago
      It has definitely impacted the BTC price. A ton of BTC was quickly sold off in order to try and support UST.
  - FabHK 4y ago
    You're referring to Tether (USDT), which has indeed been suspected of being printed to prop up BTC. This is about TerraUSD (UST).
- cheeseface 4y ago
  Tether (USDT) is the largest "stablecoin" and the most interesting one here. Tether (USDT) and USD Coin (USDC) have a combined market cap of ~120. The total "stablecoin" market cap is ~170B. UST was at ~18B before the collapse, so it does account around 10% of the market. Significant, but not the most important player.
  - sc68cal 4y ago
    Lehman Brothers was "not the most important player" and yet, look what its failure triggered.
  - cuteboy19 4y ago
    USDT has a circulating supply much greater than its market cap
uejfiweun 4y ago
Not sure how exactly this digital asset is financially intertwined with other assets, but at the very least I'd expect this to cause some significant negative sentiment within the markets. Anyone who's invested in a digital asset right now is watching this situation and thinking, could this happen to my money too? I'd guess that a sizeable portion of these people are going to end up selling. Also, anyone find it sus that these massive selloffs are happening exactly in the middle of the night for the US east coast?
- qayxc 4y ago
  > Also, anyone find it sus that these massive selloffs are happening exactly in the middle of the night for the US east coast? Not in the slightest. Time zones exist and it only goes to show that maybe a lot of tokens have been held oversea. The (crypto-) world doesn't just consist of the US, let alone the US east coast. If some (institutional) investors in Europe or Asia decided to liquidate their assets, that's exactly what you'd expect.
- JumpCrisscross 4y ago
  > sus that these massive selloffs are happening exactly in the middle of the night for the US east coast? Not totally. Algorithmic stablecoins have two equilibria: 0 and 1. Zero is presumably permanent. Small dislocations from 1 are fixable, but require arbitrage bandwidth. That bandwidth has a limit that varies based on participation. Considering this, it’s almost expected that the peg would break more violently when most arbitrageurs are asleep. And given a single unfixed deviation from 1 pushes the system to 0, and given zero is a permanent outcome, one would expect the long-run value of the system to be zero while governed by these rules. (Hence the push to accumulate unconnected reserves.)
reducesuffering 4y ago
Sister coin Luna gone from $88 to $5.80 in the last 7 days as they sell off to try to maintain the peg.
anm89 4y ago
was just at .38
- anm89 4y ago
  about to go below .3
  - formerly_proven 4y ago
    Dive! Dive! Dive!
cuteboy19 4y ago
Perpetual Money Machine broke :( Obviously tether and friends won't go down this path right?
- qayxc 4y ago
  Right? https://bit.ly/3FBA2fD https://bit.ly/3FBA2fD
  - mtmail 4y ago
    The obfuscated URL points to a meme image of a surprised person.
davidkuennen 4y ago
What does this mean?
- thematrixturtle 4y ago
  It means a lot of people who paid $1 for an asset that was supposed to be worth $1 now have 40 cents, and these people are not very happy about it. Also, that $1 valuation was supposed to be backed up by around $4 billion worth of bitcoin. If Terra (the company behind UST) starts selling bitcoin to prop up the valuation, the price of bitcoin will also tank. And since markets anticipate that this is what will happen, the price of bitcoin is already tanking, which reduces the value of the no-longer-$4B hoard, which means they would need to sell more, and you can see where this is going.
  - zydex 4y ago
    Much of those Bitcoin reserves have already been sold, causing most of the BTC price decrease.
    - deleted 4y ago
      [deleted]
  - landemva 4y ago
    >>> supposed to be backed up by around $4 billion worth of bitcoin. That is uninformed and incorrect. UST is supported by promise of conversion into LUNA at $1 per UST, so it is supported by convertibility. It is unwinding. I have not held either of these. Those not just making stuff up can read the docs: https://www.terra.money/intro-to-terra https://www.terra.money/intro-to-terra
    - zydex 4y ago
      Incorrect. UST is also supported by LFG Bitcoin reserves intended to defend the peg, so the term "backed up" is entirely appropriate.
    - thematrixturtle 4y ago
cheeseface 4y ago
The biggest Stablecoin, Tether, is also struggling (https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/). Their 3 month trend is clearly downwards.
- mike_d 4y ago
  That is pure FUD. In the last year there has been less than one tenth of a cent of movement. It is so stable the graph is incredibly zoomed in to show any movement at all.
  - ahahahahah 4y ago
    > In the last year there has been less than one tenth of a cent of movement That aged well. Tether hit $0.9935 hours after this comment.
    - jfk13 4y ago
      Looks like it dipped further to $0.9508, before mostly recovering (currently $0.997). Time will tell, I guess.
  - dvh 4y ago
    They should sell small amount at 0.5 once a month to normalize the charts
    - sfshaw 4y ago
      Like a periodic stress test to see how quickly things stabilize themselves?
      - FabHK 4y ago
        No, just to change the scale on the vertical axis of the graph when you look at the 3M (or longer) chart.
  - throwaway290 4y ago
mike_d 4y ago
It is worth clarifying that this is not USDT, the actual stable coin most people use.
- hh3k0 4y ago
  USDT is a scam and will implode eventually, too.
  - mike_d 4y ago
    They now publish quarterly audits alternating between major accounting firms, and publicly disclose the breakdown of backing assets. Less than 7% is "other," including digital assets. https://tether.to/en/transparency/#reports https://tether.to/en/transparency/#reports Edit: I falsely claimed they were alternating firms, but it turns out it was just a name change recently. That is my bad.
    - graeme 4y ago
      Attestations, not audits. Tether is able to move assets between accounts on attestation day to show backing, and has done so in the past. You can read all about it in the NYAG case Edit: to reply your edit, there was no recent name change. Tether really really wants to give the impression they’re audited, but they have never done one It’s not just a name change. The purpose of the attestations is to create the illusion of an audit.
    - cheeseface 4y ago
      They have had the same accounting firm for the past 5 reports, not alternating. " MHA Cayman" is just the new name for "Moore Cayman". https://www.coindesk.com/markets/2022/01/26/tethers-new-accounting-firm-is-the-old-one-with-baggage/ https://www.coindesk.com/markets/2022/01/26/tethers-new-acco...
      - JumpCrisscross 4y ago
        Also, even per their “audits,” a good deal of their assets are in crypto, which means it’s presently uncollateralised to the tune of tens of billions of dollars.
teknopaul 4y ago
Stable coins are meant to be backed by dollars, but the people running them haven't done that, they spent the reserves hoping no one would notice. Looks like some people have.
- ohiovr 4y ago
  That is basically how every fractional reserve banking system ends.
  - rchaud 4y ago
    An unregulated fractional reserve banking system with no minimum reserve requirements, and with no lender of last resort.
  - pjc50 4y ago
    .. which is why in the real world central banks are there to act as lenders of last resort. If there's a bank run, print money and lend it to the banks until the run stops. This is separate from the issues facing stablecoins. I'm reminded of the British government's failed attempt to maintain a "stablepound" against the "stablemark", in the proto-stablecoin mechanism known as the ERM. https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday Many of the same features are there. Spend the reserves! Increase the interest rates! Ultimately they had to de-peg. The person on the other side of that trade? George Soros. Yes, really.
- Nursie 4y ago
  In this case it seems to have been much more complex than that. There was UST, which was supposed to be stable, and a linked coin Luna which was a form of balancing token, with smart contracts allowing conversion between the two, with the Luna exchange rate supplied by an oracle. If UST starts to lose value, buy pressure is created because someone could buy 100 of them at (say) $39 and immediately convert to $100 of Luna. If it starts to rise, say to $1.10, you use Luna to convert to UST at a discount and then sell it to turn a profit. There were multiple other mechanisms to this, including one that involved staking your UST for interest and getting Anchor tokens, so that others could take loans. Anchor would give a 20% interest rate(!) and then there was something about loan defaults and buying collateral at a discount and ... Massively complex, and one of those things that works fine, until one day it doesn't.
sixhobbits 4y ago
Matt Levine on point again with more information about how this works and why it stopped [0]. I liked the comparison between a bank run and a 'death spiral'. > A bank run is a fairly mild event compared to a death spiral. In a bank run, your $1 stablecoin is backed by some pool of assets that are worth something; a rush to withdraw money leads to fire sales that depress their value, but their value derives from something other than confidence in the stablecoin. In a death spiral, the whole system is built on confidence in the stablecoin; if that confidence evaporates then there is no floor at all on the value. [0] https://archive.ph/slgNt https://archive.ph/slgNt
- sc68cal 4y ago
  > And so the LFG bought a bunch of Bitcoin and promised to use it to defend Terra’s peg to the dollar. If one Terra goes down to $0.90, instead of turning Terra into Luna and selling them in a death spiral, the LFG can buy Terra for $0.90 and pay for it in Bitcoin. If the LFG has enough Bitcoin, and if Bitcoin’s price holds up, then it can defend the peg and keep the price of Terra close to $1. So they've basically re-invented fractional reserve banking, with Terra/Luna taking the place of bank notes in old-timey banking, and BTC being the gold bars sitting in bank vaults, in this metaphor.
- Animats 4y ago
  Yes. Stablecoins have two stable points: 1 and 0.
  - neonnoodle 4y ago
    The space is ripe for a quantum stablecoin
- nrp 4y ago
  This is truly wild to watch happening in real time. At the time he published his post, UST was around $0.90 and the recovery path to near term stability at $1 seemed plausible. At the time of the HN post, it was at $0.30 and the death spiral to $0 seemed plausible. As I write this comment, it's sitting at just about $0.50, which is obviously not a stable position for a stablecoin. It seems self-evident that a stablecoin ever being closer to $0 than $1 should destroy confidence in it, but apparently not immediately!
imron 4y ago
The crypto dump before the pump now that Elon has bought Twitter.
- kennywinker 4y ago
  Idk what you expect him to do at the helm of twitter, but tipping your favourite tweeter in dogecoin isn't exactly going to prop up the entire market.
  - imron 4y ago
    I'm mostly being facetious, but the cynic in me does wonder about the timing of the current slump. And yeah, Musk tweeting that Twitter will accept Dogecoin isn't going to prop up the market in its current falling state, but once the market depresses somewhat and then stabilizes, Musk announcing support for Twitter+crypto would be enough to start pumping up the market again.
    - thawaya3113 4y ago
      and this is why cryptocurrencies as marketed today are a scam. Sure, Twitter will “accept” Dogecoin. But the only reason people have Dogecoin is because they expect its value to rise, and rise dramatically. So why would anyone pay for whatever they’re paying in Dogecoin, when they expect the value of Dogecoin to increase in the future? So, for example, if I’m trying to make a transaction for $10. And let’s say the dollar loses 10% value due to inflation in a year, while Dogecoin increases by 20% in a year. If I pay for the transaction in USD, a year later in 2023, that $10 USD would be worth $9 in 2022 USD. If I pay for it in Dogecoin, however, the $10 worth of Dogecoin would a year later have been worth about $10.80 in 2022 USD. If you think the value of crypto is going up then it makes absolutely no sense to use crypto for transactions.
      - emteycz 4y ago
        Why would they not pay? Perhaps they don't care about the .8 USD they'll lose the opportunity to gain?
byecomputer 4y ago
> TerraUSD (UST) is pegged to the price of a dollar and is secured by Terra (LUNA). LUNA is an asset reserve that ensures the stability and security of the UST through the seigniorage process (income received from an emission of money). Sounds like the peg was more-or-less a perpetual motion device that relied on a strong wind
- trhway 4y ago
  Basically the same way how they made AAA bonds "secured" by garbage bonds, and that resulted in the crash of 2008.
  - qeternity 4y ago
    No, absolutely not what caused the crash. Loose monetary policy caused the crash.
    - arcticbull 4y ago
      Sure, if you put on your tinfoil hat. What caused the 2008 crash was nothing to do with loose monetary policy. If you recall, that began in earnest after, and in response to, the crash. It was loose regulatory policy. In no small part that Clinton rolled back Glass-Steagall in 1999. [1] Toxic mortgage-backed CDOs didn't have to become a systemic risk in the first place. There were a lot of contributing factors, but low interest rates weren't really top 10. [1] https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass–Steagall_Act https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the...
      - qeternity 4y ago
        > Toxic mortgage-backed CDOs didn't have to become a systemic risk in the first place. The problem had nothing to do with CDOs. No matter how you slice and dice risk, you never increase/decrease it. Someone would have owned the underlying MBS. The issue was that the Blue Dog Democrats in the 90s decided with Alan Greenspan that homeownership should be incentivized. This created a housing bubble which ultimately is what caused the GFC.
deleted 4y ago
[deleted]
hasperdi 4y ago
Could someone explain (like I'm 5) why would I want to have stablecoin instead of the real currency?
- thawaya3113 4y ago
  Even scammers need to feed their kids.
- Nursie 4y ago
  Because you want to operate in a way that doesn't involve real currency, either on an exchange without any traditional banking arrangements, or perhaps one that doesn't wish to be regulated as dealing with real currency. You may wish to avoid KYC/AML rules, you may want to avoid potential taxes incurred when changing to and from real currency, the exchange may wish to avoid reporting requirements too. You may wish to transfer large-ish sums around between exchanges without any traditional authorities being involved, and in a way that doesn't expose you to volatility. More cynically, exchanges may or may not be able to get these stable-currency tokens (and this is more of a tether concern than UST) at a significant discount compared to real currency, or the exchange may wish to invent currency-like instruments that can be used on its platform without the need to hold real currency reserves.
- quickthrower2 4y ago
  Day trading bitcoin. Broke: Transfer $1000US to exchange. Wait 3 days. Buy. Sell. Want to buy another coin. Need a new exchange. Withdraw. Wait 3 days. Send to new exchange. Wait 3 days. Buy new coin. Pay income tax. Send passport photos to anonymous stranger. Woke: Transfer $1000US to exchange. Wait 2 days. Buy tether. Buy sell wrapped instruments on different chains using smart contracts NOT exchanges. Never wait for traditional finance. No KYC from strangers in foreign places. No income tax! Satire some, but true. TLDR: Smoother gambling.
  - cxx 4y ago
    Wouldn't you still have to go through KYC when you cash out your USDT?
moondowner 4y ago
Here's a thread summarising how this happened. https://threadreaderapp.com/thread/1524006086147252227.html https://threadreaderapp.com/thread/1524006086147252227.html
- thematrixturtle 4y ago
  > - borrowed $3bn in $btc > - spread around some fud about peg and bank runs > - dumped the fuck out of their $3bn $btc on market to trigger wider panic I'm sorry, but this is deep in /r/wallstreetbets conspiracy territory. The Occam's razor explanation is that the infinite 20% returns Luna/Anchor Ponzi is actually collapsing and that's what's triggering the runs.
  - Waterluvian 4y ago
    And is it so surprising that the Ponzi scheme collapses when the general economy is having a bad time?
    - unicornmama 4y ago
      It has more to do with lending rates. The 10 year peaked above 3% and ibonds now yield 9.6%. Ponzi’s are getting a one-two punched. Suckers now have alternatives to seek better returns. Scammers and exploiters now pay to leverage up ponzi run ups.
      - Waterluvian 4y ago
        Fair enough. I just see it all as one interrelated ball of spaghetti economy.
  - littlestymaar 4y ago
    This kind of market manipulation does happen all the time in the cryptocurrencies trading world though. That doesn't mean it's the most likely explanation in this case (as there was a literal Ponzi scheme behind all this !), but it's not completely impossible either.
paganel 4y ago
And of course there are now posts like this one [1] topping the dedicated sub-reddit. [1] https://old.reddit.com/r/terraluna/comments/un0fni/for_those_considering_suicide_heres_my_story_of/ https://old.reddit.com/r/terraluna/comments/un0fni/for_those...
- frays 4y ago
  Why do people enjoy reading these types of stories so much?
  - paganel 4y ago
    I personally didn't enjoy it, I post it more as a sign that, maybe, the powers that be (SEC? some other institution) will, somehow, intervene. People killing themselves because of financial losses that could have been prevented had some prior regulations had been in place does not look good for those institutions I mentioned (SEC and the others). Or maybe the people at those institutions (and the people supporting the people at those institutions) just don't care anymore about this type of events and about how it reflects on the whole "ecosystem".
    - rmbyrro 4y ago
      I don't think regulation alone will solve it. Let's not forget the massive Madoff ponzi scheme in a highly regulated space...
      - harambae 4y ago
        Someone on HN pointed out recently that a lot more Madoff ponzi money was recovered than one might expect. https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Madoff_investment_scandal https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Mad...
        rmbyrro 4y ago
        It doesn't require regulation to recover funds from fraudsters. [1] I have the opinion that a higher likelihood of getting caught and facing prison would be more effective than regulators that can sometimes be easily tricked for years. [1] https://news.ycombinator.com/item?id=30260787 https://news.ycombinator.com/item?id=30260787
deleted 4y ago
[deleted]
bambax 4y ago
> If I made up [Luna] and [Terra] on my computer and said to you “I will give you the number 10 billion in this Excel spreadsheet if you give me 1 million U.S. dollars,” you would say no, and if I raised my offer to 400 quadrillion you would not change your mind. https://www.bloomberg.com/opinion/articles/2022-05-10/another-algorithmic-stablecoin-isn-t https://www.bloomberg.com/opinion/articles/2022-05-10/anothe...
- flipchart 4y ago
  https://archive.ph/KaAHJ https://archive.ph/KaAHJ
- throwaway4good 4y ago
  Terra/Luna is just one of many algorithmic stable coins out there. The biggest AFAIK is still Maker/DAI which is orderly unwinding at the moment: https://coinmarketcap.com/currencies/maker/ https://coinmarketcap.com/currencies/maker/ https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/ (Click one year and market cap to see the unwinding.)
  - emrx 4y ago
    Institutional stables (USDC,USDT,BUSD) are backed by traditional USD (more or less audited) Algorithmic stables are vulnerable to things like what happened to ust because the coin basket has to be balanced always, DAI tends to be more or less stable because it has a big part of its reserves in USDC so its more like a wrapped USDC with a little ETH. The more damaged ones were people who felt attracted for the completely unrealistic 20% interest. However, this absolute dump was coordinated by big funds, they saw they could borrow and dump whatever, nobody would save the peg.
    - CryptoPunk 4y ago
    - fubb1 4y ago
      all stablecoins are 100% scam... they dont have the reserve they wont pay the money they are not backed...
Ecko123 4y ago
mcintyre1994 4y ago
It looks like their reserve wallet is now empty: https://bitinfocharts.com/bitcoin/wallet/Luna-LFG https://bitinfocharts.com/bitcoin/wallet/Luna-LFG I'm not sure what if anything they have left elsewhere to try to prop this up. But if they deployed all those reserves yesterday to get it back to $0.91-ish then I don't see how they recover it again.
rvz 4y ago
This chaos will only speed up stablecoin regulations [0]. [0] https://techcrunch.com/2022/05/10/us-treasury-secretary-janet-yellen-pushes-for-stablecoin-regulation-by-end-of-year https://techcrunch.com/2022/05/10/us-treasury-secretary-jane...
RadixDLT 4y ago
is xusd any better? https://coinmarketcap.com/currencies/xusd/ https://coinmarketcap.com/currencies/xusd/
- jfk13 4y ago
  No.
  - RadixDLT 4y ago
    what do you mean no?
frouge 4y ago
ELI5 Why stable coin are a thing when I can trade bitcoins to USD?
- pjc50 4y ago
  Some of the "stablecoins" are implemented on top of another blockchain, in such a way that it's possible to do crypto-to-stable transactions automatically fully within the blockchain system. That's attractive to the kind of people who want to build ever more complex financial machines. It also provides a system that can pretend it's not subject to money laundering law.
- xboxnolifes 4y ago
  Fewer legal restrictions for a brokerage to hold a stablecoin than USD.
- aaaaaaaaata 4y ago
  Slippage, in a word.
- delaaxe 4y ago
  Some jurisdictions don't consider trades towards stablecoins as taxable events
- FabHK 4y ago
  You can remove your crypto price risk, while still remaining on-chain (and outside the traditional regulated banking system). Some people like that. ETA: Though, as some people are learning now, you're not actually removing your crypto price risk.
- lofatdairy 4y ago
  Here, $UST's justification was a 20% interest for holding. Thus, in theory, just by owning $UST, you make more than you would holding dollar bills (emphasis on "in theory"). Broadly speaking, the raison d'etre of stablecoins is liquidity. Interfacing between fiat and crypto is difficult for banking reasons and taxing reasons, but interfacing between crypto coins is easy. Thus, stablecoins are seen as a useful tool for both accounting, as well as being coins that are hedged against collapses (again, in theory).
nathias 4y ago
Synthetic stablecoins using economic games implemented in smart-contracts to achieve pegging are not magically 1:1 with the pegged asset (even a representative currency would break this ratio sometimes), they are a set of mechanisms to bring the currency towards this goal ratio. The problem isn't that UST is below peg, the problem is if it can't return above or at peg, this is the point where most synthstables fail, where they fall into a negative loop and just slowly die. However there are at least some that have not failed this, but have not been tested at these scales. Either way UST turns, we will know more about how we can make stable coins. Synthetic stablecoins are the most important technology of our time and a very large step for our species to organize ourselves.
- lilyball 4y ago
  > Synthetic stablecoins are the most important technology of our time and a very large step for our species to organize ourselves. What do you mean by this?
  - nathias 4y ago
    I mean the industrial model of the State and the organization of labor it provides that is being deteriorated by globalization will change significantly. Things change when people get the same tools the corporations have been playing around with for decades. Bad future: State owned CBDCs with types for different 'kinds' of people creating a society even more neofeudal Good future: Decentralized DAPPs organizing workers with shared interests regardless of their location and social capital
lvass 4y ago
This was a sad week for me. I've basically spent the last year working on Terra. Everything moves fast there, so many new and shiny things and people excited for them, most of which did work, until it didn't I guess. I always felt like it had permission to fail, moving fast breaks things, but it really hurt when it happened. I just removed my last asset there. I'll be eternally grateful to them. I didn't have good job prospects as a fresh engineer from a collapsing economy. They really had an use for an arbitrageur, I took notice and without asking any permission or having any knowledge or experience I was helping all these different markets there not falling off price, and perhaps I have a roof over my head thanks to that. I'm finally going to sleep since yesterday. I guess it's time to get a job, I just need to recover mentally.
- FabHK 4y ago
  This is an incarnation of big costs of the crypto/blockchain obsession: Some individuals put all their savings (or more) into crypto. Those early enough might have fared well, some of them extremely well. But it is not a miraculous value creating machine, but only a redistribution machine. For everyone that has done well, others have lost. The other cost is the massive amount of time and effort so many people sink into this that could have been spent on more productive things.
  - twirlock 4y ago
  - deltree7 4y ago
    If cryptoland is an island of it's own, it produces nothing that an outside consumer or corporation would pay money for. So, Revenue is $0 (sure there are intra-island transfers where some crypto-corp buys services from some other crypto-corp). However, crytpoland has plenty of costs. Electricity, exorbitant salaries, lambos, parties, marketing, compute, capital (servers, gpus). I'd even say to the tune of Billions of $$$. Now they have an additional cost, Interest So, someone has to fund cryptoland of these $Billion expense, Where does the money come from? Investors, Big and Small.
simonebrunozzi 4y ago
I've been following the "crypto" space for a good number of years now, and when stablecoins emerged, I thought that the model didn't make much sense. Back then, I thought that using a different collateral (e.g. US real estate), properly "locked", would have been much more interesting. Then eventually I co-founded a startup in 2017 [0] (but left quite early at the end of 2018), with the idea that the "city of the future" should have something to do with crypto and digital. The company had made a lot of progress since I left (I still have a small chunk of shares, otherwise not really affiliated with them anymore). Imagine if you could take a house worth, say, $100,000, then "lock" it in a "trust" controlled by a token (NFT, we used these back in 2017 when no one knew about them), and you can use up to a safe % of the house value as collateral for a stable coin (say 20%, or $20,000). The NFT acts as a "key" to the property. Fabrica found a clever way to do this, with the aforementioned trust. In a trust you can say that the beneficiary is whoever owns a certain NFT. You can "sell" a house (more properly, transfer control/benefit of the trust owning the house) with a simple transaction on the Ethereum blockchain. This would allow you to use the intrinsic value of a property (being a collateral), without any side effects, by simply "locking" the NFT associated with the property. The moment you want to "unlock" it, you give back the $20,000 and unlock the NFT, and then you can unwind the trust and go back to the original ownership structure. Or, change the trust so that the beneficiary is now a person, not an NFT. I thought this would be a revolution. Of course, it didn't happen (while I was at Fabrica we went through the 2018 "crypto winter" and that almost killed the company, then we had to part ways, and the team who was left struggled for a while before regaining some financial stability). We also decided we didn't want to do an ICO, because we thought most of these were scams, and it wasn't the right way to build trust with our customer base. Well, I hope this was interesting to read. [0]: https://fabrica.land/ https://fabrica.land/
- JumpCrisscross 4y ago
  > thought that using a different collateral (e.g. US real estate) All that was old is new again: “The newly created Rentenmark replaced the old Papiermark. Because of the economic crisis in Germany after the First World War, there was no gold available to back the currency. [Minister of Finance] Luther thus used [economist] Helfferich's idea of a currency backed by real goods. The new currency was backed by the land used for agriculture and business. This was mortgaged (Rente is a technical term for mortgage in German)…” https://en.m.wikipedia.org/wiki/Rentenmark https://en.m.wikipedia.org/wiki/Rentenmark
JumpCrisscross 4y ago
Super curious about the recent jump to ~50¢ [1], particularly given LUNA is almost monotonously beelining for zero [2]. Is price discovery quivering? Or is someone actually buying UST? [1] https://coinmarketcap.com/currencies/terrausd/ https://coinmarketcap.com/currencies/terrausd/ [2] https://coinmarketcap.com/currencies/terra-luna/ https://coinmarketcap.com/currencies/terra-luna/
- pjc50 4y ago
  Someone is probably having fun juggling the falling knives.

181 points by irjustin 4y ago

There are 100s of people popping up in reddit and twitter who seem to be suicidal over this (Luna+UST). Sad but there are people who put bizarre amounts of money they worked hard for (or borrowed) into this...

timcavel 4y ago

codefreeordie 4y ago

Turns out, just because something stays stable during peaceful times doesn't mean it's stable at all. And, indeed, looking at the mechanism by which UST was supposedly guaranteed to remain stable, it's clear that this day was inevitable.

TedShiller 4y ago
Hence Unstablecoin

joebob42 4y ago

does this explosion impact the broader crypto marker particularly? I know some of these platforms are interconnected in weird ways but don't know much about it. And is there any sensible world where it stabilizes at some value other than 0 or 1?

JellyYelly 4y ago
> does this explosion impact the broader crypto marker particularly? Yes, if a lot of btc is bought in this stable coin, and the stable coin is printed, to buy btc in order to pump up the btc price then if that stable coin loses its peg, it cannot be used to pump btc anymore. When Tether finally dies it'll take down btc and the whole industry with it
- londons_explore 4y ago
  This particular crash doesn't seem to have impacted btc prices though. Although BTC has been trending downwards with most of the rest of the financial markets this week.
  - zydex 4y ago
    It has definitely impacted the BTC price. A ton of BTC was quickly sold off in order to try and support UST.
- FabHK 4y ago
  You're referring to Tether (USDT), which has indeed been suspected of being printed to prop up BTC. This is about TerraUSD (UST).
cheeseface 4y ago
Tether (USDT) is the largest "stablecoin" and the most interesting one here. Tether (USDT) and USD Coin (USDC) have a combined market cap of ~120. The total "stablecoin" market cap is ~170B. UST was at ~18B before the collapse, so it does account around 10% of the market. Significant, but not the most important player.
- sc68cal 4y ago
  Lehman Brothers was "not the most important player" and yet, look what its failure triggered.
- cuteboy19 4y ago
  USDT has a circulating supply much greater than its market cap

uejfiweun 4y ago

Not sure how exactly this digital asset is financially intertwined with other assets, but at the very least I'd expect this to cause some significant negative sentiment within the markets. Anyone who's invested in a digital asset right now is watching this situation and thinking, could this happen to my money too? I'd guess that a sizeable portion of these people are going to end up selling. Also, anyone find it sus that these massive selloffs are happening exactly in the middle of the night for the US east coast?

qayxc 4y ago
> Also, anyone find it sus that these massive selloffs are happening exactly in the middle of the night for the US east coast? Not in the slightest. Time zones exist and it only goes to show that maybe a lot of tokens have been held oversea. The (crypto-) world doesn't just consist of the US, let alone the US east coast. If some (institutional) investors in Europe or Asia decided to liquidate their assets, that's exactly what you'd expect.
JumpCrisscross 4y ago
> sus that these massive selloffs are happening exactly in the middle of the night for the US east coast? Not totally. Algorithmic stablecoins have two equilibria: 0 and 1. Zero is presumably permanent. Small dislocations from 1 are fixable, but require arbitrage bandwidth. That bandwidth has a limit that varies based on participation. Considering this, it’s almost expected that the peg would break more violently when most arbitrageurs are asleep. And given a single unfixed deviation from 1 pushes the system to 0, and given zero is a permanent outcome, one would expect the long-run value of the system to be zero while governed by these rules. (Hence the push to accumulate unconnected reserves.)

reducesuffering 4y ago

Sister coin Luna gone from $88 to $5.80 in the last 7 days as they sell off to try to maintain the peg.

anm89 4y ago

was just at .38

anm89 4y ago
about to go below .3
- formerly_proven 4y ago
  Dive! Dive! Dive!

cuteboy19 4y ago

Perpetual Money Machine broke :( Obviously tether and friends won't go down this path right?

qayxc 4y ago
Right? https://bit.ly/3FBA2fD https://bit.ly/3FBA2fD
- mtmail 4y ago
  The obfuscated URL points to a meme image of a surprised person.

davidkuennen 4y ago

What does this mean?

thematrixturtle 4y ago
It means a lot of people who paid $1 for an asset that was supposed to be worth $1 now have 40 cents, and these people are not very happy about it. Also, that $1 valuation was supposed to be backed up by around $4 billion worth of bitcoin. If Terra (the company behind UST) starts selling bitcoin to prop up the valuation, the price of bitcoin will also tank. And since markets anticipate that this is what will happen, the price of bitcoin is already tanking, which reduces the value of the no-longer-$4B hoard, which means they would need to sell more, and you can see where this is going.
- zydex 4y ago
  Much of those Bitcoin reserves have already been sold, causing most of the BTC price decrease.
  - deleted 4y ago
    [deleted]
- landemva 4y ago
  >>> supposed to be backed up by around $4 billion worth of bitcoin. That is uninformed and incorrect. UST is supported by promise of conversion into LUNA at $1 per UST, so it is supported by convertibility. It is unwinding. I have not held either of these. Those not just making stuff up can read the docs: https://www.terra.money/intro-to-terra https://www.terra.money/intro-to-terra
  - zydex 4y ago
    Incorrect. UST is also supported by LFG Bitcoin reserves intended to defend the peg, so the term "backed up" is entirely appropriate.
  - thematrixturtle 4y ago

cheeseface 4y ago

The biggest Stablecoin, Tether, is also struggling (https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/). Their 3 month trend is clearly downwards.

mike_d 4y ago
That is pure FUD. In the last year there has been less than one tenth of a cent of movement. It is so stable the graph is incredibly zoomed in to show any movement at all.
- ahahahahah 4y ago
  > In the last year there has been less than one tenth of a cent of movement That aged well. Tether hit $0.9935 hours after this comment.
  - jfk13 4y ago
    Looks like it dipped further to $0.9508, before mostly recovering (currently $0.997). Time will tell, I guess.
- dvh 4y ago
  They should sell small amount at 0.5 once a month to normalize the charts
  - sfshaw 4y ago
    Like a periodic stress test to see how quickly things stabilize themselves?
    - FabHK 4y ago
      No, just to change the scale on the vertical axis of the graph when you look at the 3M (or longer) chart.
- throwaway290 4y ago

mike_d 4y ago

It is worth clarifying that this is not USDT, the actual stable coin most people use.

hh3k0 4y ago
USDT is a scam and will implode eventually, too.
- mike_d 4y ago
  They now publish quarterly audits alternating between major accounting firms, and publicly disclose the breakdown of backing assets. Less than 7% is "other," including digital assets. https://tether.to/en/transparency/#reports https://tether.to/en/transparency/#reports Edit: I falsely claimed they were alternating firms, but it turns out it was just a name change recently. That is my bad.
  - graeme 4y ago
    Attestations, not audits. Tether is able to move assets between accounts on attestation day to show backing, and has done so in the past. You can read all about it in the NYAG case Edit: to reply your edit, there was no recent name change. Tether really really wants to give the impression they’re audited, but they have never done one It’s not just a name change. The purpose of the attestations is to create the illusion of an audit.
  - cheeseface 4y ago
    They have had the same accounting firm for the past 5 reports, not alternating. " MHA Cayman" is just the new name for "Moore Cayman". https://www.coindesk.com/markets/2022/01/26/tethers-new-accounting-firm-is-the-old-one-with-baggage/ https://www.coindesk.com/markets/2022/01/26/tethers-new-acco...
    - JumpCrisscross 4y ago
      Also, even per their “audits,” a good deal of their assets are in crypto, which means it’s presently uncollateralised to the tune of tens of billions of dollars.

teknopaul 4y ago

Stable coins are meant to be backed by dollars, but the people running them haven't done that, they spent the reserves hoping no one would notice. Looks like some people have.

ohiovr 4y ago
That is basically how every fractional reserve banking system ends.
- rchaud 4y ago
  An unregulated fractional reserve banking system with no minimum reserve requirements, and with no lender of last resort.
- pjc50 4y ago
  .. which is why in the real world central banks are there to act as lenders of last resort. If there's a bank run, print money and lend it to the banks until the run stops. This is separate from the issues facing stablecoins. I'm reminded of the British government's failed attempt to maintain a "stablepound" against the "stablemark", in the proto-stablecoin mechanism known as the ERM. https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday Many of the same features are there. Spend the reserves! Increase the interest rates! Ultimately they had to de-peg. The person on the other side of that trade? George Soros. Yes, really.
Nursie 4y ago
In this case it seems to have been much more complex than that. There was UST, which was supposed to be stable, and a linked coin Luna which was a form of balancing token, with smart contracts allowing conversion between the two, with the Luna exchange rate supplied by an oracle. If UST starts to lose value, buy pressure is created because someone could buy 100 of them at (say) $39 and immediately convert to $100 of Luna. If it starts to rise, say to $1.10, you use Luna to convert to UST at a discount and then sell it to turn a profit. There were multiple other mechanisms to this, including one that involved staking your UST for interest and getting Anchor tokens, so that others could take loans. Anchor would give a 20% interest rate(!) and then there was something about loan defaults and buying collateral at a discount and ... Massively complex, and one of those things that works fine, until one day it doesn't.

sixhobbits 4y ago

Matt Levine on point again with more information about how this works and why it stopped [0]. I liked the comparison between a bank run and a 'death spiral'. > A bank run is a fairly mild event compared to a death spiral. In a bank run, your $1 stablecoin is backed by some pool of assets that are worth something; a rush to withdraw money leads to fire sales that depress their value, but their value derives from something other than confidence in the stablecoin. In a death spiral, the whole system is built on confidence in the stablecoin; if that confidence evaporates then there is no floor at all on the value. [0] https://archive.ph/slgNt https://archive.ph/slgNt

sc68cal 4y ago
> And so the LFG bought a bunch of Bitcoin and promised to use it to defend Terra’s peg to the dollar. If one Terra goes down to $0.90, instead of turning Terra into Luna and selling them in a death spiral, the LFG can buy Terra for $0.90 and pay for it in Bitcoin. If the LFG has enough Bitcoin, and if Bitcoin’s price holds up, then it can defend the peg and keep the price of Terra close to $1. So they've basically re-invented fractional reserve banking, with Terra/Luna taking the place of bank notes in old-timey banking, and BTC being the gold bars sitting in bank vaults, in this metaphor.
Animats 4y ago
Yes. Stablecoins have two stable points: 1 and 0.
- neonnoodle 4y ago
  The space is ripe for a quantum stablecoin
nrp 4y ago
This is truly wild to watch happening in real time. At the time he published his post, UST was around $0.90 and the recovery path to near term stability at $1 seemed plausible. At the time of the HN post, it was at $0.30 and the death spiral to $0 seemed plausible. As I write this comment, it's sitting at just about $0.50, which is obviously not a stable position for a stablecoin. It seems self-evident that a stablecoin ever being closer to $0 than $1 should destroy confidence in it, but apparently not immediately!

imron 4y ago

The crypto dump before the pump now that Elon has bought Twitter.

kennywinker 4y ago
Idk what you expect him to do at the helm of twitter, but tipping your favourite tweeter in dogecoin isn't exactly going to prop up the entire market.
- imron 4y ago
  I'm mostly being facetious, but the cynic in me does wonder about the timing of the current slump. And yeah, Musk tweeting that Twitter will accept Dogecoin isn't going to prop up the market in its current falling state, but once the market depresses somewhat and then stabilizes, Musk announcing support for Twitter+crypto would be enough to start pumping up the market again.
  - thawaya3113 4y ago
    and this is why cryptocurrencies as marketed today are a scam. Sure, Twitter will “accept” Dogecoin. But the only reason people have Dogecoin is because they expect its value to rise, and rise dramatically. So why would anyone pay for whatever they’re paying in Dogecoin, when they expect the value of Dogecoin to increase in the future? So, for example, if I’m trying to make a transaction for $10. And let’s say the dollar loses 10% value due to inflation in a year, while Dogecoin increases by 20% in a year. If I pay for the transaction in USD, a year later in 2023, that $10 USD would be worth $9 in 2022 USD. If I pay for it in Dogecoin, however, the $10 worth of Dogecoin would a year later have been worth about $10.80 in 2022 USD. If you think the value of crypto is going up then it makes absolutely no sense to use crypto for transactions.
    - emteycz 4y ago
      Why would they not pay? Perhaps they don't care about the .8 USD they'll lose the opportunity to gain?

byecomputer 4y ago

> TerraUSD (UST) is pegged to the price of a dollar and is secured by Terra (LUNA). LUNA is an asset reserve that ensures the stability and security of the UST through the seigniorage process (income received from an emission of money). Sounds like the peg was more-or-less a perpetual motion device that relied on a strong wind

trhway 4y ago
Basically the same way how they made AAA bonds "secured" by garbage bonds, and that resulted in the crash of 2008.
- qeternity 4y ago
  No, absolutely not what caused the crash. Loose monetary policy caused the crash.
  - arcticbull 4y ago
    Sure, if you put on your tinfoil hat. What caused the 2008 crash was nothing to do with loose monetary policy. If you recall, that began in earnest after, and in response to, the crash. It was loose regulatory policy. In no small part that Clinton rolled back Glass-Steagall in 1999. [1] Toxic mortgage-backed CDOs didn't have to become a systemic risk in the first place. There were a lot of contributing factors, but low interest rates weren't really top 10. [1] https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the_Glass–Steagall_Act https://en.wikipedia.org/wiki/Aftermath_of_the_repeal_of_the...
    - qeternity 4y ago
      > Toxic mortgage-backed CDOs didn't have to become a systemic risk in the first place. The problem had nothing to do with CDOs. No matter how you slice and dice risk, you never increase/decrease it. Someone would have owned the underlying MBS. The issue was that the Blue Dog Democrats in the 90s decided with Alan Greenspan that homeownership should be incentivized. This created a housing bubble which ultimately is what caused the GFC.

deleted 4y ago

[deleted]

hasperdi 4y ago

Could someone explain (like I'm 5) why would I want to have stablecoin instead of the real currency?

thawaya3113 4y ago
Even scammers need to feed their kids.
Nursie 4y ago
Because you want to operate in a way that doesn't involve real currency, either on an exchange without any traditional banking arrangements, or perhaps one that doesn't wish to be regulated as dealing with real currency. You may wish to avoid KYC/AML rules, you may want to avoid potential taxes incurred when changing to and from real currency, the exchange may wish to avoid reporting requirements too. You may wish to transfer large-ish sums around between exchanges without any traditional authorities being involved, and in a way that doesn't expose you to volatility. More cynically, exchanges may or may not be able to get these stable-currency tokens (and this is more of a tether concern than UST) at a significant discount compared to real currency, or the exchange may wish to invent currency-like instruments that can be used on its platform without the need to hold real currency reserves.
quickthrower2 4y ago
Day trading bitcoin. Broke: Transfer $1000US to exchange. Wait 3 days. Buy. Sell. Want to buy another coin. Need a new exchange. Withdraw. Wait 3 days. Send to new exchange. Wait 3 days. Buy new coin. Pay income tax. Send passport photos to anonymous stranger. Woke: Transfer $1000US to exchange. Wait 2 days. Buy tether. Buy sell wrapped instruments on different chains using smart contracts NOT exchanges. Never wait for traditional finance. No KYC from strangers in foreign places. No income tax! Satire some, but true. TLDR: Smoother gambling.
- cxx 4y ago
  Wouldn't you still have to go through KYC when you cash out your USDT?

moondowner 4y ago

Here's a thread summarising how this happened. https://threadreaderapp.com/thread/1524006086147252227.html https://threadreaderapp.com/thread/1524006086147252227.html

thematrixturtle 4y ago
> - borrowed $3bn in $btc > - spread around some fud about peg and bank runs > - dumped the fuck out of their $3bn $btc on market to trigger wider panic I'm sorry, but this is deep in /r/wallstreetbets conspiracy territory. The Occam's razor explanation is that the infinite 20% returns Luna/Anchor Ponzi is actually collapsing and that's what's triggering the runs.
- Waterluvian 4y ago
  And is it so surprising that the Ponzi scheme collapses when the general economy is having a bad time?
  - unicornmama 4y ago
    It has more to do with lending rates. The 10 year peaked above 3% and ibonds now yield 9.6%. Ponzi’s are getting a one-two punched. Suckers now have alternatives to seek better returns. Scammers and exploiters now pay to leverage up ponzi run ups.
    - Waterluvian 4y ago
      Fair enough. I just see it all as one interrelated ball of spaghetti economy.
- littlestymaar 4y ago
  This kind of market manipulation does happen all the time in the cryptocurrencies trading world though. That doesn't mean it's the most likely explanation in this case (as there was a literal Ponzi scheme behind all this !), but it's not completely impossible either.

paganel 4y ago

And of course there are now posts like this one [1] topping the dedicated sub-reddit. [1] https://old.reddit.com/r/terraluna/comments/un0fni/for_those_considering_suicide_heres_my_story_of/ https://old.reddit.com/r/terraluna/comments/un0fni/for_those...

frays 4y ago
Why do people enjoy reading these types of stories so much?
- paganel 4y ago
  I personally didn't enjoy it, I post it more as a sign that, maybe, the powers that be (SEC? some other institution) will, somehow, intervene. People killing themselves because of financial losses that could have been prevented had some prior regulations had been in place does not look good for those institutions I mentioned (SEC and the others). Or maybe the people at those institutions (and the people supporting the people at those institutions) just don't care anymore about this type of events and about how it reflects on the whole "ecosystem".
  - rmbyrro 4y ago
    I don't think regulation alone will solve it. Let's not forget the massive Madoff ponzi scheme in a highly regulated space...
    - harambae 4y ago
      Someone on HN pointed out recently that a lot more Madoff ponzi money was recovered than one might expect. https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Madoff_investment_scandal https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Mad...
      - rmbyrro 4y ago
        It doesn't require regulation to recover funds from fraudsters. [1] I have the opinion that a higher likelihood of getting caught and facing prison would be more effective than regulators that can sometimes be easily tricked for years. [1] https://news.ycombinator.com/item?id=30260787 https://news.ycombinator.com/item?id=30260787

deleted 4y ago

[deleted]

bambax 4y ago

> If I made up [Luna] and [Terra] on my computer and said to you “I will give you the number 10 billion in this Excel spreadsheet if you give me 1 million U.S. dollars,” you would say no, and if I raised my offer to 400 quadrillion you would not change your mind. https://www.bloomberg.com/opinion/articles/2022-05-10/another-algorithmic-stablecoin-isn-t https://www.bloomberg.com/opinion/articles/2022-05-10/anothe...

flipchart 4y ago
https://archive.ph/KaAHJ https://archive.ph/KaAHJ
throwaway4good 4y ago
Terra/Luna is just one of many algorithmic stable coins out there. The biggest AFAIK is still Maker/DAI which is orderly unwinding at the moment: https://coinmarketcap.com/currencies/maker/ https://coinmarketcap.com/currencies/maker/ https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/ (Click one year and market cap to see the unwinding.)
- emrx 4y ago
  Institutional stables (USDC,USDT,BUSD) are backed by traditional USD (more or less audited) Algorithmic stables are vulnerable to things like what happened to ust because the coin basket has to be balanced always, DAI tends to be more or less stable because it has a big part of its reserves in USDC so its more like a wrapped USDC with a little ETH. The more damaged ones were people who felt attracted for the completely unrealistic 20% interest. However, this absolute dump was coordinated by big funds, they saw they could borrow and dump whatever, nobody would save the peg.
  - CryptoPunk 4y ago
  - fubb1 4y ago
    all stablecoins are 100% scam... they dont have the reserve they wont pay the money they are not backed...

Ecko123 4y ago

mcintyre1994 4y ago

It looks like their reserve wallet is now empty: https://bitinfocharts.com/bitcoin/wallet/Luna-LFG https://bitinfocharts.com/bitcoin/wallet/Luna-LFG I'm not sure what if anything they have left elsewhere to try to prop this up. But if they deployed all those reserves yesterday to get it back to $0.91-ish then I don't see how they recover it again.

rvz 4y ago

This chaos will only speed up stablecoin regulations [0]. [0] https://techcrunch.com/2022/05/10/us-treasury-secretary-janet-yellen-pushes-for-stablecoin-regulation-by-end-of-year https://techcrunch.com/2022/05/10/us-treasury-secretary-jane...

RadixDLT 4y ago

is xusd any better? https://coinmarketcap.com/currencies/xusd/ https://coinmarketcap.com/currencies/xusd/

jfk13 4y ago
No.
- RadixDLT 4y ago
  what do you mean no?

frouge 4y ago

ELI5 Why stable coin are a thing when I can trade bitcoins to USD?

pjc50 4y ago
Some of the "stablecoins" are implemented on top of another blockchain, in such a way that it's possible to do crypto-to-stable transactions automatically fully within the blockchain system. That's attractive to the kind of people who want to build ever more complex financial machines. It also provides a system that can pretend it's not subject to money laundering law.
xboxnolifes 4y ago
Fewer legal restrictions for a brokerage to hold a stablecoin than USD.
aaaaaaaaata 4y ago
Slippage, in a word.
delaaxe 4y ago
Some jurisdictions don't consider trades towards stablecoins as taxable events
FabHK 4y ago
You can remove your crypto price risk, while still remaining on-chain (and outside the traditional regulated banking system). Some people like that. ETA: Though, as some people are learning now, you're not actually removing your crypto price risk.
lofatdairy 4y ago
Here, $UST's justification was a 20% interest for holding. Thus, in theory, just by owning $UST, you make more than you would holding dollar bills (emphasis on "in theory"). Broadly speaking, the raison d'etre of stablecoins is liquidity. Interfacing between fiat and crypto is difficult for banking reasons and taxing reasons, but interfacing between crypto coins is easy. Thus, stablecoins are seen as a useful tool for both accounting, as well as being coins that are hedged against collapses (again, in theory).

nathias 4y ago

Synthetic stablecoins using economic games implemented in smart-contracts to achieve pegging are not magically 1:1 with the pegged asset (even a representative currency would break this ratio sometimes), they are a set of mechanisms to bring the currency towards this goal ratio. The problem isn't that UST is below peg, the problem is if it can't return above or at peg, this is the point where most synthstables fail, where they fall into a negative loop and just slowly die. However there are at least some that have not failed this, but have not been tested at these scales. Either way UST turns, we will know more about how we can make stable coins. Synthetic stablecoins are the most important technology of our time and a very large step for our species to organize ourselves.

lilyball 4y ago
> Synthetic stablecoins are the most important technology of our time and a very large step for our species to organize ourselves. What do you mean by this?
- nathias 4y ago
  I mean the industrial model of the State and the organization of labor it provides that is being deteriorated by globalization will change significantly. Things change when people get the same tools the corporations have been playing around with for decades. Bad future: State owned CBDCs with types for different 'kinds' of people creating a society even more neofeudal Good future: Decentralized DAPPs organizing workers with shared interests regardless of their location and social capital

lvass 4y ago

This was a sad week for me. I've basically spent the last year working on Terra. Everything moves fast there, so many new and shiny things and people excited for them, most of which did work, until it didn't I guess. I always felt like it had permission to fail, moving fast breaks things, but it really hurt when it happened. I just removed my last asset there. I'll be eternally grateful to them. I didn't have good job prospects as a fresh engineer from a collapsing economy. They really had an use for an arbitrageur, I took notice and without asking any permission or having any knowledge or experience I was helping all these different markets there not falling off price, and perhaps I have a roof over my head thanks to that. I'm finally going to sleep since yesterday. I guess it's time to get a job, I just need to recover mentally.

FabHK 4y ago
This is an incarnation of big costs of the crypto/blockchain obsession: Some individuals put all their savings (or more) into crypto. Those early enough might have fared well, some of them extremely well. But it is not a miraculous value creating machine, but only a redistribution machine. For everyone that has done well, others have lost. The other cost is the massive amount of time and effort so many people sink into this that could have been spent on more productive things.
- twirlock 4y ago
- deltree7 4y ago
  If cryptoland is an island of it's own, it produces nothing that an outside consumer or corporation would pay money for. So, Revenue is $0 (sure there are intra-island transfers where some crypto-corp buys services from some other crypto-corp). However, crytpoland has plenty of costs. Electricity, exorbitant salaries, lambos, parties, marketing, compute, capital (servers, gpus). I'd even say to the tune of Billions of $$$. Now they have an additional cost, Interest So, someone has to fund cryptoland of these $Billion expense, Where does the money come from? Investors, Big and Small.

simonebrunozzi 4y ago

I've been following the "crypto" space for a good number of years now, and when stablecoins emerged, I thought that the model didn't make much sense. Back then, I thought that using a different collateral (e.g. US real estate), properly "locked", would have been much more interesting. Then eventually I co-founded a startup in 2017 [0] (but left quite early at the end of 2018), with the idea that the "city of the future" should have something to do with crypto and digital. The company had made a lot of progress since I left (I still have a small chunk of shares, otherwise not really affiliated with them anymore). Imagine if you could take a house worth, say, $100,000, then "lock" it in a "trust" controlled by a token (NFT, we used these back in 2017 when no one knew about them), and you can use up to a safe % of the house value as collateral for a stable coin (say 20%, or $20,000). The NFT acts as a "key" to the property. Fabrica found a clever way to do this, with the aforementioned trust. In a trust you can say that the beneficiary is whoever owns a certain NFT. You can "sell" a house (more properly, transfer control/benefit of the trust owning the house) with a simple transaction on the Ethereum blockchain. This would allow you to use the intrinsic value of a property (being a collateral), without any side effects, by simply "locking" the NFT associated with the property. The moment you want to "unlock" it, you give back the $20,000 and unlock the NFT, and then you can unwind the trust and go back to the original ownership structure. Or, change the trust so that the beneficiary is now a person, not an NFT. I thought this would be a revolution. Of course, it didn't happen (while I was at Fabrica we went through the 2018 "crypto winter" and that almost killed the company, then we had to part ways, and the team who was left struggled for a while before regaining some financial stability). We also decided we didn't want to do an ICO, because we thought most of these were scams, and it wasn't the right way to build trust with our customer base. Well, I hope this was interesting to read. [0]: https://fabrica.land/ https://fabrica.land/

JumpCrisscross 4y ago
> thought that using a different collateral (e.g. US real estate) All that was old is new again: “The newly created Rentenmark replaced the old Papiermark. Because of the economic crisis in Germany after the First World War, there was no gold available to back the currency. [Minister of Finance] Luther thus used [economist] Helfferich's idea of a currency backed by real goods. The new currency was backed by the land used for agriculture and business. This was mortgaged (Rente is a technical term for mortgage in German)…” https://en.m.wikipedia.org/wiki/Rentenmark https://en.m.wikipedia.org/wiki/Rentenmark

JumpCrisscross 4y ago

Super curious about the recent jump to ~50¢ [1], particularly given LUNA is almost monotonously beelining for zero [2]. Is price discovery quivering? Or is someone actually buying UST? [1] https://coinmarketcap.com/currencies/terrausd/ https://coinmarketcap.com/currencies/terrausd/ [2] https://coinmarketcap.com/currencies/terra-luna/ https://coinmarketcap.com/currencies/terra-luna/

pjc50 4y ago
Someone is probably having fun juggling the falling knives.