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> 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.

by bambax 5y 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 5y ago
https://archive.ph/KaAHJ https://archive.ph/KaAHJ
throwaway4good 5y 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 5y 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 5y ago
  - fubb1 5y ago
    all stablecoins are 100% scam... they dont have the reserve they wont pay the money they are not backed...
  - Nursie 5y ago
    Nobody really knows what USDT is backed with, but it makes a pretty good show of pretending to have reserves... > this absolute dump was coordinated by big funds Really? Because people have been talking about the reserve to pay out the promised interest falling away for some time now.
  - throwaway4good 5y ago
    Sorry - my comment was referring to algorithmic stable coins - Tether is not an algorithmic stable coin and obviously the biggest of the stable coins.
  - arcticbull 5y ago
    > Institutional stables (USDC,USDT,BUSD) are backed by traditional USD (more or less audited) Sorry you can't say USDT and "more or less audited" in the same sentence. Literally un-audited. It's an empty vault in the Bahamas lol. [1] Institutionalized stable would be a better description of USDT. The issue is algorithmic and partially-collateralized stable coins are all, each and every one of them, vulnerable to attack. They purport to be $1, but you know fundamentally they are not. Therefore you can attack the peg and walk away with boatloads of money. This is actually how Soros made his money - he broke the GBP when it was pegged. [2] It's much easier to break these pseudo-dollars since the market is unregulated, you can do whatever you want, and they're small potatoes in the world of tradfi. [edit] This is a great listen on the whole thing. [3] [1] https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether https://www.bloomberg.com/news/features/2021-10-07/crypto-my... [2] https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp https://www.investopedia.com/ask/answers/08/george-soros-ban... [3] https://cryptocriticscorner.com/2022/05/04/episode-71-terra-luna-and-algorithmic-stablecoins/ https://cryptocriticscorner.com/2022/05/04/episode-71-terra-...
    - TrapLord_Rhodo 5y ago
      but what if you fully collateralize using uncorrelated assets? Theoretically you can purchase synthetic stocks, tokenized real estate, other stablecoins. No one has tried it yet tho.
      - arcticbull 5y ago
        Since all of those went down together just now, I think that might not be enough.
        TrapLord_Rhodo 5y ago
        well you only get a depeg with huge volitilty. Luna dropped 97%, that's why it depeged. Synethic SnP, real estate is like 10% max which isn't high enough volitilty to lead to what esseentially was a bankrun on UST. The problem is getting people to trust the underlying collateral. Also, you can take the Dai approach and be over collateralized. Dai is at 150%, instead of trying to maintain parity.
  - overtonwhy 5y ago
    Emphasis on "less audited": https://www.coindesk.com/markets/2021/08/09/tether-reveals-more-details-about-its-reserves/?outputType=amp https://www.coindesk.com/markets/2021/08/09/tether-reveals-m... "The order further finds that Tether and Bitfinex’s combined assets included funds held by third-parties, including at least 29 arrangements that were not documented through any agreement or contract, and that Tether transferred Tether reserve funds to Bitfinex, including when Bitfinex needed help responding to a “liquidity crisis.”" https://www.cftc.gov/PressRoom/PressReleases/8450-21 https://www.cftc.gov/PressRoom/PressReleases/8450-21
  - buggeryorkshire 5y ago
    Audited? Where?
  - CTDOCodebases 5y ago
    USDT is as murky as it gets. It's backed mostly by debt of unknown origin.
- mypastself 5y ago
  My problem with Maker is that I’m still having trouble understanding what purpose it serves for a borrower other than gambling with leverage.
  - CryptoPunk 5y ago
- cdiddy2 5y ago
  DAI is not an algorithmic stablecoin. It is an overcollateralized stablecoin. They are very very different.
  - throwaway4good 5y ago
    How are they different? In core workings they look very much the same to me.
    - cdiddy2 5y ago
      UST actually burns/mints LUNA to try and keep the balance in check. Everything to run the currency is within the same system. DAI requires 150% collateral in a currency completely outside the system that it can't burn or mint. It is a big difference. edit: UST is going to be collateralized in the future if it survives this https://twitter.com/stablekwon/status/1524331190995484672 https://twitter.com/stablekwon/status/1524331190995484672
      - throwaway4good 5y ago
        It doesn't matter if you lock up something in a contract and sell if it price drops or the dillute existing holders by expanding the issuance and selling it. In aggregate the effect is the same. And they are both run by algorithms.
        cdiddy2 5y ago
        If both DAI and MKR go to zero users still have the collateral. If UST and LUNA go to zero then there is nothing left(apart from very recently they started adding some BTC reserves).
chmod775 5y ago
Someone did not think that through. You could make the same argument with about: that they're essentially the same as some number in a spreadsheet. What makes people trust a currency is who is controlling it. In the case of some cryptocurrencies that answer may be "people who contribute processing power". For USD that is "the US government", and for miscellaneous virtual currencies it may be some company who manages it in spreadsheet...
- deleted 5y ago
  [deleted]
- jl2718 5y ago
  Fiat: If you give me food and shelter that I need to survive, I’ll give you numbers in a spreadsheet that you need to give to the people with guns so that they don’t lock you up in jail or shoot you.
  - lvass 5y ago
    That's totally correct. But it's also how it works the best, the world is brutal, move on. I'd rather face that than the bank run I just went through, and I was practically unscathed compared to the many horror stories out there.
  - vba616 5y ago
    Fiat currency can be and is used by people who don't live in the country that issues it. Think of prisoners using cigarettes for currency - it's not necessary for the tobacco companies to be involved or even care.
- chmod775 5y ago
  Oops! The second sentence should read: "You could make the same argument about USD: ..."

by bambax 5y ago

flipchart 5y ago

https://archive.ph/KaAHJ https://archive.ph/KaAHJ

throwaway4good 5y 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 5y 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 5y ago
- fubb1 5y ago
  all stablecoins are 100% scam... they dont have the reserve they wont pay the money they are not backed...
- Nursie 5y ago
  Nobody really knows what USDT is backed with, but it makes a pretty good show of pretending to have reserves... > this absolute dump was coordinated by big funds Really? Because people have been talking about the reserve to pay out the promised interest falling away for some time now.
- throwaway4good 5y ago
  Sorry - my comment was referring to algorithmic stable coins - Tether is not an algorithmic stable coin and obviously the biggest of the stable coins.
- arcticbull 5y ago
  > Institutional stables (USDC,USDT,BUSD) are backed by traditional USD (more or less audited) Sorry you can't say USDT and "more or less audited" in the same sentence. Literally un-audited. It's an empty vault in the Bahamas lol. [1] Institutionalized stable would be a better description of USDT. The issue is algorithmic and partially-collateralized stable coins are all, each and every one of them, vulnerable to attack. They purport to be $1, but you know fundamentally they are not. Therefore you can attack the peg and walk away with boatloads of money. This is actually how Soros made his money - he broke the GBP when it was pegged. [2] It's much easier to break these pseudo-dollars since the market is unregulated, you can do whatever you want, and they're small potatoes in the world of tradfi. [edit] This is a great listen on the whole thing. [3] [1] https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether https://www.bloomberg.com/news/features/2021-10-07/crypto-my... [2] https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp https://www.investopedia.com/ask/answers/08/george-soros-ban... [3] https://cryptocriticscorner.com/2022/05/04/episode-71-terra-luna-and-algorithmic-stablecoins/ https://cryptocriticscorner.com/2022/05/04/episode-71-terra-...
  - TrapLord_Rhodo 5y ago
    but what if you fully collateralize using uncorrelated assets? Theoretically you can purchase synthetic stocks, tokenized real estate, other stablecoins. No one has tried it yet tho.
    - arcticbull 5y ago
      Since all of those went down together just now, I think that might not be enough.
      - TrapLord_Rhodo 5y ago
        well you only get a depeg with huge volitilty. Luna dropped 97%, that's why it depeged. Synethic SnP, real estate is like 10% max which isn't high enough volitilty to lead to what esseentially was a bankrun on UST. The problem is getting people to trust the underlying collateral. Also, you can take the Dai approach and be over collateralized. Dai is at 150%, instead of trying to maintain parity.
- overtonwhy 5y ago
  Emphasis on "less audited": https://www.coindesk.com/markets/2021/08/09/tether-reveals-more-details-about-its-reserves/?outputType=amp https://www.coindesk.com/markets/2021/08/09/tether-reveals-m... "The order further finds that Tether and Bitfinex’s combined assets included funds held by third-parties, including at least 29 arrangements that were not documented through any agreement or contract, and that Tether transferred Tether reserve funds to Bitfinex, including when Bitfinex needed help responding to a “liquidity crisis.”" https://www.cftc.gov/PressRoom/PressReleases/8450-21 https://www.cftc.gov/PressRoom/PressReleases/8450-21
- buggeryorkshire 5y ago
  Audited? Where?
- CTDOCodebases 5y ago
  USDT is as murky as it gets. It's backed mostly by debt of unknown origin.
mypastself 5y ago
My problem with Maker is that I’m still having trouble understanding what purpose it serves for a borrower other than gambling with leverage.
- CryptoPunk 5y ago
cdiddy2 5y ago
DAI is not an algorithmic stablecoin. It is an overcollateralized stablecoin. They are very very different.
- throwaway4good 5y ago
  How are they different? In core workings they look very much the same to me.
  - cdiddy2 5y ago
    UST actually burns/mints LUNA to try and keep the balance in check. Everything to run the currency is within the same system. DAI requires 150% collateral in a currency completely outside the system that it can't burn or mint. It is a big difference. edit: UST is going to be collateralized in the future if it survives this https://twitter.com/stablekwon/status/1524331190995484672 https://twitter.com/stablekwon/status/1524331190995484672
    - throwaway4good 5y ago
      It doesn't matter if you lock up something in a contract and sell if it price drops or the dillute existing holders by expanding the issuance and selling it. In aggregate the effect is the same. And they are both run by algorithms.
      - cdiddy2 5y ago
        If both DAI and MKR go to zero users still have the collateral. If UST and LUNA go to zero then there is nothing left(apart from very recently they started adding some BTC reserves).

chmod775 5y ago

Someone did not think that through. You could make the same argument with about: that they're essentially the same as some number in a spreadsheet. What makes people trust a currency is who is controlling it. In the case of some cryptocurrencies that answer may be "people who contribute processing power". For USD that is "the US government", and for miscellaneous virtual currencies it may be some company who manages it in spreadsheet...

deleted 5y ago
[deleted]
jl2718 5y ago
Fiat: If you give me food and shelter that I need to survive, I’ll give you numbers in a spreadsheet that you need to give to the people with guns so that they don’t lock you up in jail or shoot you.
- lvass 5y ago
  That's totally correct. But it's also how it works the best, the world is brutal, move on. I'd rather face that than the bank run I just went through, and I was practically unscathed compared to the many horror stories out there.
- vba616 5y ago
  Fiat currency can be and is used by people who don't live in the country that issues it. Think of prisoners using cigarettes for currency - it's not necessary for the tobacco companies to be involved or even care.
chmod775 5y ago
Oops! The second sentence should read: "You could make the same argument about USD: ..."