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> 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 s

> 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.

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.