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Pegs fail at the worst possible time. You can transfer or store value via oak tokens flown by trained pigeons, because that might be convenient (to you) and do
by unyttigfjelltol 4y ago
Pegs fail at the worst possible time. You can transfer or store value via oak tokens flown by trained pigeons, because that might be convenient (to you) and doesn't involve the Fed. But if someone tells you the token/pigeon method has the same attributes as a bank-to-bank USD wire, that person would be mistaken. The methods would be no closer to equivalence if one were to stamp "USD" on the oaken rounds and train the birds to collect a receipt.
- eru 4y agoAs long as the guys who issue the token have sufficient assets to redeem them, and regularly redeem them to any comer, I don't see much of a problem. If there's oak and pigeons involved, that doesn't change much---apart from being might inconvenient. The problem algorithmic stable coins is that the backing is either non-existent or at best really suspect. Tether is a bit better in that they at least claim to have real world backing, but they don't tell you what it is, so you can't trust it. Btw, the backing for a token denominated in USD doesn't have to be USD. Eg most banks back their deposits with all kinds of assets and bonds, not just physical cash (or balanced at the Fed). Having a few reserves in USD on hand is important, but in the longer run it's more important that the worth of your backing assets is reliably higher than your liabilities. The difference between the two is your equity cushion.