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Unfortunately none of these 'stablecoins' are actually backed 1:1 with a fully audited deposit at all. So when the crypto market crashes, some get exposed as a

Unfortunately none of these 'stablecoins' are actually backed 1:1 with a fully audited deposit at all. So when the crypto market crashes, some get exposed as a lie, which causes the crypto market to crash...

_fat_santa 4y ago
I noticed that DEI is backed with BTC as one of the funding options. I think it's a bit risky to back a stablecoin with a non-stablecoin that can have wild price movements.
zionic 4y ago
DAI is, it is in fact over-collateralized.
- grey-area 4y ago
  We'll find out. I suspect you're wrong, unless by collateralized you mean they store other cryptocurrencies of questionable value as their collateral. In that case sure they're probably just overflowing with funds, until they actually need to use them during a crash.
  - zeven7 4y ago
    Dai is backed by other cryptos, so 100% transparent, and it was around in the last crash in 2018 and held up well. At the time it was backed 100% by ETH (it is now multi-collateral) and maintained the peg as ETH crashed from $1400 down to $80/ETH. It's a very different system from UST. The backing is made up from collateral from borrowers. If the price goes too far down, their position is liquidated, with borrowers losing their collateral to maintain the peg. So the funds are all accounted for, and there's an active system to convert the funds to stabilize the peg. By design Dai will still be $1 when there's only $100 left of crypto backing the peg.
    - AlexandrB 4y ago
      I think this comment has it right: https://news.ycombinator.com/item?id=31414217 https://news.ycombinator.com/item?id=31414217 DAI may still be vulnerable to a liquidity crisis. I.e. if there are no buyers for the collateral. This is probably not an issue if DAI is relatively small, but what if it becomes the dominant stablecoin?
      - charcircuit 4y ago
        FYI that did happen 2 years ago due to congestion on ethereum. Well technically there was a buyer but he bid 0 DAI to win the auctions. DAI remained pegged and they got rid of the debt by minting and auctioning off MKR.
- deleted 4y ago
  [deleted]

_fat_santa 4y ago

I noticed that DEI is backed with BTC as one of the funding options. I think it's a bit risky to back a stablecoin with a non-stablecoin that can have wild price movements.

zionic 4y ago

DAI is, it is in fact over-collateralized.

grey-area 4y ago
We'll find out. I suspect you're wrong, unless by collateralized you mean they store other cryptocurrencies of questionable value as their collateral. In that case sure they're probably just overflowing with funds, until they actually need to use them during a crash.
- zeven7 4y ago
  Dai is backed by other cryptos, so 100% transparent, and it was around in the last crash in 2018 and held up well. At the time it was backed 100% by ETH (it is now multi-collateral) and maintained the peg as ETH crashed from $1400 down to $80/ETH. It's a very different system from UST. The backing is made up from collateral from borrowers. If the price goes too far down, their position is liquidated, with borrowers losing their collateral to maintain the peg. So the funds are all accounted for, and there's an active system to convert the funds to stabilize the peg. By design Dai will still be $1 when there's only $100 left of crypto backing the peg.
  - AlexandrB 4y ago
    I think this comment has it right: https://news.ycombinator.com/item?id=31414217 https://news.ycombinator.com/item?id=31414217 DAI may still be vulnerable to a liquidity crisis. I.e. if there are no buyers for the collateral. This is probably not an issue if DAI is relatively small, but what if it becomes the dominant stablecoin?
    - charcircuit 4y ago
      FYI that did happen 2 years ago due to congestion on ethereum. Well technically there was a buyer but he bid 0 DAI to win the auctions. DAI remained pegged and they got rid of the debt by minting and auctioning off MKR.
deleted 4y ago
[deleted]