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Provided you trust the stablecoin, it's a lot safer to keep e.g. USDC in a wallet you control rather than hold USD fiat balance on an exchange or some other sha

by nly 4y ago

Provided you trust the stablecoin, it's a lot safer to keep e.g. USDC in a wallet you control rather than hold USD fiat balance on an exchange or some other shady crypto service.

lottin 4y ago
Why is it safer? Isn't USDC issued by some entity, which promises to convert USDC back into USD?
- Jommi 4y ago
  Multiple parties need to fail for USDC to not be tradeable or redeemable to USD - holding in an exchange just requires one party to fail (exchange hacked, exit scam etc.) It's pretty simple risk logic.
  - lottin 4y ago
    If the issuer of USDC fails to redeem USDC with USD, the price of USDC in the market will collapse, so I'm not sure which "multiple parties" have to fail for USDC not to be redeemable. Further, keeping funds in a non-custodial wallet entails a huge operational risk that you're glossing over entirely.
    - Jommi 4y ago
      Going to Circle to redeem your USDC for FIAT USD is not the only way of receiving FIAT USD from USDC. You can also sell it for another asset, and sell that for FIAT. Or sell it for FIAT on an exchange. The OP was about the safety of "holding" fiat on a single exchange vs USDC on your wallet. Your point about non-custodial wallet risk is a misonemer as this is purely about can you trust yourself more than trust an exchange.
      - lottin 4y ago
        I don't think you understand how a currency peg works. If USDC loses the peg, arbitrageurs will buy USDC and redeem them, pocketing the difference. This will create a buying pressure that will re-establish the peg. Therefore maintaining the peg depends crucially on the issuer's ability to redeem USDC. If the issuer fails to redeem USDC, it's game over. The point that I made about the risks associated with using non-custodial wallets is also very valid.
        Jommi 4y ago
        I don't think you understand how USDC's redempetion works. It's not a website accessible by anyone open for redemptions 24/7. Read on that first before discussing this topic please.
        lottin 4y ago
        And this matters why? Being an economist, I think I know how a currency peg works, but if you think I'm wrong feel free to explain it to me.
        Jommi 4y ago
        : D Being an economist does not mean you automatically know how Circle (a payments company based in the US) issues the ERC-20 token that is called "USDC", or how the redemptions for that work. You can read about it here: https://www.circle.com/en/usdc https://www.circle.com/en/usdc and here https://www.centre.io/usdc https://www.centre.io/usdc You can see centralized and decentralized exchanges with USDC liquidity here: https://www.coingecko.com/en/coins/usd-coin#markets https://www.coingecko.com/en/coins/usd-coin#markets
        lottin 4y ago
        This is like suggesting that a mechanic should read some car's owner's manual in order to learn how internal combustion engines work. Look, don't try derail the conversation. Your claim is that in the event that the issuer of USDC would fail to redeem the tokens, you could still redeem them elsewhere. Explain how that would work.
- eudoxus 4y ago
  It's safer cus there are hundreds of crypto exchanges that exist, in jurisdictions all over with varying levels of regulation or compliance. Many of which have run off with customer funds. You can always be sure that your funds are safer in your own wallet than on an exchange. However, USDC is issued by a consortium spear headed by Coinbase which is a publicly traded US company that has a wealth of regulatory compliance hoops they jump through, and have routine independent auditors track the reserves of USDC. But youre right in that there's elements of trust that you need to place.
  - lottin 4y ago
    > You can always be sure that your funds are safer in your own wallet than on an exchange. How is that so? Do you also think that keeping cash under a mattress is safer that keeping it in a bank?

by nly 4y ago

Provided you trust the stablecoin, it's a lot safer to keep e.g. USDC in a wallet you control rather than hold USD fiat balance on an exchange or some other shady crypto service.

lottin 4y ago

Why is it safer? Isn't USDC issued by some entity, which promises to convert USDC back into USD?

Jommi 4y ago
Multiple parties need to fail for USDC to not be tradeable or redeemable to USD - holding in an exchange just requires one party to fail (exchange hacked, exit scam etc.) It's pretty simple risk logic.
- lottin 4y ago
  If the issuer of USDC fails to redeem USDC with USD, the price of USDC in the market will collapse, so I'm not sure which "multiple parties" have to fail for USDC not to be redeemable. Further, keeping funds in a non-custodial wallet entails a huge operational risk that you're glossing over entirely.
  - Jommi 4y ago
    Going to Circle to redeem your USDC for FIAT USD is not the only way of receiving FIAT USD from USDC. You can also sell it for another asset, and sell that for FIAT. Or sell it for FIAT on an exchange. The OP was about the safety of "holding" fiat on a single exchange vs USDC on your wallet. Your point about non-custodial wallet risk is a misonemer as this is purely about can you trust yourself more than trust an exchange.
    - lottin 4y ago
      I don't think you understand how a currency peg works. If USDC loses the peg, arbitrageurs will buy USDC and redeem them, pocketing the difference. This will create a buying pressure that will re-establish the peg. Therefore maintaining the peg depends crucially on the issuer's ability to redeem USDC. If the issuer fails to redeem USDC, it's game over. The point that I made about the risks associated with using non-custodial wallets is also very valid.
      - Jommi 4y ago
        I don't think you understand how USDC's redempetion works. It's not a website accessible by anyone open for redemptions 24/7. Read on that first before discussing this topic please.
        lottin 4y ago
        And this matters why? Being an economist, I think I know how a currency peg works, but if you think I'm wrong feel free to explain it to me.
        Jommi 4y ago
        : D Being an economist does not mean you automatically know how Circle (a payments company based in the US) issues the ERC-20 token that is called "USDC", or how the redemptions for that work. You can read about it here: https://www.circle.com/en/usdc https://www.circle.com/en/usdc and here https://www.centre.io/usdc https://www.centre.io/usdc You can see centralized and decentralized exchanges with USDC liquidity here: https://www.coingecko.com/en/coins/usd-coin#markets https://www.coingecko.com/en/coins/usd-coin#markets
        lottin 4y ago
        This is like suggesting that a mechanic should read some car's owner's manual in order to learn how internal combustion engines work. Look, don't try derail the conversation. Your claim is that in the event that the issuer of USDC would fail to redeem the tokens, you could still redeem them elsewhere. Explain how that would work.
eudoxus 4y ago
It's safer cus there are hundreds of crypto exchanges that exist, in jurisdictions all over with varying levels of regulation or compliance. Many of which have run off with customer funds. You can always be sure that your funds are safer in your own wallet than on an exchange. However, USDC is issued by a consortium spear headed by Coinbase which is a publicly traded US company that has a wealth of regulatory compliance hoops they jump through, and have routine independent auditors track the reserves of USDC. But youre right in that there's elements of trust that you need to place.
- lottin 4y ago
  > You can always be sure that your funds are safer in your own wallet than on an exchange. How is that so? Do you also think that keeping cash under a mattress is safer that keeping it in a bank?