2 ms·

And look at the incentives of all the individual parties in such a scenario. I think this is the only way a "stablecoin" can function as designed... but it is

by jerf 4y ago

And look at the incentives of all the individual parties in such a scenario. I think this is the only way a "stablecoin" can function as designed... but it is not possible to construct an entity that has any scalable incentive to provide the backing that would create such a coin. For that entity, it is nothing but downside. Therefore, stable coins are a fiction on par with perpetual motion machines. In the short term there's all sorts of perpetual motion and over unity machines... in the long term, not so much.

rsync 4y ago
What about the scenario your parent describes, but free redemption is 30 days and faster redemption costs (some basis points) ?
sudosysgen 4y ago
Why couldn't you use short-term fed paper? Even a 0.5% yearly yield would be more than enough.
- jerf 4y ago
  But why would you use short-term fed paper to make money with your stake, when you could just plain buy short-term fed paper, without the risk of people "redeeming" it from you? Backing a currency isn't about taking deposits from people. You can't back with deposits because your liabilities = assets then. You have to put your own stuff up, but then all you are doing is running the risk that people will redeem it away from you. Backing a currency is basically just giving your stuff away with extra steps.
  - sudosysgen 4y ago
    Because you can get interest on the fed paper from money that isn't yours? And if people redeem from you, just add a clause where if the liquidity pool is gone you have to wait X days before getting it redeemed.
    - jerf 4y ago
      It is yours. Again, you can't back with "deposits". If you have deposits, the depositors have a claim that encumbers the assets; you can't then "back" something with encumbered assets. You can only back a currency with unencumbered assets. And if you have unencumbered assets, why would you use them to back a currency?
      - sudosysgen 4y ago
        Sure, I understand what you mean. It is still beneficial to the holder of deposits on which a small but nonzero yield is being received.

by jerf 4y ago

rsync 4y ago

What about the scenario your parent describes, but free redemption is 30 days and faster redemption costs (some basis points) ?

sudosysgen 4y ago

Why couldn't you use short-term fed paper? Even a 0.5% yearly yield would be more than enough.

jerf 4y ago
But why would you use short-term fed paper to make money with your stake, when you could just plain buy short-term fed paper, without the risk of people "redeeming" it from you? Backing a currency isn't about taking deposits from people. You can't back with deposits because your liabilities = assets then. You have to put your own stuff up, but then all you are doing is running the risk that people will redeem it away from you. Backing a currency is basically just giving your stuff away with extra steps.
- sudosysgen 4y ago
  Because you can get interest on the fed paper from money that isn't yours? And if people redeem from you, just add a clause where if the liquidity pool is gone you have to wait X days before getting it redeemed.
  - jerf 4y ago
    It is yours. Again, you can't back with "deposits". If you have deposits, the depositors have a claim that encumbers the assets; you can't then "back" something with encumbered assets. You can only back a currency with unencumbered assets. And if you have unencumbered assets, why would you use them to back a currency?
    - sudosysgen 4y ago
      Sure, I understand what you mean. It is still beneficial to the holder of deposits on which a small but nonzero yield is being received.