8 ms·

I buy a stable coin, the seller now has a dollar and I have a stable coin which has a value of nearly a dollar. Now the seller has real money and does somethin

I buy a stable coin, the seller now has a dollar and I have a stable coin which has a value of nearly a dollar. Now the seller has real money and does something with it and either makes more real money or looses it. I get my dollar back or not. I mean don't get me wrong but even Ponzi had to work a little bit more for his thing?!

sangnoir 4y ago
I think the most common use-cases is to sell your crypto and get an almost-dollar without triggering a taxable event, since you're changing from one security for another.
- Sevii 4y ago
  Trading from one security to another is a taxable event in the US.
  - peab 4y ago
    You can get a stable coin loan, while using your non stable crypto as collateral.
PragmaticPulp 4y ago
> I get my dollar back or not. This is the core issue. Note that you can't go to Tether and demand your $1 back as an individual. You would have to use an exchange and hope that you can trade 1 Tether for 1 dollar on an exchange where you can cash out. Note that the company that owns Tether also owns and exchange, which further opens the door for a lot of fraud and shenanigans as they co-mingle exchange deposits with their Tether reserves. It's possible for exchanges to run for a long time without actually having 100% of funds in reserve as long as the customers don't all withdraw their funds at the same time. In other words: A hypothetical fraudulent stable coin could "work" for a long time, until it suddenly doesn't work at all and the value plummets.
- anonporridge 4y ago
  > In other words: A hypothetical fraudulent stable coin could "work" for a long time, until it suddenly doesn't work at all and the value plummets. Sounds exactly like what happened to the dollar itself, which once upon a time used to be a "stablecoin" pegged to gold. It was pegged soundly to $35 per ounce of gold for decades. It was even ok with the one time 'repegging' from $20 to $35 in 1932 to deal with the Great Depression. But then when we finally broke the gold peg in 1971 and then all the pent up cheating broke free and the price crashed to ~$160 per ounce in only 3 years, and then all the way to $630 after 10 years. https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-...
  - Nursie 4y ago
    That's still several orders of magnitude slower than the overnight cratering we see from stablecoins.
    - anonporridge 4y ago
      Things move several orders of magnitude slower in the analog world. The digital world moves fast.
  - jerf 4y ago
    Pegging one currency to another is fundamentally impossible in the long term. If you don't believe me, keep your eye on the foreign exchanges for the next, oh, year or so. Hopefully that's a generous enough time frame, since trying to guess how long the paper mache coverings can be slapped up and held together is always very hard, but there's a lot of "pegged" currencies in the world that are not going to be pegged for much longer because they simply won't be able to be.
sebastianconcpt 4y ago
Like any currency. If the network has others buying that coin for 1 dollar (and there is enough liquidity), then yes. If you want to call this a Ponzi scheme, then you have to be fair and consistent and call the dollar system "the other Ponzi" scheme too (because your 1 dollar purchasing power is not the same as todays).
- Eisenstein 4y ago
  The person holding the last 'dollar' in the 'dollar' Ponzi is the US Government. The person holding the last 'dollar' in the 'tether' Ponzi is a shady businessman who won't reveal his books. Which one would you rather owe you?
  - lixtra 4y ago
    It’s not the fact that the government owes you that makes USD valuable. It’s you owing the government (taxes) that makes USD desirable for you - or go to jail.
    - junofan 4y ago
      Let’s not fall for this modern monetary theory chestnut. Paying taxes didn’t save the Zimbabwean dollar. Taxes aren’t what makes money work.
  - junofan 4y ago
    It’s offshore USD not controlled by the US government. That’s the whole point. Its users may transact USD completely outside the US’s financial tendrils. That’s the unique selling proposition, and why it’s commonly used by offshore exchanges.
- deleted 4y ago
  [deleted]
- notahacker 4y ago
  This financially illiterate meme needs to die. It's like MLM scammers saying 'well all companies are structured like a pyramid' There's a massive difference between "we issue a token which has purchasing power because people are legally required to obtain it to pay their debts and taxes. Its purchasing power is allowed to slowly diminish over time, but it will continue to be demanded because people need it to meet obligations" and "we issue a token and lie that it's worth a dollar because it's backed by an equivalent quantity of dollars. Its purchasing power will collapse at the time we stop redeeming them for dollars, whether that's because we run out, get arrested or move on to the next grift with lots of un-redeemed dollars in our pockets"
hurril 4y ago
And before you made that transaction, everything was the same as afterwards. Except the trade in ownership. So what is your point?
- Defitio 4y ago
  It's interesting that you formulate your argument so specific to exclude all the risk in the middle while arguing for it. Just assume you really don't know: you bet that 1. This has some advantage for you while the company bets it has some advantage for them. Great bet everyone wins?! 2.also with every bet the company makes with others does what to your bet?
  - valzam 4y ago
    What's the difference between a stablecoin and cash app or paypal? Stablecoin is just a fancy term for fiat as tokens but any non-bank entity that holds fiat and gives you access to it.
    - Defitio 4y ago
      Because by buying that coin you created money and circumvented all Fiat protection off it.
bnralt 4y ago
The other thing about this transaction is that it, like all crypto, ends up being inflationary if they are able to be used as currency and don't end up collapsing. IE, there's $100 worth of currency in the system. Everyone gives it to Stablecoin Co. and they get $100 worth of stablecoins. Then Stablecoin Co. invests the money back into the system. Now there's $200 worth of currency in the system, leading to inflation. What's weird is that crypto folks often complain about people printing money and causing inflation. But that's the whole crypto ecosystem. If something can be used as currency, it doesn't matter if the U.S. government is printing one dollar and handing it to somebody so that they can buy goods or if a crypto project is printing one NotDollar that has the same amount of worth and can be used to buy the same amount of things.
max51 4y ago
The difference is that ponzi are normally offering good rate of return on the investment that are difficult/impossible to get consistently. When your company/coin don't offer any interest on the investment, it's very easy to just buy something super safe with a return of 0.25 - 1% and pocket the profit while not touching the main capital. Don't get me wrong, they can still be scams. The only difference is that unlike a typical ponzi, it is possible to have a sustainable and profitable business model with a stable coin.
- namdnay 4y ago
  > it is possible to have a sustainable and profitable business model with a stable coin. I guess it's possible, but only within the limits of the current general interest rates. there is no magic world of safe investments returning higher interest than the safest bonds
  - gruez 4y ago
    Note that all the parent post claimed was "profitable", without specifying how profitable. Thus unless interest rates go to zero, it should still be profitable. Negative interest rates has happened with some currencies, but for USD it has yet to happen.
  - max51 4y ago
    I don't know how much people is required to run that type of operation, but even 0.5% can pay for a lot of people when you are sitting on a pile of cash worth >20B.
athinggoingon 4y ago
Listen/read the latest econtalk episode to learn why Stable coins are supper popular at places like Argentina: https://www.econtalk.org/devon-zuegel-on-inflation-argentina-and-crypto/ https://www.econtalk.org/devon-zuegel-on-inflation-argentina... Basically, the reason is that the Government print a lot of money which result in high/hyper inflation, but then create all these obstacles for the locals to run transactions in more stable currencies (e.g. USD). The locals use Stable coins to facilitate transactions that would otherwise be very hard or impossible to perform in local currencies (e.g. buying a house).
- JumpCrisscross 4y ago
  > why Stable coins are supper popular at places like Argentina People want to hold dollars without following KYC. Stablecoins temporarily fill this niche. (There is zero chance this is allowed to persist. But it won’t be a priority until we catch serious bad guys laundering money with stablecoins.)
- martindale 4y ago
  It's mostly Bitcoin, actually.
- dools 4y ago
  “ Basically, the reason is that the Government print a lot of money which result in high/hyper inflation” Incorrect, Argentina has problems with currency stability because they issue debt denominated in a currency they do not issue in order to satisfy import requirements
  - notch656a 4y ago
    Argentina's money supply has rapidly expanded with their recent currency crisis. https://tradingeconomics.com/argentina/money-supply-m2 https://tradingeconomics.com/argentina/money-supply-m2

sangnoir 4y ago

I think the most common use-cases is to sell your crypto and get an almost-dollar without triggering a taxable event, since you're changing from one security for another.

Sevii 4y ago
Trading from one security to another is a taxable event in the US.
- peab 4y ago
  You can get a stable coin loan, while using your non stable crypto as collateral.

PragmaticPulp 4y ago

> I get my dollar back or not. This is the core issue. Note that you can't go to Tether and demand your $1 back as an individual. You would have to use an exchange and hope that you can trade 1 Tether for 1 dollar on an exchange where you can cash out. Note that the company that owns Tether also owns and exchange, which further opens the door for a lot of fraud and shenanigans as they co-mingle exchange deposits with their Tether reserves. It's possible for exchanges to run for a long time without actually having 100% of funds in reserve as long as the customers don't all withdraw their funds at the same time. In other words: A hypothetical fraudulent stable coin could "work" for a long time, until it suddenly doesn't work at all and the value plummets.

anonporridge 4y ago
> In other words: A hypothetical fraudulent stable coin could "work" for a long time, until it suddenly doesn't work at all and the value plummets. Sounds exactly like what happened to the dollar itself, which once upon a time used to be a "stablecoin" pegged to gold. It was pegged soundly to $35 per ounce of gold for decades. It was even ok with the one time 'repegging' from $20 to $35 in 1932 to deal with the Great Depression. But then when we finally broke the gold peg in 1971 and then all the pent up cheating broke free and the price crashed to ~$160 per ounce in only 3 years, and then all the way to $630 after 10 years. https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-...
- Nursie 4y ago
  That's still several orders of magnitude slower than the overnight cratering we see from stablecoins.
  - anonporridge 4y ago
    Things move several orders of magnitude slower in the analog world. The digital world moves fast.
- jerf 4y ago
  Pegging one currency to another is fundamentally impossible in the long term. If you don't believe me, keep your eye on the foreign exchanges for the next, oh, year or so. Hopefully that's a generous enough time frame, since trying to guess how long the paper mache coverings can be slapped up and held together is always very hard, but there's a lot of "pegged" currencies in the world that are not going to be pegged for much longer because they simply won't be able to be.

sebastianconcpt 4y ago

Like any currency. If the network has others buying that coin for 1 dollar (and there is enough liquidity), then yes. If you want to call this a Ponzi scheme, then you have to be fair and consistent and call the dollar system "the other Ponzi" scheme too (because your 1 dollar purchasing power is not the same as todays).

Eisenstein 4y ago
The person holding the last 'dollar' in the 'dollar' Ponzi is the US Government. The person holding the last 'dollar' in the 'tether' Ponzi is a shady businessman who won't reveal his books. Which one would you rather owe you?
- lixtra 4y ago
  It’s not the fact that the government owes you that makes USD valuable. It’s you owing the government (taxes) that makes USD desirable for you - or go to jail.
  - junofan 4y ago
    Let’s not fall for this modern monetary theory chestnut. Paying taxes didn’t save the Zimbabwean dollar. Taxes aren’t what makes money work.
- junofan 4y ago
  It’s offshore USD not controlled by the US government. That’s the whole point. Its users may transact USD completely outside the US’s financial tendrils. That’s the unique selling proposition, and why it’s commonly used by offshore exchanges.
deleted 4y ago
[deleted]
notahacker 4y ago
This financially illiterate meme needs to die. It's like MLM scammers saying 'well all companies are structured like a pyramid' There's a massive difference between "we issue a token which has purchasing power because people are legally required to obtain it to pay their debts and taxes. Its purchasing power is allowed to slowly diminish over time, but it will continue to be demanded because people need it to meet obligations" and "we issue a token and lie that it's worth a dollar because it's backed by an equivalent quantity of dollars. Its purchasing power will collapse at the time we stop redeeming them for dollars, whether that's because we run out, get arrested or move on to the next grift with lots of un-redeemed dollars in our pockets"

hurril 4y ago

And before you made that transaction, everything was the same as afterwards. Except the trade in ownership. So what is your point?

Defitio 4y ago
It's interesting that you formulate your argument so specific to exclude all the risk in the middle while arguing for it. Just assume you really don't know: you bet that 1. This has some advantage for you while the company bets it has some advantage for them. Great bet everyone wins?! 2.also with every bet the company makes with others does what to your bet?
- valzam 4y ago
  What's the difference between a stablecoin and cash app or paypal? Stablecoin is just a fancy term for fiat as tokens but any non-bank entity that holds fiat and gives you access to it.
  - Defitio 4y ago
    Because by buying that coin you created money and circumvented all Fiat protection off it.

bnralt 4y ago

The other thing about this transaction is that it, like all crypto, ends up being inflationary if they are able to be used as currency and don't end up collapsing. IE, there's $100 worth of currency in the system. Everyone gives it to Stablecoin Co. and they get $100 worth of stablecoins. Then Stablecoin Co. invests the money back into the system. Now there's $200 worth of currency in the system, leading to inflation. What's weird is that crypto folks often complain about people printing money and causing inflation. But that's the whole crypto ecosystem. If something can be used as currency, it doesn't matter if the U.S. government is printing one dollar and handing it to somebody so that they can buy goods or if a crypto project is printing one NotDollar that has the same amount of worth and can be used to buy the same amount of things.

max51 4y ago

The difference is that ponzi are normally offering good rate of return on the investment that are difficult/impossible to get consistently. When your company/coin don't offer any interest on the investment, it's very easy to just buy something super safe with a return of 0.25 - 1% and pocket the profit while not touching the main capital. Don't get me wrong, they can still be scams. The only difference is that unlike a typical ponzi, it is possible to have a sustainable and profitable business model with a stable coin.

namdnay 4y ago
> it is possible to have a sustainable and profitable business model with a stable coin. I guess it's possible, but only within the limits of the current general interest rates. there is no magic world of safe investments returning higher interest than the safest bonds
- gruez 4y ago
  Note that all the parent post claimed was "profitable", without specifying how profitable. Thus unless interest rates go to zero, it should still be profitable. Negative interest rates has happened with some currencies, but for USD it has yet to happen.
- max51 4y ago
  I don't know how much people is required to run that type of operation, but even 0.5% can pay for a lot of people when you are sitting on a pile of cash worth >20B.

athinggoingon 4y ago

Listen/read the latest econtalk episode to learn why Stable coins are supper popular at places like Argentina: https://www.econtalk.org/devon-zuegel-on-inflation-argentina-and-crypto/ https://www.econtalk.org/devon-zuegel-on-inflation-argentina... Basically, the reason is that the Government print a lot of money which result in high/hyper inflation, but then create all these obstacles for the locals to run transactions in more stable currencies (e.g. USD). The locals use Stable coins to facilitate transactions that would otherwise be very hard or impossible to perform in local currencies (e.g. buying a house).

JumpCrisscross 4y ago
> why Stable coins are supper popular at places like Argentina People want to hold dollars without following KYC. Stablecoins temporarily fill this niche. (There is zero chance this is allowed to persist. But it won’t be a priority until we catch serious bad guys laundering money with stablecoins.)
martindale 4y ago
It's mostly Bitcoin, actually.
dools 4y ago
“ Basically, the reason is that the Government print a lot of money which result in high/hyper inflation” Incorrect, Argentina has problems with currency stability because they issue debt denominated in a currency they do not issue in order to satisfy import requirements
- notch656a 4y ago
  Argentina's money supply has rapidly expanded with their recent currency crisis. https://tradingeconomics.com/argentina/money-supply-m2 https://tradingeconomics.com/argentina/money-supply-m2