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Baloney. Many stablecoins are not pegged 1:1 to USD, for a strict example see Rai. If a stablecoin has enough collateral, then the managers (human or algorithmi
by simple-thoughts 4y ago
Baloney. Many stablecoins are not pegged 1:1 to USD, for a strict example see Rai. If a stablecoin has enough collateral, then the managers (human or algorithmic) can let the peg loosen in order to purchase and burn the coin at a discount or mint and sell the coin at a premium.
That said I’m being a bit pedantic as the specific design of USDD (as well as UST) has that property since the collateral is correlated to the stablecoins peg. So you’re correct in this specific case though not in general.
- jpgvm 4y agoYou are missing the forest for the trees. The point is that the ability to maintain the peg is the only important value of a stablecoin, if this is brought into question it will be tested. Once it is tested it will either hold, thus 1 or fail and reside permanently at 0. The exact implementation of the peg management - human, algorithm or otherwise doesn't change this fact.
- simple-thoughts 4y agoEvery stablecoin has a set of use cases, and in some a strict peg isn’t even one of them - instead it’s low volatility. Yes you’re correct that in the case of USDD maintaining a 1:1 peg matters but the use case of USDD is so that Justin and friends mint USDD for themselves then stake for farming tokens and dump those (such as crv and epx). Basically a way to exploit the tokenomics of stableswap amm, so in this case a 1:1 peg is needed. In other cases the primary use case can be to provide liquidity for a product or service. In these cases, a strict 1:1 peg isn’t needed as the product essentially goes on sale if the stablecoin’s value falls. Of course the merchant needs to be locked in to the stablecoin as the sale mechanism for this to work.