6 ms·

Stablecoins have totally valid use cases in the crypto ecosystem that don’t involve skirting regulations. People want something that isn’t volatile. It takes da

Stablecoins have totally valid use cases in the crypto ecosystem that don’t involve skirting regulations. People want something that isn’t volatile. It takes days to deposit and withdraw actual USD from exchanges and requires centralized entities that charge fees (or are totally untrustworthy as we’ve seen). Contracts and dapps can hold and interact with USDC to create useful applications that aren’t just speculative investing.

hef19898 4y ago
Morgan Stanley ised to take a couple of days as well to wire Euros to my bank account. Never ever was that an issue, or something I wanted to solve by using an almast-but-not-really Euro, or Dollar.
- rufusroflpunch 4y ago
  It’s not really any less of a dollar than any other dollar is. All of our digital dollars are just bank liabilities. Circle and Tether are just banks with dollar liabilities. Their liabilities can be transferred on crypto networks rather than traditional bank wires.
  - rglullis 4y ago
    > Circle and Tether are just banks with dollar liabilities. But no regulatory oversight, and no chance for the common folk to prosecute or get their money back if they default. I am one of the resident crypto apologists here on HN, but there is no way that we should even try to accept what the big exchanges are doing. The whole point of crypto is to have systems that do not depend on "too big to fail" institutions, why are we suddenly trying to find excuses for their BS?
    - jacobsimon 4y ago
      Not trying to make excuses for any of these companies. I'm just saying, in the abstract, there are lots of reasons why an end user would want a stablecoin besides "avoiding regulations". Even if it weren't pegged to a national currency, there is value in having a digital currency that limits its volatility. Pegging to another currency is a shortcut for doing that w/o needing decentralized monetary policy.
      - coliveira 4y ago
        Basically these people are trying to get the benefit of digital currencies without the downside of volatility. Somebody else will have to take the volatility risk. This is easy to do when the crypto currencies are going up in value, and almost impossible to do on the downside.
        zeven7 4y ago
        > almost impossible to do on the downside And yet most stable coins have maintained their peg for years now, despite many of them having gone through 2 large bear markets. If 80%-90% down and still pegged doesn't disprove "impossible to do on the downside" I don't know what could. Clarification: I do think Tether is not fully backed and is likely to depeg some day, but the assertion that it's "impossible to do on the downside" is clearly not true even for Tether. And it's very clearly not impossible to keep a peg if the peg is fully backed, which may be the case for some coins (without naming specifics). DAI, backed by verifiable collateral, has also done extremely well through 2 bear markets.
        Animats 4y ago
        > I do think Tether is not fully backed and is likely to depeg some day. Which is a good reason to get out. Stablecoins have only two stable points, 1 and 0. When they crash, they go all the way. Look at what happened with the stablecoins that already crashed.
        landemva 4y ago
        1 or 0 is true of government currencies. The unknown is when. For the Bretton Woods USD 'when' was August 15 1971. https://history.state.gov/milestones/1969-1976/nixon-shock https://history.state.gov/milestones/1969-1976/nixon-shock
        jacobsimon 4y ago
        Maybe but not necessarily. I can log in to Coinbase and buy USDC with dollars in my bank account, use the USDC in a variety of decentralized applications or contracts, and then exchange my USDC for USD again via Coinbase. It’s similar to going to the bank and withdrawing cash, and it has no inherent volatility or downside risk.
    - matthewdgreen 4y ago
      Tether has no meaningful regulatory oversight. Circle has money transmitter licenses in most US states, some of which cover them as a virtual asset service provider, and require specific conditions around the way that they store customer funds: https://www.circle.com/en/legal/usdc-terms https://www.circle.com/en/legal/usdc-terms I'm not claiming this is perfect, but it's pretty different.
      - smoldesu 4y ago
        That's great, but that only eliminates 2-3 classes of fraud from their potential thousands of exploits. We put too much trust in centralized companies to manage decentralized communities, and I'd bet you dollars-to-donuts that Circle will end up complicit in some sort of scheme.
    - rufusroflpunch 4y ago
      Sorry, I did not mean to insinuate anything resembling cover for these stablecoins. I do not own any and I never would. In fact, I only own Bitcoin and I don’t keep any on any exchange at all. This is the only way I would ever recommend when interacting with cryptocurrencies.
  - thatguy0900 4y ago
    It is less of a dollar, because I can say you can exchange it for a dollar when you can not, in fact, exchange it for a dollar when you try to,because I never had enough(or any) dollars. In the real world when the bank runs out of dollars the government will give me dollars instead.
    - aeternum 4y ago
      For US citizens perhaps, but if you're a Russian citizen or company, the USD in your bank account is now just a worthless database entry. Just because that weapon hasn't been pointed at some group of US citizens yet doesn't mean it can't in the future.
      - hef19898 4y ago
        Maybe, maybe not. In the meanwhile SBF and similar figures are happy to protect your money in crypto assets.
        aeternum 4y ago
        Not your keys, not your coins. Those not willing to learn self-custody are definitely better off in USD.
    - jacquesm 4y ago
      > In the real world when the bank runs out of dollars the government will give me dollars instead. Up to a point.
    - rufusroflpunch 4y ago
      I think that is a fair critique, but that will be coming at some point, very likely. Either a law requiring 100% liquid reserves, or a law bringing them into the FDIC system.
- jacquesm 4y ago
  And that's entirely on them, international bank transfers within the EU take mere moments now.
grey-area 4y ago
If a stablecoin is fully backed by USD, why does it exist? The only reasons for these coins to exist are: 1. Avoid proper financial controls and regulations imposed on real currencies and operate illegally. 2. To separate fools from their USD and replace it with USDT or whatever.
- zeven7 4y ago
  Those are not the only possible reasons for stable coins to exist. The obvious other reason is to use them on the blockchain. You cannot use USD on the blockchain. Maybe you don't think there's anything of value on the blockchain and that's why you don't see a use for it. I don't want to get into an argument over whether blockchain tech has a use case or a future in this comment chain, but for the sake of understanding what stable coins could be used for just grant the following: - There is some use for ETH out there that doesn't involve avoiding financial controls and regulations or separating fools from their USD If you will grant that, then it's easy to see why here would be a use for USDC or similar. ETH price fluctuates. If you need to be able to utilize Ethereum, it's helpful to have value on it. If you don't want that value to fluctuate, you can hold it in USDC and convert to ETH when you want to use it. Plain and simple, this is the first application for stable coins. If you will not grant that there is a use case for ETH then there's no point in having a discussion about stable coins anyway. That's a separate discussion that needs to be had first.
  - Hasu 4y ago
    > There is some use for ETH out there that doesn't involve avoiding financial controls and regulations or separating fools from their USD I do not grant this, because Ethereum has been around for 7 years and no such uses have materialized yet.
    - zeven7 4y ago
      Ok, then there's no point in having the stable coin conversation.
- zeven7 4y ago
graeme 4y ago
Not volatile? The point of stablecoins is they’re supposed to match the USD in value. By definition they are more volatile than usd as they are pegged to it and vary in price
- chrisbaker98 4y ago
  The point is that their prices are less volatile than the prices of "real" cryptocurrencies like Bitcoin.
- KMag 4y ago
  > By definition they are more volatile than usd as they are pegged to it and vary in price I understand your reasoning, and you're correct in this case (assuming your numeraire is USD). However, if your numeraire is something like a GDP-weighted basket of USD, EUR, JPY, and CNH, it's possible for a USD-pegged asset to be less volatile than USD (since your unit of account isn't USD).
  - KMag 4y ago
    Note that if the above is the case, that would imply that the tracking error of your USD-pegged asset is correlated to the non-USD components of your numeraire. In a risk-off/flight-to-quality environment (depending on the exact circumstances, but in general) you'd expect EUR and CNH to drop in relation to the USD and often JPY to rise in relation to USD. The opposite would be expected in a risk-on scenario. Presumably, your USD-pegged asset would drop in relation to the USD in a risk-off scenario and rise in a risk-on scenario, so in that case it would seem that your tracking error would tend to be correlated to the non-USD components of your numeraire basket. So, if macro risk-on/risk-off are the primary drivers of your pegged asset's tracking error, it would seem that your pegged asset would tend to have less volatility than USD if a GDP-weighted basket of major currencies is your unit of account.
deleted 4y ago
[deleted]
MomoXenosaga 4y ago
anigbrowl 4y ago
My first and only experience with stablecoins was when I moved a bunch of Stellaris into one and when I went back to do another transaction a few days later its value had been reduced to zero for 'technical reasons' that I am still unable to comprehend. Whoever was operating it basically helped themselves to a year's worth of investment gains, which soured me on the concept.

hef19898 4y ago

Morgan Stanley ised to take a couple of days as well to wire Euros to my bank account. Never ever was that an issue, or something I wanted to solve by using an almast-but-not-really Euro, or Dollar.

rufusroflpunch 4y ago
It’s not really any less of a dollar than any other dollar is. All of our digital dollars are just bank liabilities. Circle and Tether are just banks with dollar liabilities. Their liabilities can be transferred on crypto networks rather than traditional bank wires.
- rglullis 4y ago
  > Circle and Tether are just banks with dollar liabilities. But no regulatory oversight, and no chance for the common folk to prosecute or get their money back if they default. I am one of the resident crypto apologists here on HN, but there is no way that we should even try to accept what the big exchanges are doing. The whole point of crypto is to have systems that do not depend on "too big to fail" institutions, why are we suddenly trying to find excuses for their BS?
  - jacobsimon 4y ago
    Not trying to make excuses for any of these companies. I'm just saying, in the abstract, there are lots of reasons why an end user would want a stablecoin besides "avoiding regulations". Even if it weren't pegged to a national currency, there is value in having a digital currency that limits its volatility. Pegging to another currency is a shortcut for doing that w/o needing decentralized monetary policy.
    - coliveira 4y ago
      Basically these people are trying to get the benefit of digital currencies without the downside of volatility. Somebody else will have to take the volatility risk. This is easy to do when the crypto currencies are going up in value, and almost impossible to do on the downside.
      - zeven7 4y ago
        > almost impossible to do on the downside And yet most stable coins have maintained their peg for years now, despite many of them having gone through 2 large bear markets. If 80%-90% down and still pegged doesn't disprove "impossible to do on the downside" I don't know what could. Clarification: I do think Tether is not fully backed and is likely to depeg some day, but the assertion that it's "impossible to do on the downside" is clearly not true even for Tether. And it's very clearly not impossible to keep a peg if the peg is fully backed, which may be the case for some coins (without naming specifics). DAI, backed by verifiable collateral, has also done extremely well through 2 bear markets.
        Animats 4y ago
        > I do think Tether is not fully backed and is likely to depeg some day. Which is a good reason to get out. Stablecoins have only two stable points, 1 and 0. When they crash, they go all the way. Look at what happened with the stablecoins that already crashed.
        landemva 4y ago
        1 or 0 is true of government currencies. The unknown is when. For the Bretton Woods USD 'when' was August 15 1971. https://history.state.gov/milestones/1969-1976/nixon-shock https://history.state.gov/milestones/1969-1976/nixon-shock
      - jacobsimon 4y ago
        Maybe but not necessarily. I can log in to Coinbase and buy USDC with dollars in my bank account, use the USDC in a variety of decentralized applications or contracts, and then exchange my USDC for USD again via Coinbase. It’s similar to going to the bank and withdrawing cash, and it has no inherent volatility or downside risk.
  - matthewdgreen 4y ago
    Tether has no meaningful regulatory oversight. Circle has money transmitter licenses in most US states, some of which cover them as a virtual asset service provider, and require specific conditions around the way that they store customer funds: https://www.circle.com/en/legal/usdc-terms https://www.circle.com/en/legal/usdc-terms I'm not claiming this is perfect, but it's pretty different.
    - smoldesu 4y ago
      That's great, but that only eliminates 2-3 classes of fraud from their potential thousands of exploits. We put too much trust in centralized companies to manage decentralized communities, and I'd bet you dollars-to-donuts that Circle will end up complicit in some sort of scheme.
  - rufusroflpunch 4y ago
    Sorry, I did not mean to insinuate anything resembling cover for these stablecoins. I do not own any and I never would. In fact, I only own Bitcoin and I don’t keep any on any exchange at all. This is the only way I would ever recommend when interacting with cryptocurrencies.
- thatguy0900 4y ago
  It is less of a dollar, because I can say you can exchange it for a dollar when you can not, in fact, exchange it for a dollar when you try to,because I never had enough(or any) dollars. In the real world when the bank runs out of dollars the government will give me dollars instead.
  - aeternum 4y ago
    For US citizens perhaps, but if you're a Russian citizen or company, the USD in your bank account is now just a worthless database entry. Just because that weapon hasn't been pointed at some group of US citizens yet doesn't mean it can't in the future.
    - hef19898 4y ago
      Maybe, maybe not. In the meanwhile SBF and similar figures are happy to protect your money in crypto assets.
      - aeternum 4y ago
        Not your keys, not your coins. Those not willing to learn self-custody are definitely better off in USD.
  - jacquesm 4y ago
    > In the real world when the bank runs out of dollars the government will give me dollars instead. Up to a point.
  - rufusroflpunch 4y ago
    I think that is a fair critique, but that will be coming at some point, very likely. Either a law requiring 100% liquid reserves, or a law bringing them into the FDIC system.
jacquesm 4y ago
And that's entirely on them, international bank transfers within the EU take mere moments now.

grey-area 4y ago

If a stablecoin is fully backed by USD, why does it exist? The only reasons for these coins to exist are: 1. Avoid proper financial controls and regulations imposed on real currencies and operate illegally. 2. To separate fools from their USD and replace it with USDT or whatever.

zeven7 4y ago
Those are not the only possible reasons for stable coins to exist. The obvious other reason is to use them on the blockchain. You cannot use USD on the blockchain. Maybe you don't think there's anything of value on the blockchain and that's why you don't see a use for it. I don't want to get into an argument over whether blockchain tech has a use case or a future in this comment chain, but for the sake of understanding what stable coins could be used for just grant the following: - There is some use for ETH out there that doesn't involve avoiding financial controls and regulations or separating fools from their USD If you will grant that, then it's easy to see why here would be a use for USDC or similar. ETH price fluctuates. If you need to be able to utilize Ethereum, it's helpful to have value on it. If you don't want that value to fluctuate, you can hold it in USDC and convert to ETH when you want to use it. Plain and simple, this is the first application for stable coins. If you will not grant that there is a use case for ETH then there's no point in having a discussion about stable coins anyway. That's a separate discussion that needs to be had first.
- Hasu 4y ago
  > There is some use for ETH out there that doesn't involve avoiding financial controls and regulations or separating fools from their USD I do not grant this, because Ethereum has been around for 7 years and no such uses have materialized yet.
  - zeven7 4y ago
    Ok, then there's no point in having the stable coin conversation.
zeven7 4y ago

graeme 4y ago

Not volatile? The point of stablecoins is they’re supposed to match the USD in value. By definition they are more volatile than usd as they are pegged to it and vary in price

chrisbaker98 4y ago
The point is that their prices are less volatile than the prices of "real" cryptocurrencies like Bitcoin.
KMag 4y ago
> By definition they are more volatile than usd as they are pegged to it and vary in price I understand your reasoning, and you're correct in this case (assuming your numeraire is USD). However, if your numeraire is something like a GDP-weighted basket of USD, EUR, JPY, and CNH, it's possible for a USD-pegged asset to be less volatile than USD (since your unit of account isn't USD).
- KMag 4y ago
  Note that if the above is the case, that would imply that the tracking error of your USD-pegged asset is correlated to the non-USD components of your numeraire. In a risk-off/flight-to-quality environment (depending on the exact circumstances, but in general) you'd expect EUR and CNH to drop in relation to the USD and often JPY to rise in relation to USD. The opposite would be expected in a risk-on scenario. Presumably, your USD-pegged asset would drop in relation to the USD in a risk-off scenario and rise in a risk-on scenario, so in that case it would seem that your tracking error would tend to be correlated to the non-USD components of your numeraire basket. So, if macro risk-on/risk-off are the primary drivers of your pegged asset's tracking error, it would seem that your pegged asset would tend to have less volatility than USD if a GDP-weighted basket of major currencies is your unit of account.

deleted 4y ago

[deleted]

MomoXenosaga 4y ago

anigbrowl 4y ago

My first and only experience with stablecoins was when I moved a bunch of Stellaris into one and when I went back to do another transaction a few days later its value had been reduced to zero for 'technical reasons' that I am still unable to comprehend. Whoever was operating it basically helped themselves to a year's worth of investment gains, which soured me on the concept.