Stablecoin Deep Dive - Assignment

Look into the stablecoins I’ve mentioned and let’s share some opinions in the forum. What do you think about Tether’s reserves? Do you think USDT creates an existential risk to crypto? What is your favorite stablecoin? Looking at DAI Stats, we can see that a significant amount of the collateral backing DAI is USDC. Do you think this makes DAI more, or less secure than if it were backed by, something like ETH? Sound off in the forum and let’s talk about it.

It’s pretty feral that CEXes still use USDT as a primary trading pair for a lot of their primary trading pairs.

I mulled on the concept quite a bit. My initial thoughts were that when USDT collapses, so will the rest of the crypto market in some pseudo black-swan event. :swan:
The thought was that if USDT has printed billions of tokens on their own accord and continued to buy up the supply of BTC/ETH etc. then these coins would need to undergo a period of price discovery again without fake dollars pumping the price.

Earlier in 2021 when they were to release the reports to the New York Attorney General, I was counting holding my breath for the big crypto crash. And then several months later they released that laughable 1 or 2 page ‘report’ that showed USDT was backed by like ~3% of cash reserves. :laughing:
Nothing happened, and it held its peg just fine.

But now instead, I think maybe the crash of USDT would be a good thing for crypto prices. :partying_face:
Should there be some bank run on USDT (and I still think it’s inevitable), what are people going to trade their exit out of USDT to?
…other tokens.

So you have an instance of tens of billions of dollars buying up all the supply of crypto on the market.
Sure, USDT would lose its peg, but I think you’d see a whopping big green candle on all your fav tokens. :green_heart: :green_circle: :green_book: :green_apple: :leafy_green: :green_square: :evergreen_tree:

Looking forward to seeing what happens. Might not be for a while, but I’ve stopped losing sleep over it :sleeping:

USDC is my favourite stablecoin.

I’m no fan of DAI being backed by multiple assets - INCLUDING Tether :man_facepalming:

I haven’t sat on it for very long, but I think sticking with SAI - the single-asset collateral (ETH) would be a better move.
Or just being wayy more selective in what’s allowed to back it.

But pls, I’d love people to explain why I’m wrong. I don’t have strong opinions on this.

It’s somewhat a socially enforced construct and if the house of cards begin to fall, you have the best chance surviving when you’re backed by sound assets. And ETH is about as sound as it gets in crypto-land, seeing as if ETH drops, everything built upon it likely will (except for maybe the centralized stablecoins).


Interesting topic…I think a stablecoin that is supposed to represent and be pegged in value to a synthetic FIAT asset should be backed 100% by that asset (similar to 1 PaxGold token being backed by 1oz of physical gold in a vault) otherwise there is risk that the asset is undercollateralized and is somewhat replicating the fractional reserve system that currently exists. However, the free market will decide over time what risk/reward/safety we are all willing to accept in a stablecoin (if they are indeed necessary). Of all of the stablecoins mentioned I prefer USDC for now, but I also recognize that it is not 100% backed. Crypto investing in general requires a certain element of risk that comes with the unregulated nature of it, so at this stage of it’s evolution it would be naive to think there is a perfect solution. For now, my hope is that we stop valuing assets in USD in the future and start measuring value in Satoshi’s, ETH or some other form of decentralized value that can’t be interfered with by governments, bureaucrats or centralized organizations.


I think the value of Tether’s reserves depends on the future of the crypto market and what regulation is imposed by the feds. I have no doubt in my mind that we are moving towards a Digital financial system within the next ten years, where paper currency will be no more. Although I do not have a favourite stablecoin, I have felt reasonably comfortable using USDC.


Tether skeeves me out. The fact that all the centralized exchanges, that I’ve used, rely on USDT to create trading pairs, is disturbing. How can so many people have trust in the Tether organization when they haven’t earned it? As jak described, I used to think that the inevitable collapse of Tether would destroy the crypto market, which could still happen due to fear, however, most people would just want to get rid of their Tether and would probably buy anything else possible.
Regardless, CEXs need to make to switch to alternative, and I think it should be TUSD as they are fully transparent. Decentralized stablecoins are currently too volatile (relatively). I personally feel comfortable using USDC, as it is tied to the reputation of Coinbase, however most CEXs would probably have an issue giving the power of the stablecoin market to their competitor.

1 Like

Tether leaves many question marks. USDT can create existential crisis for crypto. My favorite stable coin is DAI. Complicated question, depends on who you trust. DAI backed by USDC is safer if you trust traditional financial institutions over decentralized blockchains. DAI backed by eth is safer if you trust vice-versa.


To echo what others have said, I don’t like the idea of a stable coin being tied to FIAT. In my opinion, it makes the coin more centralized by proxy as it allows pricing to be dictated by governments and bureaucracies. Being backed by Satoshi’s or ETH feels like a better option as it’s being backed by decentralized, but staying power cryptos.


My favorite stable coins are USDC and DAI, but I don’t like the idea of a stable coin being tied to FIAT. USDT can create existential crisis for crypto in my opinion. Crypto investing in general requires a certain element of risk that comes with the unregulated nature of it.


Cryptocurrencies (at least some of them) shouldn’t stay volatile forever. So hopefully stablecoins are just a necessary evil in the short term.
It seems that tether has a sketchy reputation, and I suppose the lack of transparency in what is backing it is troublesome. I think that tether will lose ground to other stablecoins and so it won’t become a crisis for crypto. I only hope that other stablecoins will be able to continue to have a proper reserve as they keep growing.
Dai being backed by centralized stablecoins seems to reduce it’s decentralized nature. At the same time, perhaps there is some benefit to having some backing from stable assets as opposed to volatile ones like eth.

1 Like

Tether FUD again in a close future?

The “Tether FUD” has been around for a while now, but in my personal opinion that doesn´t seems to impact the markets. In the PDF Tether released regarding the backing of the USDt, we can observe that only 3.87% of the Cash & Cash equivalents sections is really Cash. That it´s one of the cons I see on Tether.
I think that USDT might pose a threat to the Crypto Industry. And I can support my statement by working out this hypothesis: If both (the US regulators and the US government) begin to inquire into Tether, they could be in serious problems:

  1. Referring to the backing of all the USDT on circulation, they allegedly say they are totally cash backed
  2. Market Prices manipulation
By market manipulation (pumping prices up), I refer when tether minted new coins it was always followed by BTC moving up. Here you can see the [Study](
1 Like

I think we would see a big market crash if something happens to USDT, but we would definitely decouple from tether. And I agree with you in preferring USDC, I like it more haha

And regarding the multi-asset collateral, I think it´s cool, but I think the DAO shouldn´t allow centralize coins control by central entities to be used as collateral. It gives this centralize Entities a significant control over the protocol. For example, at the time of the writing 42.6% of DAI generate by collateral is backed by USDC. If something happens to USDC, DAI will fall without doubt.

We are at a very young market, we need to see where are we heading and act accordingly.
All of the above is what I think at the present moment

1 Like

I agree about USDT, at some point something is going to go bad with it, dont know what and dont know when… that said, I do need to change some, lol

I prefer USDC over tether but now learning more about BUSD backing and using BSC more, that could be a good option.

I would prefer my stable coin to be backed by dollar funds, especially rather than ETH or other asset as they are fine while the sun shines and the direction is up but what about on the way back down again

I think we would see a crash but depending on what happened I am pretty certain that everyone would find other stable coins to sure up in or even large caps and the market would bounce back quick with those safely in others buying the dip frantically

1 Like

Yes indeed I agree with your thought, but I not sure about how can we reduce the volatility of one asset, and make it simulate the price of a FIAT currency.

Tether, hold it for as short amount of time as possible. I personally only use it for trades where there is a lack of other trading pairs. While I wouldn’t consider it an existential risk to crypto, if it crashes it would definitely cause more than a few headaches considering it is still the most used stable coin. It certainly would wreck the market to a deep level.
As for DAI, there are pros and cons using USDC to back it. At the very least USDC is somewhat reliably backed and can give some stability to DAI but yeah, like tether there is counterparty risk that has to be considered and one cannot truly call it Defi until even that is gone. Question is then, how to stabilize the peg to 1 dollar. I personally don’t see it as an easy problem to solve.

I think that the fact that Tether is already going through intense scrutiny not only from the SEC but from the wider public is a cause for concern with regards to their claimed reserves. Although I think that a big part of this is the fact that their major selling point to users is their dollar/asset backed reserves, and they used this heavily to promote adoption, which is understandable because literally they were the first. I think that the existential risk for crypto really boils down to whether a Stablecoin should indeed be backed by an equivalent real-life asset at all. Even fiat currencies cannot claim to do this, and the idea in and of itself needlessly complicates a game-theory based system that should ideally regulate itself as time goes on and adoption becomes more widespread.
I’m literally still learning as I go but currently, my favorite Stablecoins is UST, simply because its algorithm and method of regulation is so simple. But beyond this, they have a very attractive model for adoption, where the staking of Luna perpetuates the stability, usage, and growth of both tokens.
As for DAI, because their most significant source of collateral is USDC (handled and backed by the Coinbase team), I would say that it can more easily avoid volatility or straight up collapse due to price fluctuations in either USDC or Ethereum. This is because Coinbase (which is not only a widely used exchange, but a well established market maker in and of itself) is incentivized to maintain their USD peg, giving DAI a significant buffer against fluctuations in the price of Ether. The interoperability of EVM makes it so that different DAO’s may rely on each other to achieve a state close to Pareto efficiency. In other words, all parties will be happy, and any competitive (selfish) actions become unattractive to any individual participant.

As someone mentioned above, nothing happened after the Tether report came out. I think decentralized/crypto advocates believe in hard money, but I think the majority of the world does not care. Fiat is not backed by anything, not even the equivalent in assets, just the word of the government. We can look into history and see that all fiat currencies have failed, so it’s possible that stablecoins that are not properly backed may eventually fail too, but as long as people’s bags are being pumped, people don’t want to think about it. It may also take a long time to fail, so people don’t want to worry what might happen in the future. Take the example of self-custody. Not many people really want to take responsibility for their assets - it’s too complicated, causes anxiety; people want to set it and forget it. So with fiat money, firstly, most people aren’t the wiser of the issues with fiat, so I doubt they will be aware of the problems with USDT. As long as the majority are using it, they will too. Basically what I’m trying to say is that, even though their reserves are questionable to me, I don’t think the majority of people that use stablecoins truly care.
I also don’t think USDT will pose an existential risk to crypto because it is something that is inevitable in a monetary system. We’re just moving towards a new monetary system is all (in terms of how we bank). It’s hard to back money, we’ve seen it time and time again. Fiat comes and goes, hard money comes in, but eventually fiat comes back. Fiat always comes back, why does fiat come back? Because it creates wealth, no matter how fake that wealth is. Imagine how your experience of life improved when you got a credit card? Suddenly, you’re able to buy that phone/TV/vacation/schooling etc that you weren’t able to afford at the time. Unless we evolve into beings that have transcended the need to own things, we will always have the flip flop between hard money and fiat (I’m calling coins not properly backed fiat in this case) and it’ll work until it doesn’t and a new system will be ushered in. What do others think?

I think as more adoption occurs, perhaps the stablecoins with actual backing will eventually gain a larger marketcap, but they will need to make it easy for people to acquire and there will need to be more trading pairs. I don’t want to have USDT but the trading pairs with the most liquidity tends to be USDT, so the other stablecoins will have to fight past that first mover advantage. I think USDC has become popular because it has the backing of a huge entity which is Coinbase. Also, if you’re using a smaller exchange to purchase your crypto because of the country you are in, it’s probably easier to get USDT than say TUSD. For me, TUSD sounds great because there is daily proof of the reserves, but I can see that if I was trading more, I may end up using something like BUSD because as much as I dislike the idea of a centralized exchange… it’s just soooo easy to use with such low fees! Every percentage point counts. What can I say… I’m a part of the general mass (normie?).


I think Tether’s reserves should be more transparent in order to “comply” with the transparency of blockchain. There should be no question as to the value of something that they are claiming to be stable especially if what they claim is true. If not, Tether could be bringing some risk into the market if something were to go wrong.
I do like DAI as a stable coin option the most due to its decentralized state, but its reserves being more stable coins may be an issue in the long run.
Personally, id like to see Stable coins like DAI and/or UST tie in gold (or PAXG) into their algorithm as it would help de-couple the crypto market away from the Dollar since for the last couple years they printing has been through the roof.
value backs value and i see no value in the USD

1 Like

Tether is very worrisome because it is the largest stablecoin in market cap. It has little regulation and the minting and distribution of Tether token is questionable to many. Is it creating fake volume? Was Bitcoin artificially pumped? If 50% of reserved assets are potentially worthless, it will collapse the market and there will be no one to step in. I do believe if there were a collapse it would be a much faster recovery because there are alternative stablecoins with stronger foundation.
TrueUSD sounds pretty cool with real time audits that are picked up by Chainlink to update on chain transactions.
Multi collateral Dai does make Dai more secure, it becomes faster to provide liquidity in situation like Black Thursday. Maybe Maker could have become insolvent if there weren’t other assets such as BAT to redeem Dai when it was under capitalized.

1 Like

On Tether’s breakdown stats, it displays that almost 85% of its total reserves are a combination of cash equivalents, short-term deposits, and commercial paper. I believe this is very unsecured and sketchy for a stablecoin that needs to keep steady in a large market. Although USDT is the largest stablecoin by market cap, I think it would be better for the crypto space if the funds locked in its capital were spread to other stablecoins/assets, where LTV’s of other stablecoins and prices of assets purchased would rise overall. In addition to that, only 5% of Tether’s reserves are digital assets and true crypto investments anyways.

Overall, my favorite stablecoin is USDC although it is centralized as well. I’m currently lending a small amount on BlockFi and earning a great interest rate whilst being cognizant of the risk there. I just like how the value of USDC hardly fluctuates, but I’ve definitely developed a liking for MakerDAO stablecoin through the further research of this course.

DAI being heavily backed by a stablecoin like USDC as opposed to a volatile asset such as ETH makes more sense for better security. Although DAO and ETH are decentralized and USDC is not, it just seems better to pledge a stablecoin for more secured collateral. The price of ETH isn’t as steady as USDC, thus providing a higher chance of liquidation.

1 Like