Stablecoins Discussion

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#21

In the case where the USD continues to inflate at manageable levels then DAI will happily remain stable to 1 USD… 1 DAI would just be worth less and less compared to ETH or gold. Where DAI struggles is during periods of rapid price change of the underlying collateral- like during Black Thurdsay in March were ETH fell 40% in the space of a couple hours.

In the case where USD experiences hyper inflation then the whole world economy will go down the toilet. It wouldn’t be pretty for anything.

Even in the case where cyrpto assets just outgrow fiat and become the dominate system of money, there would come a time when having a stable coin pegged to fiat currency would no longer make sense. So in my mind stablecoins will eventually be pegged to something else or become obsolete.

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#22

yes i was kind of thinking along those lines, not so sure about obsolete (unless as humans we find some other great tech that supersedes crypto) I can however definitely see how fiat can be outlived and stablecoins being pegged to something else, gold, silver, etc…

#23

I think it is time for a EUR pegged stablecoin, but a decentralized one!
We cant rely on the ECB or some Malta based corporation to do anything in favour to the people…

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#24

It is a fair point if the future would really play out black or white, crpyto or fiat.
For now and the next 5-10 years it would be quite helpful for everyone in Europe and around to not have an additional usd/eur risk, but a deentra;ized DAI like EUR pegged SC!

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#25

lol, the more I look into Malta and its history I’m not so bullish on this EURS token anymore (exit with the Godfather soundtrack music theme).

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#26

Exactly! That’s why it is on us/ the community to create a decentralized digital EUR.
There are so many things wrong with the ECB and the EU, but not with the general idea of community and us the people who live in Europe.

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#27

Question: If I have a USD stablecoin like a DAI, and the US currency hyper-inflates, does my DAI coin devalue directly with the US currency? Eg: If a loaf of bread is 100USD in hyper-inflation, is it also 100DAI? If so, what kind of stable coin would be immune to the hyper-inflation?

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#28

Hi @Mirran yes , it would hyper-inflate as it follows the same dollar price , its basically pegged to dollar.

So if you dont want to hyper-inflate you should use other cryptos like Bitcoin or Ethereum. I just use DAI , USDC or USDT mainly for trading when i want to sell in the top , save my balance when it goes down and buy cheaper with this stablecoin balance so i finally increase my overall amount of BTC or ETH.

Hope this helps,

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#29

It does. Thank you. I was thinking, since bitcoin transfers are pretty liquid, there will good reasons to put small amounts of bitcoin into $. But I think if I keep the stablecoin amounts small then I wouldn’t be caught with too much to lose if there was some hyper inflation happening.

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#30

@Mirran yes , also i believe a stablecoin is a way to keep your assets value our of FIAT system during a BTC dump for example. Then when BTC drop 20 or 30% then you buy BTC again with your stablecoin so you will earn BTCs after all

Regards,

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#31

Thanks. Is there a way to see a dump beforehand?

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#32

ey @Mirran , not at all. Nobody can predict the market , however you can have a plan , follow the market daily through fundamentals and technical analisys and make a prediction based on statistics.

so It is very important to always take profits, as you never know when its going down

Regards,

#33

Is DAI a ponzi scheme?

I only started learning about DAI today, but from what I heard, ALL new DAI is created through loans, and these loans must be repaid with interest, and the interest is also paid in DAI. If that is true, then old debts can only be paid with new debts, since the DAI to pay the interest on the old debt was never created. This means that it is literally impossible for all borrowers of DAI to pay off their debts, since the DAI to do so does not exist. The US dollar has the same problem, which is why we have permanent exponential growth of debt and of the money supply.

Can someone clear this up for me? If some portion of DAI could be created without a loan, or if the interest could be paid back in a different currency, then this problem would be avoided. But as it has been explained to me, DAI is an unstable system that requires increasingly large amounts of capital to continue to function. I suppose in the long run, maybe it won’t matter, since the dollar may collapse before the Maker system runs out of new capital for loans, and then Maker and DAI would be obsolete anyway.

And in response to the original post, I imagine if we got into the situation where faith in the dollar was rapidly eroding, then adoption of real money such as gold or bitcoin would be rapidly increasing as a response. The volatility problem of crypto currencies would go away as soon as a sufficiently large group of people used them for their daily transactions. So far as I’m aware, there is nothing inherent in the nature of digital currencies that make them more volatile than paper fiat.

#34

I believe stable coins are very much needed in the space and they will always be.
Either for defi, trading, diversification, taking profit or just as fiat gateway.

However, I think they do not fulfill the “reserve asset” function, as most of them are centralized so there is the risk they are not properly managed (not backed with enough fiat) and as USD direct competitor they will face regulatory issues at some point.

Therefore, at the moment I believe it makes sense to hold them only for a short period of time, waiting to buy crypto or to convert them back to fiat. Holding fiat is still much more secure to me than holding stable coins that MAYBE are PARTIALLY backed by fiat.

That is why decentralized stable coins like DAI are a much more interesting concept to me.

However, my main concern is that I don’t quite get the risks involved with DAI. With centralized stable coins at least the risks are clear to me, whereas with DAI I am not quite sure.

@amedeobrands could you please explain which are the scenarios that will see DAI price dropping in price and failing as a stable coin? Ethereum dropping price by 80-90% will make DAI failing? Or what about the other collaterals it has? What does it need to happen to create a domino effect that will break DAI?

Thanks!

#35

I was wondering what if the US Dollar collapses would that have an effect on the DAI token?

#36

i like the idea of stable coins as it allows you to have easily do risk management (this way you can still hold profits in these tokens and not convert back to fiat). I would however, like to see stable coins being backed up by real value assets like gold/silver rather than fiat since fiat is not backed by anything!

#37

Greetins,
Thanks for making the discussion topic,
I am a novice to the whole eco systems I have used USDT as it seemed to be transferable with so many coins, in future I will use DAI as it is more transparent & trustworthy.
Thanks again.

#38

Decentralized Stablecoins Dead? Stablecoin Apollo lands web3
In the past two years, with the development of the DeFi ecosystem, the demand for stablecoins has also increased greatly. For the gradually expanding crypto market, the emergence of stablecoins has provided more convenience to the market. Given the growing demand, various stablecoins have emerged in an endless stream of varying quality. Although demand is a hard requirement, the instability of stablecoins has also become the most worrying point for users. With the death of UST, the stablecoin market ushered in a brief darkness. Who can become the protagonist of the fairy tale and incarnate Apollo to bring light to the stablecoin market!

Briefly describe the status quo of decentralized stablecoins

Stablecoins are issued one after another. They want to become the Apollo of the stablecoin market, and they want to bring light and hope to the stablecoins. The funny thing is that they do not have any innovation and optimization, and try to use immutable mechanisms and exaggerated language to become the mainstay of stablecoins, this is undoubtedly to cheat money.

Let’s briefly talk about the more popular decentralized stablecoins in the market: DAI, MIM, USDD.

DAI

We all know the old-fashioned decentralized stablecoins. The over-collateralized stablecoin, after the death of UST, became the largest decentralized stablecoin by market cap. The high risk of liquidation and the low utilization rate of funds are the disadvantages it faces. At present, DAI is relatively stable. In order to maintain stability, a large amount of USDC is reserved in the asset, but USDC is a centralized stablecoin. Although the development is stagnant at this stage, DAI is also gradually seeking breakthroughs. We will not talk about the future, at least it seems that DAI does not meet my expectations for a decentralized stablecoin.

MIM

The market cap of MIM is second only to DAI, but the difference is still relatively large. Some aspects of it are similar to the mechanism of DAI, and it is also an over-collateralized stablecoin, which has low capital utilization and faces liquidation risks. Unlike DAI, MIM supports cross-chain. To sum up, a little innovative, but not much.

USDD

The stablecoin just issued by Tron in May, the stability mechanism is called “the second UST” by many users. The reason is that its mechanism is highly similar to LUNA. As an algorithmic stablecoin, USDD is relatively transparent, and due to the support of Tron, USDD’s capital reserves are also very strong. Despite this, USDD still de-peg for more than a week in the stETH event, indicating that USDD’s anti-risk ability is not strong.

Killer Stablecoins: The Future of Decentralized Stablecoins

The decentralized stablecoin market is stagnant, and the risks faced by stablecoin projects are beyond our users’ tolerance.

Looking at the entire stablecoin market, the innovations, stability and transparency of these three stablecoins are relatively good.

GHO

GHO is a multi-collateralized decentralized stablecoin that fully supports the Aave protocol and is pegged to the U.S. dollar. It is also a popular decentralized stablecoin recently. Aave is a decentralized lending system that can provide multiple application scenarios for GHO, and the collateral for minting GHO can continue to earn interest. The borrower mortgages the assets, mints GHO, and continues to enjoy the interest brought by the collateral. There is room for arbitrage when prices deviate, thereby exploiting arbitrageurs to return to stability. Second, the dynamic adjustment of borrowing rates can also ensure stability.

When the price of $GHO>$1, you can use the stablecoin to mint $GHO and sell it at a high price for arbitrage.

When the price of $GHO>$1, GHO debt can be repaid.

The emergence of GHO has greatly improved the liquidity of the stablecoin market and increased the market’s confidence in decentralized stablecoins. But the main problem is that the borrowing rate of GHO is determined by the community, and the borrowing rate is a key factor in maintaining the stability of GHO, and there are risks.

FRAX

Unlike other stablecoins, FRAX is a partially algorithmic stablecoin. To mint FRAX, you need to own two tokens: USDC (or another supported crypto asset) and FXS, relying on arbitrageurs to maintain stability. In Frax v2, the AMO mechanism was introduced to promote the development of Frax. In the previous stage, FRAXBP was launched to further increase liquidity. The risk of FRAX is that FXS itself is the governance token of Frax, which can be issued indefinitely. The value depends on the issuing institution and is not stable. This goes back to the problem of UST. Both FXS and LUNA are equivalent to Negative Equity. The existence of FXS makes Frax face a certain degree of crisis.

Curve

Curve is a popular stablecoin trading platform. Friends who are familiar with stablecoins must know about Curve. So why put Curve here? The reason is that Curve is about to issue a stablecoin, and it is an overcollateralized stablecoin. After the failure of UST, many people want to carve up the market of decentralized stablecoins, and Curve is one of them. The details of the stablecoin have not been disclosed, and you can look forward to it.

TiUSD

TiUSD is the first decentralized stablecoin using Use-to-Earn launched by TiTi Protocol. Transparency, stability, high capital utilization, strong anti-risk ability, TiUSD is all satisfied.

Similar to GHO, TiUSD also has multi-asset reserves, a mechanism that can protect against risks to the greatest extent. The difference is that TiUSD has no over-collateralization, which solves the risk of liquidation of users and improves the utilization rate of their funds. At the same time, TiUSD introduces MMF, TiTi-AMM, Reorders, etc., creating a new game mode and further ensuring stability. At present, TiTi Protocol has completed a financing round, the main network has not been launched yet, but the test network has been opened. Partners who focus on the stablecoin track can try it out. After all, the testnet is a good opportunity to learn about a project at a low cost.

In the battle of the gods, who can bring light and hope to the decentralized stablecoin?

Undoubtedly, if web3 wants to develop and the encryption market wants to progress, the demand for stablecoins will continue to expand, and the demand for decentralized stablecoins will become higher and higher. Therefore, choosing a stable and highly risk-resistant decentralized stablecoin is an indispensable link.

At present, there are not many perfect decentralized stablecoin projects in the market. GHO has been recognized by many people, FRAX is also making progress, FRAXBP is a good opportunity, Curve has entered the stablecoin market and compete for market share, TiTi Protocol has a perfect mechanism, high transparency, security and stability. The myth war of decentralized stablecoins is about to kick off, maybe the head of the gods is here!

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