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by cornyNetHandle 3083 days ago
It may attempt to trend towards the dollar over time, but will it be trending that way during the time that you personally need it?

"The market can remain irrational longer than you can remain solvent", springs immediately to mind.

edit: Also, pegging a cryptocurrency to the dollar seems almost comedically perverse. What is it for?
3 comments
dragonwriter 3083 days ago
> Also, pegging a cryptocurrency to the dollar seems almost comedically perverse. What is it for?

The frequently cited money transmission benefits of a cryptocurrency, without value instability of playing games with monetary policy.

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cornyNetHandle 3083 days ago
If blockchain based currencies prove themselves to be a significant improvement on current monetary systems then state currencies, such as the US dollar, will adopt the new technology, as they have done with all other previous developments in money.

This would seem to indicate that a blockchain coin pegged to the dollar only keeps any marginal utility at all during the period where the technology is novel, as blockchain tech either crashing or becoming successful, would both be events that kill it.

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dragonwriter 3083 days ago
> If blockchain based currencies prove themselves to be a significant improvement on current monetary systems then state currencies, such as the US dollar, will adopt the new technology, as they have done with all other previous developments in money.

The US dollar, as such, often hasn't adopted new developments in money transmission directly (at least, not at the consumer level); the circle of businesses facilitating USD transactions has, but a dollar-pegged cryptocurrency is essentially just a new part of that ecosystem.

OTOH, the dollar has adopted, directly, new tools in money supply management, several times in its history.

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JumpCrisscross 3083 days ago
> The US dollar, as such, often hasn't adopted new developments in money transmission directly (at least, not at the consumer level)

The Federal Reserve began moving money electronically in 1915 [1]. (You read that right. Nineteen fifteen. In the early 80s, telex transmission services began.) The back offices of finance are surprisingly reactive to new technology, when the risks and rewards balance properly.

[1] https://en.m.wikipedia.org/wiki/Fedwire

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MicahZoltu 3082 days ago
As DAI gains trading volume and gets listed on more exchanges you'll likely see it stabilize. Any active trader who believes the price pressures will work has incentive to buy DAI when it is below 1 USD and sell DAI when it is over 1 USD as this is a low-risk trade (opportunity cost only). Right now, there isn't much volume so it is pretty easy for someone to come in and want a bunch of DAI or to liquidate a bunch of DAI and cause the market to shift suddenly. It will then take a few minutes for the market to correct, and with per-transaction fees the market is hesitant to correct small errors due to the lack of volume.

TL;DR: The more volume DAI has on public exchanges, the tighter it will hold its peg.

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zodiac 3083 days ago
> Also, pegging a cryptocurrency to the dollar seems almost comedically perverse. What is it for?

The general thing you want is for your currency to have stable purchasing power (for goods and services) in the short term, maybe inflate it slowly to encourage investment - monetary policy basically. Targeting a USD peg is a way to do this, of course ideally you'd want your currency to have a monetary policy independent of USD

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