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by zodiac 2986 days ago
He has a weird definition of "break". At no point did the value of collateralized ether backing each DAI go below $1 or even anywhere close to that.

There are valid arguments to be made against a DAI-like system like capital inefficiency, the appropriateness of the bounded volatility assumptions, and maybe sell spirals, but Preston Byrne's articles include a lot of invalid arguments.
1 comments
hashsalt 2986 days ago
Thats precisely his point. Contagion causes the break. Analogous to a bank run or the ruinous fall of the Thai baht in 97/98. Nobody has any real info on whether the bank has enough reserves, nor do they care. They just dont want to hold the asset.
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chrisco255 2986 days ago
In this case, they do. DAI's system is run entirely on the blockchain. It's auditable and decentralized. The biggest risk to DAI is if the value of the collateral crashed below the amount of DAI in circulation. The system has incentives in place to prevent this from happening. I'm not saying it's bullet proof, but I think it's a highly resilient system. I think adding multiple types of collateral should protect against the situation where ETH drops rapidly to near zero.
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hashsalt 2986 days ago
Bank eg was an analogy. The issue is contagion, which can be external in source.
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zodiac 2986 days ago
What do you mean "contagion"?
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