[mehmeta]

The main problem with fiat backed stablecoins is that in addition to smart contract/theoretical security, you now have to also trust the procedural security of the entity issuing the asset. A collateralized stablecoin like Maker/Dai doesn't have that additional attack vector.

For example, if the keys issuing the USDC has ever been compromised, new assets can be issued instantly by an attacker, compromising fungibility and causing other problems. Whereas if Maker/Dai smart contract proves secure over time, there's no centralized issuing entity/keys to compromise. Afaik the only centralized privilege controlled by MakerDAO is the global settlement, which merely refunds everyone their ether.

[chemmail]

The problem with stablecoins, there is no such thing as a stable coin.

[QML]

Whats the difference between a stablecoin and an IOU?

[mehmeta]

Both fiat backed assets as well as collateralized assets pegged to fiat money are called stablecoins, because they are meant to represent units of fiat money, and therefore "stable" relative to fiat. Fiat backed stablecoins fit the definition of an IOU better, since they are cryptographic promises to pay the bearer by centralized issuing entities. Whereas collateralized stablecoins are not IOUs, they are effectively loans on other cryptoassets you deposit in a smart contract (ether, in Maker/Dai's case).