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by nickpsecurity 2683 days ago
In response to stability criticism, chadski on Lobsters told me about so-called stablecoins with MakerDAO and Dai being in active use:

https://makerdao.com/en/whitepaper/

It's an Ethereum-based scheme that's tied in value to the U.S. dollar. That sounds good. The methods to achieve that look... complex... to say the least. If they work, then there's at least one of them that's stable so long as there's no serious problems in it and/or Ethereum. Well, that sounds promising. ;)
2 comments
orthecreedence 2683 days ago
I'm aware of Maker.

It's a bunch of math that uses market mechanisms to try to solve the problem of stability when the only real answer for the question "how do I stabilize a cryptocurrency" is "for each unit you issue, you have a bank account with $1 matching USD in it."

Maker essentially banks on the fact that a bundle of cryptos (ETH and a few others) will not drop past a certain amount in relation to USD over a given amount of time. They've been correct, so far, but that doesn't mean there won't come a time when the markets drop past whatever magical threshold they've set.

I'm not putting down the project, I followed it closely for a while and a lot of work went into it. My point is you can't really have a stablecoin unless you have the USD to back it up.

An interesting plot twist will be if Maker derives from other stablecoins (ones backed by USD reserves, like GUSD) and not ETH.

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teknologist 2682 days ago
I would think that, regardless of the math, the token prices might remain stable just because people think the algorithms are doing their work. Kind of like an "invisible hand" situation.

Circulating supply fluctuations don't seem to have much of an influence on crypto prices (as seen with quarterly Binance Coin burns for instance)

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thisisit 2682 days ago
>If they work

That is a big "if". Stability is a principle which has been tried time and again in fiat money and failed. Too many times to count. See GBP peg etc. for examples.

If something is unstable, it is because the market deems it to be. Adding an artificial support goes against that same market.

Cryptocurrency circles like to talk about government control being a bad thing. But in the same vein cheer stablcoins which exert near similar control - by algos or by adding coin supply. They want to have their cake and eat it too.

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