[betwixthewires]

Sure, direct 1:1 collateralized stable coins work, but look at the "algorithm" behind the underlying asset.

USD itself is an interesting stablecoin, algorithmic in nature with a board able to make decisions to change the algorithm. It is not pegged to an asset, rather it attempts to be pegged to an economic state, primarily an inflation rate, using issuance and purchase of other assets. It has failure modes as well.

Note that algorithmic and reserve based crypto stablecoins are both exposed to this, since one is backed and the other is pegged to it.

So if you want to avoid that, you need to peg your cryptocoin to something without that, i.e not a fiat currency. This is hard to do with collateral, some gold backed coins try. Pegging a stablecoin to some commodity or asset or index or "basket" algorithmically is much easier, if somewhat less stable depending on the system that is built to do it.

[TuringNYC]

>> So if you want to avoid that, you need to peg your cryptocoin to something without that, i.e not a fiat currency.

Except is that really the issue? We're not trying to worried that dollar slides and hence the stablecoin is worth less. We're mostly worried that there arent dollars backing the stablecoin to begin with.

[betwixthewires]

Mainly with stablecoins we are worried that there's no 1:1 correlation between the two assets. Whether they're backed or not is an implementation approach.

People are worried that the dollar slides, which was a big motivator for bitcoin in the first place. But my point is simply that the dollar is an algorithmic asset who's algorithm is governed by a governance body and has a targeted value based on economic factors, and if you don't want that, you should peg to an asset that does not have those properties.

If you want to do backing with dollars it's easy, just spin up a corporation, keep dollars on a balance sheet and you're done. Doing it with other assets if you want requires vaults and things, it's much easier to do it algorithmically, and the only reason reserves are easier with dollars than with other assets is that other assets actually exist, dollars are just a ledger in a computer, again, controlled algorithmically and governed by a board.

[yunohn]

You’re arguing past the other poster. The dollar sliding shouldn't affect stable coins, and is unconnected to your inflation hedge in Bitcoin.

Why don’t any entities exist that do this “easy” method? Like you said, it should be straightforward. Well, because of their #3, stables want to make more money from their cash and aren’t satisfied with just tx fees.