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by silasdavis 1198 days ago
It is also kind of an abstraction over cash and treasury bonds. A more liquid fractionalised cash/bond unit.

Though that seems to have been the problem here.

The original idea with a 100% collaterilised peg was that the entire reserve would be cash. Somewhere along the way treasury bonds were considered cash equivalent. Which on the face of it seems sort of reasonable but clearly they do have a different risk and liquidity profile. This allows the centre consortium to earn a yield.

So I'm not sure I think a USDC is a dollar, but also I'm not sure it's particularly different to what banks do with deposits to earn a yield.

One difference is you can reinvest the same USDC to earn a yield while the underlying backing USD also earns centre a yield.
3 comments
makomk 1198 days ago
Having the entire reserve as cash wouldn't exactly help here - imagine if 30% of USDC's total reserves was in Silicon Valley Bank, rather than just 30% of their cash. (I think I've pointed out before in discussions of Tether etc that stablecoins can't safely just hold their rexerves as cash in a bank account because banks can and do fail and FDIC protection basically does nothing at this scale, but I wasn't expecting it to be demonstrated quite so spectacularly.)
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re-thc 1198 days ago
The difference is at least with banks e.g. SVB here you get back your 250k. When these coins die you get 0.

And if only we're true to the "original idea" (whatever that might be). As seen with lots of coins / exchanges it's been a front to do something else.

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renonce 1198 days ago
> The original idea with a 100% collaterilised peg was that the entire reserve would be cash.

What is cash? Banknotes? You can't store 500 million pieces of $100 banknotes easily or safely.

Cash usually refers to deposits at accredited financial institutions like banks. Effectively this is an amount of money that the bank owes to Circle. The bank deposits money elsewhere, and the central place where all the money is distributed is the Federal Reserve Bank, the central bank of USA, that can never go bankrupt. OTOH, treasury bond is money that US Treasury owes to Circle, so they are not fundamentally different than cash, and in some cases it's even safer since US Treasury bonds are usually regarded risk-free.

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