Quote:
Originally Posted by ShopCat
Stablecoin completely defeats the decentralized purpose though right?
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Well, that is an interesting question. I'm not really sure what you mean when you mention "decentralized", because I think one can have it pegged and also decentralized. To me decentralized is the ethos of the blockchain.
So, what is a stablecoin then? By definition, it can't theoretically exist in the premise of a blockchain currency? Tether is supposed to be pegged to the dollar. It's supposed to be freely exchangeable for a dollar. Yet, the peg to the dollar means that it's potentially inherently unstable because the dollar is likely to decline in the future (pretty much as stable as the dollar, which I guess is more stable than something like Bitcoin). If Tether's reserves (if they actually exist) are actual dollars, then they are just a placeholder for a dollar, so that one can then trade and exchange back and forth online.
There's another "currency" out there just like this, it's called "PayPal". Funds in PayPal's accounts are denominated in US dollars. PayPal is not a bank, and is not governed by typical banking laws (although they have been moving more and more in that direction in the past decade). PayPal does actually call it's "PayPal bucks" dollars, so on the surface there's little distinction to the user. But deep inside "the machine", PayPal is not a bank and if PayPal went out of business, people would lose a lot of money. When I ran Pelican, I used to sweep the PayPal account balances every night into our bank account - sometimes the float over a few days was several hundred thousand dollars. That made me a bit nervous. Then eBay bought PayPal, and I felt better about it.
But on the surface, there doesn't seem to be a lot of difference between Tether and PayPal. Also, what is Tether doing with the US dollar balances it's supposed to have? They are supposedly in a Bahamas bank - another pillar of security. Banks make money lending funds out, therefore, just because the "money is in the bank" doesn't mean it's actually in the bank. It means the bank owes Tether the funds when they come to collect them. Not sure that any bank in the Bahamas is just sitting there, holding $35 billion in $100 US currency waiting for Tether to maybe someday come asking for it back. If Tether were smart, they would take those US dollars and invest them in something safe that would generate a return (although nothing exists like that today).
Also, how does Tether make money? Other than potentially stealing the funds that are on deposit, I fail to see the overall business model.
I think there's a real opportunity for some type of coin that fixes a lot of Bitcoin's problems. Perhaps a stablecoin that is indexed / based upon a basket of currencies (perhaps in ratios to their actual deposits?). Don't know what the future holds...
-Wayne