Quote:
Originally Posted by Wayne 962
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
|
Stablecoins can be decentralized, but are not decentralized due to being cryptocurrency alone. Same goes for exchanges (binance). The argument is that Tether is not truly decentralized because one company owns, mints and manages the supply, with basically no transparency, instead of the chain. So far I only see it used to avoid exchanging back into fiat from other coins and arbitrage. Tether is widely disliked in the community. Basically here is the recap.
Bitfinex (tether) "lost" $850m
Tether lent (embezzled) almost a billion dollars to bail out bitfinex (tether)
Tether tells no one.
About half a year later, tether updates their TOS so that USDT is backed by "assets" The total "value" of the assets as measured in USD is supposed to be equal to the supply in USDT.
Tether is publicly called out by the NYAG for fraud and misuse of funds.
Tether admits that each USDT is only (at best) 74% backed.
We then discover that tether lends USDT and counts the loan as it's own backing. Tether refuses to ignore requests to verify holdings, only admitting they are insolvent when called out.
Now they get a slap on the wrist and have to provide public quarterly reserve statements. Maybe the scam is over, but people still dislike tether.
There are other stablecoins that claim to be decentralized, there is still a lot to figure out, but Dai is one example, here is the whitepaper on how it works.
https://makerdao.com/whitepaper/DaiDec17WP.pdf In short: Dai is just like tether but the collateral is on chain and therefore fully transparent, verifiable in real time, and can be redeemed without needing to ask anyone for permission. The most important point of the stablecoin as I understand it, is to help smart contracts bridge the gap to USD while volatility is high. Maybe one day ETH would be stable enough on it own to not need this. As far as business model for Tether specifically, well, its owned by an exchange, tether doesn't have to necessarily make money as long as it furthers the overall goal of the exchange, which in general is just to increase crypto holdings and transactions. The exchange is paid in fees correlated to those. There are already many smart contract coins that are working b2b and have real revenues. This thing still a long shot per coin, but an inevitability as a whole, I think every sane, honest person into crypto agrees with that.
I typed way to mush s**t here, which I freely admit I am still learning and a novice in understanding, so forgive me if some of it is incoherent.