
Stablecoins: A Holy Grail in Digital Currency - ntomaino
https://thecontrol.co/stablecoins-a-holy-grail-in-digital-currency-b64f3371e111
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modeless
It's not decentralized if there's a trusted oracle.

So many schemes in the "blockchain" space fail to understand the core problem
Bitcoin solves. Bitcoin solves trust. You can transact Bitcoin with anybody
and you don't have to trust a single person, even the sending party. If
someone sends you Bitcoins and the transaction is 6+ confirmations deep in the
blockchain, you can be certain that you own those Bitcoins and nobody else can
take them from you without your private keys. Not a bank, not a government,
not a miner, not a "core dev", not a full node operator. The only necessary
assumption is that 51% of the hash power is not conspiring against you.

Whenever you see a new "blockchain" scheme coming out, ask yourself who you
need to trust for it to work. If the answer is not "nobody", then it is not
worth any more of your time.

~~~
skybrian
Replace "blockchain" with "merkel trees" and you get interesting things like
certificate transparency, which is certainly "worth your time".

Hype aside, public, shared, consistent, irrevocable ledgers are useful for all
sorts of things even if you're not attempting to solve the "no trust" problem.

~~~
elzr
How can you get an irrevocable ledger without solving the "no trust" problem?

~~~
skybrian
You have a lot of people watching the trusted source to make sure that it's
append-only and follows the rules for appends. It's a reputation thing; not
impossible but it will be detected.

~~~
davrosthedalek
Isn't reputation trust-by-historical-evidence?

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csomar
> The tokens have been continuously sold off in small batches by the Dai
> Foundation. Currently about 55% of the total supply has been distributed,
> with the foundation still having another 45% for future fundraising.

And here where the "Scam" alarms go full retard, basically panicking the whole
building I'm living in. The concept is yet to be finalized, let alone
functioning and yet these guys started selling "tokens" a la "DAO".

I wonder when regulators are going to strongly hammer the ICO (or the crypto
equivalent of IPO) by a 15 year of jail and catching bad jokers inland and
overseas.

~~~
empath75
As soon as I saw 'dao', I realized I was wasting my time.

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SirensOfTitan
I don't see stability as a goal right now with leading cryptocurrencies (ETH,
BTC). In fact, promoting cryptocurrency as a storage of value right now seems
off too: one day, not today.

More people will store more wealth in cryptocurrencies as the number of
applications grow. Being able to pay for my Chipotle, or renew domain names,
or buy stock in companies, or run a website all make me more willing to keep
more of my wealth in ETH. Eventually stability will come as the relative
utility of a currency pushes volume up.

The last thing I want is stability as a believer in the Ethereum platform. I
want the price of Ether to go up pursuant with the growing utilities Dapps
provide.

In the interim, solutions like Bitpay that pay merchants in USD over BTC are
brilliant. They allow merchants to buy into cryptocurrency without accepting
the volatility risk until it's low enough.

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cortesoft
So this is trying to create a currency that is democratically controlled by
the "MKR" holders - I don't really understand how this is fundamentally
different than something like the US dollar. Sure, the central bank controls a
lot of the system, but they are also 'democratically controlled' by our ACTUAL
democracy.

Now, I am sure there will be an argument made that the central bank is
beholden to special interests, who use their wealth and power to control our
democracy... but won't that same thing happen with these 'MKRs'? The wealthy
and powerful will have more control over them, and will certainly use that
power and control in their own benefit.

It seems like a common flaw in all of these 'alternative' systems people
create to replace large scale institutions; they might seem different than
what we have now, but when you scale it up to match the size of the current
system they are aiming to replace, you end up seeing that the systems are
nearly identical in practice.

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mmanfrin
I think one of the difficult things is that volatility (and speculators) do
play a role in a coin succeeding, as speculators make the 'network effect'
problem of altcoins easier to overcome.

There's next to zero reason for a random merchant to accept an altcoin unless
there are people using it, and unless that coin is known. Speculators and
volatility are very big generators of noise that gets the coin noticed and
helps bring in actual for-the-sake-of-the-coin holders, which then makes the
coin itself more attractive to a merchant (as there are people who wish to use
the coin).

As much as coin purists may like to speak derisively of speculators, I believe
that altcoins would be nowhere without those who have come in to the game to
try to earn money off of the volatility.

~~~
ntomaino
I agree with you on volatility playing an important role in bootstrapping the
network in the early days of digital currencies like Bitcoin and Ethereum.

I think stablecoins will play out differently though and are an important
component of attracting new users. I believe decentralized applications will
be built that bring mainstream users in, and these users will want a stable
store of value to use these applications.

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TylerE
There is absolutely no way this can go terrible wrong.

~~~
jabgrabdthrow
once you acknowledge this as inevitable it frees you to engineer systems that
have failure modes

dollars are stablecoins

~~~
wheelerwj
> dollars are stablecoins

i get it, dollars are digital. but really thats the only similarity.

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nickpsecurity
I think it was Ven that was the concept I liked where you build a currency on
a bunch of commodities targeted toward stability. Clive Robinson on Schneier's
blog had previously described that as the best solution then I stumbled on
Ven.

[http://www.popsci.com/worlds-most-stable-currency-is-
backed-...](http://www.popsci.com/worlds-most-stable-currency-is-backed-by-
carbon)

So, my scheme was to put something like Ven in a sane country such as
Switzerland under a nonprofit/foundation with strict rules aimed at preserving
stability, security, innovation of ecosystem, and cap on admin overhead. If
that works out pretty well, we can try a decentralized version of the same
thing. Meanwhile, centralized can already work very well. Just eliminate as
many incentives to mess it up as you possibly can to make it better.

The big brains haven't explored this option enough since they want a
crypto/algorithmic solution to hard problems instead of using the well-
understood systems of law, accounting, and safe investments. There's also a
strong preference for decentralize stuff highly-likely to fail vs centralized
stuff way better than what we have. I think that's ideological or even youth-
related.

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daics
A better whitepaper than the one linked in the article,
[https://github.com/makerdao/docs/blob/master/Dai.md](https://github.com/makerdao/docs/blob/master/Dai.md)

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xiphias
,,While the volatility of Bitcoin has decreased significantly since it
launched in 2009, it is still not a good unit of account or a stable store of
value. ''

I will gladly accept his BTC from 2009 and give him USD from 2009 for the 2009
price.

Sorry, but stability is not holy grail in itself. I would prefer constant
supply to it for long term store of value

~~~
gnaritas
Would you sign a 30 year mortgage denominated in BTC? I don't think so, it's
neither a good unit of account or store of value. Looking back at the past
when you know the previous value is not a good test; looking at the unknown
future is.

~~~
Lerc
The mortgage point illustrates the issue nicely.

However, I think if I had a reliable income that was measured and paid out in
BTC, then the answer would be yes.

That's really the benchmark for when BTC can be used as a proper currency,
when people are prepared to set their value in BTC.

At the moment it makes a decent transfer mechanism for funds where the
quantity is calculated relative to another currency at the time of transfer.

If Bitcoin were to become a standard currency it will necessarily have to go
though more volatility. Bitcoin's value, should it succeed, is significantly
higher than where it is now (conversely, should it fail, lower). When its
value does not match its utility it must eventually move. Stability increases
utility. These oppossing forces will cause occilations like a plucked string.
The occilations should deminish over time as the forces reach equilibrium. The
point of balance is anyone's guess right now.

~~~
gnaritas
> However, I think if I had a reliable income that was measured and paid out
> in BTC, then the answer would be yes.

I think you haven't thought it through if you still think that. 2BTC is
currently worth just over 2g in dollars. In 10 years time, it might be worth
10g in dollars or it might be worth 4g in dollars. You'd be crazy to agree to
pay 2BTC a month for 30 years with a currency that doesn't have a predictable
future value. The dollar has a predictable future value; stability is not
about not losing value, it's about predictable value.

> That's really the benchmark for when BTC can be used as a proper currency,
> when people are prepared to set their value in BTC.

No, people can do that now, but they do it in relation to exchange rates of
more stable currencies. BTC will be usable as a proper currency only when its
future value becomes somewhat predictable, predictable enough to denominate
long term contracts like mortgages in it without relation to another
currencies exchange rate. It'll take decades to reach that point.

A currency without a reasonable long term predictable value, isn't a currency,
it's a commodity.

