1/ Watching #btc volatility & thinking about current use cases, I finally appreciate why @VitalikButerin says it's important to make a StableCoin. Ppl should be able to store value w/o taking on all this currency risk.
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4/ A club that won't let anyone in who doesn't want to gamble is going to end up being a club of gamblers, not the world new financial system. A good StableCoin is one possible answer.
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5/ Making one, however, without centralization or counterparty risk, is...non-trivial. But deeply fascinating if you're into monetarism & cryptoeconomics! Looking forward to continued community speculation on the topic.
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6/ p.s. since many seem unversed in the basics of how & why to make a "StableCoin", some reading: https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/ … https://medium.com/topl-blog/dangerous-volatility-and-why-we-need-a-stable-cryptocurrency-6d66dcd605f8 … https://bitshares.org/technology/price-stable-cryptocurrencies/ …https://thecontrol.co/stablecoins-a-holy-grail-in-digital-currency-b64f3371e111 …
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IMO any coin will be stable as soon it gets sufficient adoption. The dollar is stable even with QE because of the world adoption and demand. BRL is less stable in world terms b/c it's used solely in Brazil, but it's relatively stable inside Brazil despite inflationary policies.
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Certainly a coin at full adoption will have more stable value. However, I question whether a (non-stablecoin) cryptocurrency will ever be as stable as USD. Won't demand shift among altcoins far more than among fiats (which each have a locked-in market)?
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Perhaps demand shift among alts could be dampened by a “basket of alts” coin, in analogy to a “basket of metals” dampening demand shift betw say gold & silver.
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I like it! The issue for backing a token w/ one or more commodity/fiat is the counterparty risk (who holds the reserves?). But a stablecoin contract that securely holds and automatedly trades altcoins would be a trustless reserve.
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In general I'm not sure how a network would securely hold private keys to accounts other networks, but it seems easy for an Ethereum contract to exchange/hold ERC20 tokens.
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Perhaps http://prism.exchange could be used for this. Use ETH contracts to hold a basket of alts in proportion to their market caps. Provides stability without traditional reserve-holder-counterparty risk. Result = a synthetic “stablecoin”?
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That's close to what I'm imagining. Market cap is nice since no rebalancing (important!). You would buy in/cash out using a full basket. Though I think vulnerability to exchange arbitrage or price-feed attacks is a serious concern.
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I was also thinking, rather than keeping a cap-weighted basket, you let people buy in/sell out with any altcoin; converting at a rate based on the current valuation of that coin relative to the reserve pool. But that's potentially even more vulnerable to arbitrage.
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It's not non-trivial, it's impossible and impractical. Not only do you need a third party to keep prices steady, but the whole concept of "steady" is nonsense, since all prices are relative to something else. Lock it to the dollar, and you're doomed if the dollar crashes.
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If you can peg it to one currency, you can peg it to any combination of currencies/commodities/cryptos. One is hard, but going from one to a basket seems quite easy to me (as long as you're careful to avoid arbitrage attacks).
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Who does the pegging? And how do they not become corrupt? That's the problem Bitcoin solved by abandoning the old dogma of gold backing or pegging. Best way to get stability is still mass adoption.
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The network itself does the pegging. Imagine, for example, that we implement this via an ERC20 token, and an Ethereum smart contract is our "central bank" peg adjuster. It reads Ethereum oracles, and expand/contracts money supply based on Stable:USD exchange rates.
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On the topic of monetarism, cryptoeconomics, and the prospects of a stablecoin without counterparty risk: http://www.independent.org/pdf/tir/tir_20_04_05_harwick.pdf …
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Very good! I like your paper; the connection of money supply adjustments to intermediation / credit creation (even in decentralized systems) is important & not well integrated into the (smidgeon) of crypto research on stablecoins.
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Basecoin could be the ticket
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Basecoin feels like a blowup waiting to happen. Tether is the only safe option
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Why does Basecoin seem like a blowup waiting to happen?
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It's attempting to maintain a peg to an external currency without an underlying store of value and every attempt to do so has blown up. See the British pound in 1992.
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If you short Basecoin, it's a near 0-risk trade. Keep shorting with large amounts and force massive amounts of bonds to be printed. If the peg holds, close your short with ~0 loss. If it doesn't you win big. Repeat until Basecoin breaks.
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Yes. But depends on access to effective shorting. It takes awhile for a liquid market for borrowed shares to develop. Maybe they don't count derivatives as a valid price feed?
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