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So for each year, you'll update it to the new USD version? What's the difference between pegging it to USD?

Stable coin in an absolute sense won't be possible. It's only relative to pegged value. So, if you want to talk about perfect stability, there's no way you can achieve that. There is always going to be a reference of values that could also change if you compare it to other assets.

I still don't understand how you will lower the volatility to approximately 0.1%. Anyway, I think more about a stablecoin, that will cover most of the popular currencies (USD, EUR, RUB and etc.) using the same blockchain. But still, don't know how to do that without confusing everyone (something like you will need just one address to receive different stablecoins, with the ability to swap them without commission at any time.).

How would you do that? Even those centralized fiat does move out on certain ranges of volatileness it might not be completely stable but i believe those are already on their minimal.Making much more lower or close to 0 movement isnt really that hard to achieve.If you do then its a breakthrough  ;D

If you want truly a stable coin, then you have to do this: Take baseline of major currency, for example usd. Then change price of coin once usd gets higher/lower. For example if there is 5% inflation in USD, grow price of coin by 5% and every time try it to be 100% in overall, make it follow every usd fall by rise and opposite, this way we will get really stable coin where inflation of other currency doesn't matter because you know, you invested 100, you'll get 100 and nothing will affect it.

Nothing is ever truly stable, even the most robust fiat currencies experience day to day volatility, as do commodoties, stocks, indices and practically every other financial instrument.

So long as there is supply and demand, there will always be volatility, so all you can do is try your best to minimize this. The US dollar is the least volatile government-backed currency simply because it has basically become the de-facto world standard.

I think that in order to improve on the US dollar in terms of volatility you will need to peg your stablecoin that is highly in demand, but that demand never changes. Alternatively, you could design a coin that has built in anti-volatility mechiansms, changing its value so that it counters the direction of the volatility.

How such a coin would be received remains to be seen however, since volatility enables traders to profit, and most of the market trade volume results from trading.

I'm totally not with what the OP said because the reason why bitcoin was created was because of the global economies are on the verge of crisis and stable coins which are pegged to any national currency are still not safe from fluctuations whenever the economic overheated while stable coins back with precious metal just like Digital Gold (https://gold.storage/) will become a lifesaving asset and that's a true idea of stablecoin.

can you really call that coin "stable" though?
since fiat loses its value (purchasing power) it basically is going down because of inflation. so when you peg something to the value of fiat in a certain year you are pegging it to a value that is going down.

in other words the future of that coin looks like this but with a steeper slope down:
http://rebootingcapitalism.com/wp-content/uploads/2013/11/US-dollar-Value-3-value-of-the-dollar.jpg

that's exactly the point the OP is making. :P the point of pegging it to 2020 USD value is that it won't be pegged to a depreciating USD. and i agree with him, that's a lot more attractive than the current stablecoins on the market.

but i'm at a loss for how it could be done. SwayStar123, could you explain how a coin could be designed---particularly a decentralized one like DAI---to be pegged to past equivalent value?

my suspicion is this will require centralized elements in order to update the target price algorithm to account for fiat inflation.

That plan is stupid. You can't just magically increase the price of your coin for whenever you feel like it. I mean.. How? Burning tokens?
I don't really see any other possibility other than to increase the marketcap, and then dilute the amount of outstanding coins somehow of your stablecoin to inflate the price. Which would really cancel out the "profit".



I feel like this thread wants the best of both worlds, no inflation and general stability in the value of x.

I'm pretty sure this would've been done already if it was possible. You're not the first to come up with such an idea.

Doesn't really need to be centralized.

The automatic adjustment can rely on data fed in by impartial oracles, this would be coded into the core protocol.

How the system ensures this data isn't manipulated would need to be resolved however.

no oracle system is really "impartial". no matter how you structure it, you're trusting third parties to provide the data that automatically adjusts the target price. that's pretty much the definition of centralization.

it's a cool idea but i don't think it can be done in a 100% decentralized way. i'd prefer to trade back and forth between DAI and ETH etc to hedge against fiat inflation.

Not really sure how using a decentralized network of oracles is in any way the definition of centralized.

Sure, if you're taking information from a single oracle, that would be centralized, prone to censorship and manipulation etc.

However, with a sufficiently large network of oracles, including oracle smart contracts that automatically pull data from reliable sources, we wouldn't need to worry about manipulation.

Interesting, but how you'll know in year 2025 how much USD the "2019 USD" costs? I mean, yes, there are official numbers published, but aren't they published later than your needs? And are those "official" numbers accurate?


I see the trust issue. I mean, let's say you manage to keep your coin stable for a while. How can one trust you that you'll keep it "stable" forever? Especially if you say it's not backed by anything.
I'm not familiar with DAI and indeed assets are also fluctuating, but if the stable coin has big fluctuation.. that may be end of business...


And there's the usefulness issue.
We have Bitcoin-like coins that should always rise. Good investment.
We have the USD-pegged coins that are good for everyday trades, arbitrage, and maybe interaction with the banking system (pay for goods like with the debit card).
Your coin is somewhere in between. A bit of both, but actually less useful than any of them.

you can call the oracles a "decentralized network" but that's a red herring. "centralization" refers to the dynamic between nodes and oracles, not the dynamic among oracles. nodes are vulnerable to collusion among oracles the same way nodes are vulnerable in a federated consensus. they need to trust the authorities to be honest.


what kind of reliable sources? are we gonna use third party APIs to feed directly into these smart contracts? that sounds impossible to attack. :)

Is there even such a thing as stable price? Prices are always relative to each other, and they always change on free market, whether you want it or not. Authoritarian countries have tried to have fixed prices in the past, but it only caused black markets to emerge. Nowadays central banks are trying to stabilize their respective national currencies by participating on the market, but no one can achieve true stability, they simply reduce the volatility. If governments couldn't achieve stability, how can a startup succeed at it?

I find this chat interesting, and am currently working on novel ideas for a stable coin based on looking at the collateralised and algorithmic solutions that have been (publicly) explored so far, and then trying to look in the gaps.

One of the more interesting points here, is how often people say that stability might not be able to be achieved.  It's interesting because stability is not just relative, but also subjective.

To finish that point I wonder whether the reason that every "stable coin" solution to date has glaring issues and imperfections is because of a malformed premise.

Secondly is that the key, I think, is instead of focusing on the mechanism and as an afterthought - the goal, stay transfixed on the goal.. of the users.

By far the most promising route to a new currency paradigm stemming from the early beginnings of "stable coins" that we're in now are the algorithmic options, and especially their overlap radical value fluidity.  

A good example of this is Ampleforth, although I don't really like the model because it's not suitable for widespread use at all.  But the idea of shifting 1 token worth $2USD into 2 tokens worth $1USD is a step towards the kind of solution that will check all boxes (decentralization, stability, scalability, ultimate reliability) at some point in the not too distant future.

The real question is asking "if functional, widely used and trusted currencies have been instable to a degree in the past, why are people caring about perfect stability now?"  No one that uses a stable coin needs it to be perfectly stable to anything.  Just stable enough so that they won't lose non-trivial sums during a period of buying and selling it for a real world asset like USD.

Any stable coin that is useful, until the day that fiat currencies aren't the overwhelmingly primary way to buy things is the real world and receive payments in the real world, needs to be able to hold value against fiat currency.  Even if you created the perfect fixed point currency which didn't need to peg to USD etc, say it was pegged perfectly to any non-stable cryptocurrency, or even pegged to an arbitrary line drawn on a chart that didn't represent anything, or even a perfectly straight line on a chart that didn't represent anything, why would anyone transfer their real world value into something that will most likely yield back significantly less real world value at some point.

I think the winning candidate will start out being pegged to USD (as it has to right now), then have a mechanism to transition to being pegged to gold in a financial crash scenario (as it will then become the most reliable peg possible), and then have a mechanism to transition to setting the measure of stability itself (because this should be the obvious goal of any fixed point currency).

Why even bother if you're going to peg it to a fixed time USD value, might as well just keep it at 1 BTC = 1 BTC. That's forever stable.

Since USD is centralized, USDT or Tether is the closest thing, what you would need is for some bigger corporation or even a government to back the stablecoin with the fiat. More than likely, it might just create more just like fiat does, but it can do so any time indirectly by getting fiat first.

Algorithmic solutions are going to be the way forward, there is a limited lifespan for fiat-collaterialised stable coins.

Put it this way, Tether is far and above the most successful and widely used stable coin today, it was created in 2014, and there's been nothing that has outperformed it yet.

The total marketcap of Tether is 4 billion, how much USD would need to be held by Tether in order to provide a service to the other 99.9% of the world that isn't a part of crypto markets?

Can one company be trusted to hold that much wealth and no either accidentally or maliciously mismanage it?

Same problem for any fiat-collateralised solution.

I'm still struggling to wrap my head around the concept.  Can you explain it in a few sentences?

It depends on how you define stability. Stability is never absolute, it’s always relative, and it exists in people’s minds and have never been objective.

What people conceive as stable, is actually what they are used to, the world is used to price things with USD, the majority of people would think USD is always stable, introducing a new standard that is pegged to say gold, real estate, farmlands, or other assets that are considered relatively stable would not gain any traction because that is not how people think.

One possible exception is if USD goes into some hyperinflation is a short period of time that causes a lot of pain, if then and only then people will start looking for alternatives to price things, and a new standard of stability would be introduced.

In a lot of the whitepapers this was mentioned, a project named Fragments (I think they changed their name into something else now), and also one of my favorite project called Reserve, in the whitepapers they have both mentioned if the value of USD starts to drop so much, they’d starting pegging their stable coins to a basket of goods, whatever that may be.

Do this as a thought experiment, if Reserve starts to peg their stable coin to a basket of goods today, and not USD, would you consider is stable? Can you imagine exchanges start pricing BTC with Reserve and gain adoption? Probably not.

Tether and other stable coins including Dai are starting to explore multi-collateral models, this should in theory solve the scalability issue, maybe not as fast as algorithmic stable coins but I don’t see one of those gaining any traction now.

I've been trying to send you a pm.. can you either pm me or change your settings to allow newbies to pm you?

There is the issue, stamble coins don't mean they will always have the same value, that means it will have the same value against some local coins, and that coin now days is USD dollar. But if the dollar goes up, then the stable coin goes up with it. And the ones who get really affected are 3rd world countries and other countries who don't have dollars as main value.

Maybe in the future we will have some stable coins based in Euros or Rubles.

There are already stable coins based on Euros or other currencies. They're just not as popular as the USD based stable coins because ... more people would prefer to use USD than others except for their own country if a stable coin exists for their fiat currency base.

As already said by Dabs there are already stablecoins based in euro and I believe TUSD are the first to create one but I'm a kind of person that don't totally believed in stablecoins which are backed by fiat currency because incapable of fiat currency was the reason why crypto came into the picture.
I read an article which says

The question that probably never be answered is: Centralized Stable Coin or Decentralized one? Or backed by a dollar or backed by collateral like DAI?
Who knows, this industry is pretty young and until something very bad happens we won´t know it.

stable coins are useful for traders to exit day trading and keep the daily earnings, I like it very much that once tokenized in cdai, idai, sdai through defi sites it can give interest of up to 8% per annum through staking, then there is ekon which is guaranteed by gold and have a swiss based company...