Bitcoin Forum

The main harm of existing artificial “Stablecoins” is uncontrolled emission and, accordingly, uncontrolled inflation.
Today, anyone can create and print their “Stablecoins” without control, thereby increasing the total issue of the financial bubble. Is it possible to do without artificial “Stablecoins” based on Fiat, which essentially create a pyramid scheme or not, what do you think?

Stable coins is uncontrolled inflation? Yes and No.

But the government are the ones that are controlling the value of fiat, they devalue it when necessary. If stable coin is backed by or pegged with fiat, that means its value in price is equivalent to the price of fiat, just like USDT (stable coin) and USD (fiat). If fiat is devalued, then automatically stable coins are devalued.

But some stable coins are pegged with unstable coins just like wBTC that is pegged with bitcoin, or just like some cryptocurrencies like paxgold are pegged with gold price, those are not inflationary coins.

I do not entirely agree with this statement  (sorry, replied to another post).

In my opinion, if we believe that 1 USDT (tether) = 1 US dollar, then no action by the US Federal Reserve will change the fact that money surrogates (digital copies of US dollars) circulate in the global monetary system.  If usdt is used to pay for goods (works, services), then they increase the money supply and contribute to an increase in inflation.  

The US Federal Reserve can take various measures to combat inflation (raise the refinancing rate, buy back government bonds), but if money surrogates are used in parallel for calculations, this has a negative effect on inflation growth.  

Here the question is different ... Are stablecoins used to purchase goods (works, services)?  Or are they virtual instruments for trading in the cryptocurrency markets?

Any stable linked to fiat automatically increases inflation by the amount of its issue. Therefore, if this inflation threatens the economy, the authorities will find a way to impose sanctions. Centralized finance and decentralized finance should and will exist in parallel and complement each other transforming. Gradually, Fiat will be replaced by a decentralized cryptocurrency. The cryptocurrency was created not for virtual owners, but for real ones, which means there will be a real departure from centralized finance.
https://bitcointalk.org/index.php?topic=5394081.0

Stablecoins like USDT manage to live up to their names so far and keep the price at a very stable level. What they don't do is they don't solve the inflation which fiat suffers from. So is USDT=$1, but the dollar's inflation is an 8%, it means that people actually lost around 8% of their purchasing power (roughly, but actually they could lose way more on certain products and way less on others). Also, the op's right of the hypothetical risk of a stable coin just exploding eventually, when there's a panic selling event and people realize that this stability of stable coins isn't really backed by dollars or anything else of significant value.

Stablecoins need a stable demand and supply model to function and remain useful.

There are times when there has been a big divergence between the price of a stablecoin and fiat but afaik this could be mitigated by developers.buying and selling them based on dollar exchanges and having collateral for them.

I don't think inflation is considered a problem internally by economists (it's just an acknowledgement to look like they care when prices of things go up).

Do you mean anyone can simply create a stable coin without a backing equivalent asset?
Nope, regulations regulate how to issue stable coins especially fiat or other tangible commodities reserves where it cannot be withdrawn as long as its stable coins are in circulation (unless they are renewed when obsolete), and issuers must report their reserves every period. Then coin-stable inflation occurs as fiat represents it.

There are claims of residents in high inflation regions like turkey, argentina and venezuela using stablecoins like tether (which are pegged to the US dollar).

As a means of protecting their wealth against high(er) inflation than the united states has.

Stablecoins being a tiny sliver of the global economy, it is difficult to imagine a scenario where stablecoin markets represent a significant chunk of a critical asset bubble.

Tether is the largest and most famous stablecoin with a market cap of $82 billion. A crash there won't rival derivative asset bubbles like the subprime mortgage CDO bubble of 2008.

Bitcoin's market cap at $1 trillion at most, is still a small fraction of the $20 trillion dollar US economy.

I see people trying to engineer a scenario where bitcoin and crypto represent a dire threat to the global economy. Earlier this year, nobel prize winning economist, Paul Krugman attempted it.

Stablecoins can’t address the inflation issues, they just follow it and so far USDT and other stablecoins remain stable despite of the inflation. You cannot just create or print stablecoins, it requires a lot of works so technically the supply is not that big but still they are able to maintain its value. There are some country who are using USDT already because of the high inflation on their country, this serves as an alternative for them. Cryptocurrency can address the inflation, or at least gives a higher value compare to fiat money but you must consider volatility first before trying any coins/tokens.

You're wrong. Where did the capitalization of these unstable coins come from? The amount of money spent on the acquisition remained in circulation and the capitalization of these coins was added to it.

If we assume that stablecoins are fully backed, then there won't be any inflation since the stablecoin replaces the money that backs it.

stable coins will not increase or decrease in value. so saving it will not make our assets go up. In fact, its value will decrease if it is aligned with the current inflation rate. Suppose we buy goods for the future, of course, the price of the goods will rise. therefore it all depends on our goal of using stable coins, will be profitable and will be detrimental. traders need stable coins to trade, and this helps a lot

It widely depends.

If a stablecoin is properly and fully backed by the "thing" it replaces - usually USD, then there should not be artificial inflation.

The problem starts when stablecoins are not baked. And here there are at least two problems: those using the not-backed stablecoin face themselves the risk of finding themselves holding a bag of coins with no value (for example many gold-pegged stablecoin projects were for example not backed and they're long gone), and yes, the other problem is that it can cause artificial inflation. Still, maybe the oldest stablecoin and surely the most well-known one, USDT, has a long history of not being properly backed, yet people still accept it and use it, helping the crypto market being (somewhat?) artificially inflated.

In theory, one should DYOR and avoid the fishy ones. Sadly, the reality shows that this doesn't happen.
The only good news seems to be that at least the newcomers in the stablecoins "market" seem to have proper backing (or at least most of them).

Basically stable coins are still needed in crypto and I think everyone uses stable coins not to invest but use them to store assets,
For example, BUSD or USDT is proven safe to store assets,
obviously it's back again as you said that it depends on how we use stable coins

And how do they differ from a regular debit card?

While stable coins may be used like "a regular debit card", their actual real use is different:
* unlike for debit card, stable coins can be used without KYC (of course, in less and less situations, unfortunately)
* stable coins can be used for transferring value fast between different platforms. This happens (is settled, final) much faster than debit cards.

Stablecoins initial use was for traders, maybe even especially for arbitrage trading.
Nowadays many use it against Bitcoin price drops or other use cases adapted to their needs, especially no-KYC needs.



If you see stablecoins "like a debit card" and "like fiat" inflation makes fiat value drop, it can be also seen as inflating Bitcoin. That part cannot really be changed...

Personally the definition of stablecoins is a database value that stable the value of your balance within central platforms and therefore you should think about it like this basically, allowing withdrawal from platform, conversion between Cexs/Dexs and others in a good idea but ultimately stablecoins are limited to trading .

Thus, they are not directly linked to inflation ( Inflection increase per year/month while trading changes in short-term,) but the promises of the platform that keeps its stability.

Therefore, it is an intermediate stage in trading, instead of turning your profits to cash and then its deposit in the future, comes down to provide speed and low fees but otherwise, they are not "fundamental value" outside the platforms.

Inflation is mostly caused by the controlled emission,so your statement seems kinda meaningless to me.
I agree that the main problem of the stablecoins is the "fractional reserve banking",which can potentially create value out of thin air.Nobody knows how big the Tether reserve actually is.This applies to all the other stablecoins as well.
The main purpose of stablecoins is not to act like a store of value,but to make cryptocurrency trading easier and more convenient.The stablecoins aren't competitors of Bitcoin and the big altcoins.They are supposed to be a supplement of the cryptocurrency trading ecosystem.

It depends on what we called stable coin, the ones that are backed by gold and have gold price and the ones that are backed by bitcoin and have bitcoin price can be said to be deflationary. They are also stable coins because their price is stable with the price of the asset they are backed with just like wBTC that is pegged with bitcoin or PaxGold that is pegged with gold just in my previous explanation. But about the ones that people most commonly call stable coin because they are pegged with fiat, I can assume that they are inflationary but not directly but indirectly as the fiat they are backed with are declining in price, they too are reducing in value.

The total capitalization of stablecoins has exceeded $180 billion and further growth is endless.
https://coincodex.com/cryptocurrencies/sector/stablecoins/

My issue with Stablecoins are the validity of the statement that $1 = 1 Stablecoin  ::)  It is almost impossible to trace the dollars that are supposedly backing the value of the tokens.  ::)

If that was the case, then I think Stablecoins are actually helping inflation ...because more toilet paper money needs to be printed to back the Stablecoins in circulation.  :'(

That's right, stablecoins are toilet paper, but it also devalues Fiat itself.

Because currently developers can create decentralized stablecoin types that are almost inaccessible to government supervision where fiat stability is precisely the result of government policies. As a result, a portion of the stablecoin's capitalization is not in the fiat reserve records.

Decentralization is trust without collateral. When you believe in it, then you must also consider backed assets is valuable even if it's toilet paper.

Stablecoins pegged to sustainable fiat currencies don't have this issue. Theoretically you could make a stablecoin pegged to anything of value as long as the underlying asset exists. Inflation doesn't really factor into stablecoins unless you get to a point where you need to increase the supply of coin because of decreased purchasing power with high inflation (granted the coin is pegged to a fiat currency).

Inflation is a problem if the purchasing power of any individual goes down by artificially increasing the money supply.

Stablecoins I think are very different from fiat, which tends to have quite high inflation due to a stable valuation free of volatility from fiat currencies, while price stability is supported by other reserve assets, but if we look at TerraUSD and Luna which are in free fall and horrendous the crypto market at this time as stablecoins that experience significant inflation unlike others...

yes I agree with you, they are easily printed without any backed. and the result is a crash when things get out of hand. this is what is happening now to UST, the price is falling because there is no backed to recover the price. the UST team only uses Luna as a workaround, which this solution makes it even worse. the price of luna fell as a result because it continued to be printed to cover the shortage of UST.

Yes there is no way we can say with certainty that all coins in circulation of stable coins are backed by usd. We have recent example of UST crash (a stable coin) and its founder has done that before with Basis Cash (BAC), a stable coin that crashes in late 2020. Check this link for more details

https://www.businesstoday.in/amp/crypto/story/terra-luna-crashes-97-was-do-kwon-responsible-for-another-failed-stablecoin-333265-2022-05-12

I do not believe that we should be trusting the other ones either. I mean think about it, UST dropped, because they failed the algorithm part of it, but what about the ones we just simply trust? Think about how big USDT is right now, we are talking about 80+ billion dollars trusted into just one company. What happens if we all decide to sell it? They will not be able to cash them all out.

This is what they are trusting as well as a company, they think that we won't sell it all together. I do not believe that it will never happen, maybe one day it could happen and that day will be a terrible situation for all of us and that is why I never put my money in there.

Stable coins are not really concerned with inflation, they are actually connected with *the government* in a way, well that's what should have been ideally there =1$ but due to the crash in the market and some of it might also be connected to the fed increased rates, the usdt, it lost its peg quite entirely. Now this is a very tricky situation which have caused a great deal of problems for traders and the holders of USDT who thought they were holding USD perse, I don't think that changing algorithm or making improvements can ever work in this market, since what we are talking about is a market based of volatility which we tend to forget every now and then, no one is going to trust these coins again for a while.

Listen to this fact, there are no assets or commodities thats stable in price, and the world stable coin used was just to categorize as an asset that will limit your investment lost to the crypto market downtrend.
StableCoin being backed is not what prevents it from crashing.

According to the news I read, Luna experienced a dump in price due to some attacks on their platform but the project was backed with Bitcoin.

Of course all the others are risky as well. I have been saying that USDT is not to be trusted for many years now and nobody cares about it.

I hope that this UST is a good example for them and they will realize that they can't make this type of investment and get away with it because they are basically giving all of their money to some companies in this situation, which means that we are talking about these companies could be standing today, or could be bankrupted tomorrow, how can we 100% guaranteed about the companies being certain? We can't be and that is the problem, if we can't be certain about the situation then we shouldn't invest.

The concept of stable coin in crypto is sure bring lot of controversy and different speculation about stable coin too
But either its stable or non-stable the main point is, it is based on decentralization concept witch has no influence what so ever.
I personally don't have any problem with stable coin but it defy the major laws of crypto world like no control over price. This could make it almost non usable as
an investment for futuristic profit. That's my opinion.

I am curious to see some of these so called pegged stable currencies publish their audit report and for the most part USDT finally published a report recently which claims 83.74% of its reserves in cash, cash equivalents, short-term deposits and commercial paper, 4.61% in corporate bonds, 5.27% in secured loans to unaffiliated entities, and 6.38% in other investments including digital tokens but the fact remains that it is not clear how much dollar they pegged and my belief is that majority are commercial papers and cash equivalent.

In the coming years i am expecting the validity of centralized stable currencies will be questioned and it might change the complexion of the overall cryptocurrency market.

If we have to remember, way back in year 2019, USDT team admitted they were not fully backed by assets. So right now, are they saying the truth about their backing here or they are covering some of these with untraceable assets? Because they can say they have about 84% reserve cash in USD, but the remaining, who can prove about those papers that they really do exist. So when it comes to stablecoin, you also need to prepare that they may really not saying the truth here. And when it comes to algo-based, they are more prone to failure and hence, maybe, UST is failing today. They have no assets to peg to with their target $1. Algo? Their devs can manipulate this in my opinion..

The current situation of most of the coin was bery low. Since most of the good potential coin is red and shit coin was red. Their was huge potential to inverse on tge shitcoin. So you need to careful. Investment on shitcoin will leads to lose of entire money into the cryptosystem. By this mis understand of good coin, people loss some money from the cryto currency investment.Stable coin will never take your money.

It wont be stable if they keep on making or minting, some of the stablecoins are stable because its backed with a real dollar. Just look up at the algorithmic stablecoins they went down because its being minted and there is asset that is backing the value.

Absolutely right!
To introduce a Fiat monetary system into a decentralized economy with the help of artificial stablecoins is absurd. The very principle of a decentralized economy is based on its stability. An open source cryptocurrency is transparent and predictable, it can stabilize itself and manage the Fiat economy, the collapse of imaginary stable coins is an example of this. I have been working in this direction for a long time and no one has yet been able to refute the project proposed by me. (ftp://I have been working in this direction for a long time and no one has yet been able to refute the project proposed by me.)
   

The main issue with Stablecoins is the empty "promises" that they are backed on. We have now seen how some of these Stablecoins operate.... The people behind the Stablecoin will give "promises" that the coin/token is backed by something, but when something happens, they quickly sell their hoarded bitcoins to create the perception that the token is backed by BTC or whatever other token they buy with the proceeds.

So, they will ride the "promises" thing as long as they can....and when it looks like it will collapse, they come with Plan B.  ::)  They usually have a complex algorithm running the "burning" cycle and the pump and dump mechanisms.  ::)

Maybe some stable coin owners are like that which promise that they are backed by something but they don't have proofs to show if what they are talking about is true while I think there are some that don't promise at all. They are just quiet and people at the same time have a trust on them, that is why they don't complain but still using those stable coins up until now.

This sounds familiar, I think the founder of terra and ust have this promise last time. They states that they buy tons of btc for their ust stable coin but at the end they only sell btc to make a profit and not the other way around.

Too much printing of money can cause too much of emission but at the same time, too much printing of money can also cause inflation. It was still the same

“Stablecoins” is just a surrogate of an imaginary Fiat, which in essence is practically no different from electronic debit cards, the only difference is that not all exchanges work directly with Fiat and cards yet. If the US Treasury issues an electronic Dollar, then the meaning of all surrogates will simply disappear.
But that's not the main thing! Is it possible to refuse to stabilize the cryptocurrency with Fiat at all? What is the point of “Stablecoins” pegged to the dollar or to any Fiat currency if they can be printed as much as you want? A condition is necessary, on the contrary, that the Fiat issue depends on the total real volume of the decentralized world economy, and not on the whim of the local government. There is nothing more stable than the decentralized cryptocurrency itself, such as Bitcoin or open source Ethereum, which can stabilize themselves. (ftp://Ethereum, which can stabilize themselves.)

Yes, it's possible to make a stable coin without even real back up of fiat.

But those type of stable coins are likely to get exposed when someone audits and look at its history. Well, those that are backed for real, they're audited and said that they've been registered and verified that they've got an actual backing fiat.

This is what's scary in stable coins lately, even they're reputable, it cannot be removed in the minds of everyone on what happened to UST.

UST is algo-based and no backing of actual fiat. So for me, this is more risky as compared to stablecoin pegged at fiat. As UST crumbles, it goes to show that algo-based stablecoin is hard to trust your hard-earned savings. But it may be the same with stablecoin backed by real fiat, because if it is centralized, the team has the power to manipulate their code. But the crash may not be the same as algo-based. Bottomline, it is hard to trust stablecoin whether it is algo-based or fiat-based, because the future of the coin depends on the dev team themselves.

LUNA or UST is a bad example of this, this so called stablecoin collapse already at the cost of many investors and the developer of this project looks like he is going to totally abandon the project and try to create a new one with the same purpose. Though you can’t print this stablecoin but creating it online are more easy, so if you don’t want to become a victim of this scheme better not to invest at all.

CMIIW.

AFAIK, they've tried to backed it up with their weekly purchase of bitcoin but it didn't do good. Yes, algo-based or not backed up with real fiat is a danger to those investors and holders that are looking forward to save their wealth through a stable coin.

This debacle that came to UST/LUNA won't be passed by everyone who's been long on this market. It's only built by trust and then they've lost it in a span of weeks.

The main value of a stable coin is its liquidity, this quality should be possessed by the cryptocurrency itself. All artificial stablecoins based on Fiat or tangible assets do not use the main purpose of a decentralized cryptocurrency.