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Author Topic: what's the easiest way to keep a coin at a fixed price  (Read 114 times)
McDoublez
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March 18, 2018, 05:49:07 PM
 #1

How difficult is it in really to what Tether (USDT) does such as pegging the coin to US Dollar price of $1?
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March 18, 2018, 05:55:44 PM
 #2

Tether has never meant to be a decentralized coin, it's a centralized coin that is being controlled by Bitfinex, the whole idea about Tether that the only thing that gives him a value is not the network that it is based on ( as it's not a decentralized coin), but it's the fact that BitFinex promises to buy any of the tether tokens for 1$ each.

So, the value of Tether is a fixed price of 1$ as long as bitfinex keeps the promise of paying 1$ for a coin, think about it like that, there's no reason for the price of tether to increase while bitfinex can issue unlimited tethers backed with 1$, and there is also no reason for the price to decrease while you can just instantly sell your tethers to bitfinex for 1$ each.

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March 18, 2018, 06:26:43 PM
 #3

This is an interesting question, even if it comes from a newbie (and I hope it doesn't become a spam megathread).

BillCoin is right that the "Tether way" is not decentralized - and it's not really difficult to achieve, as it's the same way than payment processors like PayPal hold the peg of their tokens to fiat - simply holding a centrally-managed reserve.

But there are more decentralized ways. For example, Bitshares and Makerdao use a system where everybody can become the "backer" of a fixed-price coin and profit from that, backing the value with a collateral in another "base asset" (in Bitshares, it's the Bitshares currency which "backs" BitUSD etc.). This seems to work pretty well, but there sometimes are liquidity problems.

And while in these systems the peg is relatively safe, it is not 100% safe because there are scenarios where an attacker can drive the price of the "base asset" down (taking the "pegged asset" down with it) and profit from it, although the attack is expensive, in the order of magnitude of an 51% attack.

Emunie (now Radix) has discussed another way: trying to regulate supply and demand constantly analyzing the "market price" of the base asset on a decentralized exchange. However, I am skeptical here; there may be many ways to manipulate this "perceived market price".

My favourite to keep volatility low - a way that doesn't even need a new altcoin, but can be achieved with Bitcoin and every other major cryptocurrency - is a system where merchants can chose to back the price with goods and services, even if it's only for a short time. More details here. This would not mean a fixed price in relation to fiat, but a more stable price in relation to physical and virtual goods that are regularly traded for Bitcoin.

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March 18, 2018, 06:39:02 PM
 #4

Are you damb or something? Why do you want a coin with a fixed price? Volatility is what make coins challenging, make you depress and the same time the feeling of having fun, if you want a fixed price why don't you just stick with the Fiat?

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March 18, 2018, 07:06:15 PM
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 #5

In order for the price to be stable, it is necessary to intervene to achieve stability, which means centralization.
In general, you need to link the currency with a stable asset that will guarantee its stability.
cryptocurrency like Bitcoin is not based on fixed assets, which makes price fluctuations more obvious.
Tether (USDT) Backed by fiat currency assets, thereby sacrificing decentralization against fixed prices.

The best example of a decentralized currency that does not depend on assets is Havven
In which stability is achieved through a system that supports itself in two different currencies. The first is the stable which is used in the transactions. The transaction fees are returned to be given as equivalents in the other currency.

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March 21, 2018, 11:21:03 AM
 #6

I always see these "peg to something else" responses and it makes me wonder why no one bothers to ask the obvious question:

If "X" must be pegged to "Y" for "X" to be stable, then what is "Y" pegged to that makes it magically stable?

If enough people (merchants and users) were transacting in "X" then why would they need or care about "Y"?

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March 21, 2018, 11:26:48 AM
 #7

How difficult is it in really to what Tether (USDT) does such as pegging the coin to US Dollar price of $1?

Since it is within the market it will be subjected to volatility and of course there will be no fix value. But if there are consensus of making that coin at a stable and fix value then that can happen. If it has a fix value then somehow the traders will find that coin boring since there is no income there. There is income in volatility if there is no volatility how can we expect profit.

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March 21, 2018, 11:28:06 AM
 #8

Tether has never meant to be a decentralized coin, it's a centralized coin that is being controlled by Bitfinex, the whole idea about Tether that the only thing that gives him a value is not the network that it is based on ( as it's not a decentralized coin), but it's the fact that BitFinex promises to buy any of the tether tokens for 1$ each.

So, the value of Tether is a fixed price of 1$ as long as bitfinex keeps the promise of paying 1$ for a coin, think about it like that, there's no reason for the price of tether to increase while bitfinex can issue unlimited tethers backed with 1$, and there is also no reason for the price to decrease while you can just instantly sell your tethers to bitfinex for 1$ each.


I would have never known that if you have never posted it here. Thats really thoughtful idea behind the tether coin I guess. This way anyone can keep the value of the their tokens to 1$ no matter what happens with the market. Now I understand why they used to be scared of the tether coin whenever bitcoin had mega dumps. I have read the threads where people sacred that USDT can take over the bitcoin in terms of market cap thus making it vulnerable coin for for bitcoin and other altcoin currencies. So if Bitfinex keeps it that way then only USDT can survive otherwise the day when they will break this contract or promise then USDT might fall badly as there will be no support wall for it.


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March 21, 2018, 11:29:49 AM
 #9

How difficult is it in really to what Tether (USDT) does such as pegging the coin to US Dollar price of $1?
Tether is like that because it is centralized. In order for other coins to achieve the same stability, it needs to be centralized first. If a coin is decentralized, there is no way it will be at a fixed price because of free market(offer changes almost hourly). If you like coins that are functioning that way, you are better off using tether in the fist place. You can also try to use coins that does not move that much(but don't expect it to be at a fixed price all the time.

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March 21, 2018, 11:35:12 AM
 #10

According to me when in economics term fixed price only happen when commodity or asset at equilibrium price throughout, but this is only happen in centralize currency, in decentralize currency it is not happening because fixed is not possible because we people are always use crypto as asset to increase our rate of return, we buy at low and sell on high.  

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March 21, 2018, 12:00:40 PM
 #11

BillCoin is right that the "Tether way" is not decentralized - and it's not really difficult to achieve, as it's the same way than payment processors like PayPal hold the peg of their tokens to fiat - simply holding a centrally-managed reserve.
And why does everyone is trying to find a decentralized coin? You are willing to fix the price in fiat. Fiat emission is centralized and most part of fiat is held by the banks and controlled by the government. If you need the coin to have a stable price of 1$ then someone should guarantee this price. The only collateral for 1$ is another 1$, the other typec of collateral can lose its price in some time. And if  the coin won't be backed 1:1 then it will have a market price which is not 1$. That is the problem of absolutely all stablecoins which makes them not legit.
The only coin with a fixed price is the one that will be issued by the government.
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March 21, 2018, 12:50:14 PM
 #12

Are you damb or something? Why do you want a coin with a fixed price? Volatility is what make coins challenging, make you depress and the same time the feeling of having fun, if you want a fixed price why don't you just stick with the Fiat?

Volatility makes it hard for a coin to be used as a currency. Businesses tend to dislike gambling with their money, which is usually already earmarked for expenses such as cost of sales and salaries.

Merchants are currently relying on payment processors such as Bitpay to circumvent it a bit, but it would be more ideal if we could remove them from the equation in the future. Satoshi aimed to eliminate the mediation costs for transactions after all, as said in the Bitcoin white paper.

As others have said, the only possible way to keep a coin price fixed is to back it with something.  A coin's price doesn't have to be fixed though. If, for example, the market for Bitcoin becomes big enough and robust enough, it's completely possible for it to be just as stable as the average fiat currency -- not even they are completely stable after all.

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March 21, 2018, 04:16:31 PM
 #13

thanks to everyone for their unique input, much appreciated... thx
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March 21, 2018, 04:46:54 PM
 #14

I always see these "peg to something else" responses and it makes me wonder why no one bothers to ask the obvious question:

If "X" must be pegged to "Y" for "X" to be stable, then what is "Y" pegged to that makes it magically stable?

If enough people (merchants and users) were transacting in "X" then why would they need or care about "Y"?
That is the thing, for example a coin that is pegged to the US dollar is stable in the sense that it will always have a value of one dollar but the dollar itself is not stable it has lost its purchasing power during the last century at an alarming rate and that rate is accelerating due to the US government printing more and more dollars, that is why I think bitcoin go it right you must create a coin with limited supply and let the people to decide how much each bitcoin is worth.
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March 21, 2018, 09:12:00 PM
 #15

How difficult is it in really to what Tether (USDT) does such as pegging the coin to US Dollar price of $1?

Tether is obviously the most stable one, but as others have noticed, it's centralized and thought it would be easiest solution, it's not a great answer to your question.

A better way would be to have 2 different coins. Let's call them "FixCoin" and "FixCoin Dollar", or FC & FCD.
Now we would want FixCoin Dollar to be fixed at $1. How could we achieve this?

First, we would have to get miners or similar creatures to check the price of FixCoin continuously.
Next, we would add the possibility of turning FixCoin Dollars into FixCoins and FixCoins into FixCoin Dollars on the blockchain, which should be possible to achieve if the price is checked on a decentralized way, i.e. miners. FixCoin is checked at the market rate and FixCoin Dollar at the fixed price of $1.

Now, when FCD goes below $1, people would start turning FCD into FC, thus driving the price of FCD up.
Then, when FCD goes above $1, people would start turning FC into FCD, thus driving the price of FCD down.

Not a flawless system, of course. Low volume, large market influencers (LFI/Whales) could sabotage this system. Sadly, it's quite hard to keep a completely decentralized coin at a fixed price. Even keeping it "stable" isn't that easy.



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