On stablecoins

[deisik]

I don't really understand the purpose in having all these stable coins. If you don't like the volatility of the cryptocurrencies such as Bitcoin and Ethereum, then just convert your coins to fiat currency. Why bother converting them to stablecoins such as USDT or TUSD?

The answer is easy

If you convert your cryptocurrencies to fiat (like dollars or whatever), you may have to pay hefty fees trying to withdraw the fiat proceeds (and wait for days until you receive the funds). But with centralized stable coins, say tethers, you can completely bypass the fiat system (read, banks and all that pain in the ass that comes with them) and move your tethers either to your Tether account (or how it is called) or to another exchange where they are accepted. Essentially, these coins are working like fiat while without making use or having to use the banking system (under whatever name)

[1713582765]

1713582765

[1713582765]

1713582765

[KlepZ]

I don't really understand the purpose in having all these stable coins. If you don't like the volatility of the cryptocurrencies such as Bitcoin and Ethereum, then just convert your coins to fiat currency. Why bother converting them to stablecoins such as USDT or TUSD?

The answer is easy

If you convert your cryptocurrencies to fiat (like dollars or whatever), you may have to pay hefty fees trying to withdraw the fiat proceeds (and wait for days until you receive the funds). But with centralized stable coins, say tethers, you can completely bypass the fiat system (read, banks and all that pain in the ass that comes with them) and move your tethers either to your Tether account (or how it is called) or to another exchange where they are accepted. Essentially, these coins are working like fiat while without making use or having to use the banking system (under whatever name)

Though both the currencies are implementing the concept of Stablecoin, yet they have so many similarities and differences between them.
Similarities are: Both the coins are providing security to the investors by protecting them from price crash due to high volatility as per the market conditions.
Both the coins are backed by US dollars and each is providing 1:1 conversion as each coin is redeemed for each US dollar. TUSD is not as popular as USDT due to the late release in the crypto world and hence is unable to gain that much popularity.

[Artemis3]

I don't really understand the purpose in having all these stable coins. If you don't like the volatility of the cryptocurrencies such as Bitcoin and Ethereum, then just convert your coins to fiat currency. Why bother converting them to stablecoins such as USDT or TUSD?

The answer is easy

If you convert your cryptocurrencies to fiat (like dollars or whatever), you may have to pay hefty fees trying to withdraw the fiat proceeds (and wait for days until you receive the funds). But with centralized stable coins, say tethers, you can completely bypass the fiat system (read, banks and all that pain in the ass that comes with them) and move your tethers either to your Tether account (or how it is called) or to another exchange where they are accepted. Essentially, these coins are working like fiat while without making use or having to use the banking system (under whatever name)

Its only a token, you can use a wallet, say ETH for its erc-20 variant, put some eth in it (gas) and store your tethers. Then send them the same way you do with any other coin. It is a little more complicated than bitcoin due to this use somebody else's blockchain.

Fiat vs stable main reason they were made is so that exchanges don't have to follow the "rules" which are far more strict for actual fiat controlled in the country the operate within. An exchange can add a stable coin immediately, while for actual fiat they have to follow a long list of rules and regulations.

Stablecoins seem to do well within an exchange, for hedging trades etc, but poorly for common transactions due to this added complexity. And then there is the whole credibility issue, audits, and what not. A stable coin is technically a token whose value is pegged to some other coin. So if the pegged coin inflates 2%, they have to as well.

[Cosbycoin]

If you don't know what stablecoins are, read this Wiki article

With that read, there is an ongoing dispute over the advantages of these coins before Bitcoin and other cryptocurrencies. Many suggest that they are not actually backed up by real currencies or other assets as the companies behind them vigorously claim, that they are centralized beyond any hope, and without proper audits they can be printed out of thin air just like fiat money, which would culminate in their hyperinflation, devaluation and failure

For simplicity's sake, let's assume that these accusations are unfounded. So do these coins have any advantages compared to Bitcoin under given assumptions? In these conditions stablecoins essentially become fiat that they are representing, i.e. the US dollar, Euro, or whatever. So the whole thing is not so much about some stablecoin versus Bitcoin but rather a good old question of a fiat currency versus a cryptocurrency

And I guess you already know the answer to that question

I don't even know what they are made of or how everything works about stable coins, the only thing I know is that you can use the wage your money, just pull it out from Bitcoin and invest in any of those stable coins and your money will stay there for you without you losing or gaining anything as well.

But I don't have interest in stable coins, and I don't buy them, cause I don't really see any need for it. I just invest in Bitcoin and other cryptocurrencies that fluctuates in price and whenever I want to pull out, I just do so by shifting to dollars quickly.

[deisik]

But I don't have interest in stable coins, and I don't buy them, cause I don't really see any need for it. I just invest in Bitcoin and other cryptocurrencies that fluctuates in price and whenever I want to pull out, I just do so by shifting to dollars quickly

That's what you come to on proper consideration

That these so-called stable coins are just a crappy substitute for fiat, with fiat being a better option if you want to pull out. Another option is using shorts as a hedge (just in case, this is my preferred method of doing things in this department). But this may be not what people think or consider en masse. Besides, you can send these coins (e.g. tethers) to other exchanges (other than Bitfinex, in case of tethers) where they are accepted. Technically, you can send fiat (like dollars or whatever) too, but this is typically cumbersome and rather expensive. So there's at least one use case which accounts and allows for their existence

[Nunoluck]

If you don't know what stablecoins are, read this Wiki article

With that read, there is an ongoing dispute over the advantages of these coins before Bitcoin and other cryptocurrencies. Many suggest that they are not actually backed up by real currencies or other assets as the companies behind them vigorously claim, that they are centralized beyond any hope, and without proper audits they can be printed out of thin air just like fiat money, which would culminate in their hyperinflation, devaluation and failure

For simplicity's sake, let's assume that these accusations are unfounded. So do these coins have any advantages compared to Bitcoin under given assumptions? In these conditions stablecoins essentially become fiat that they are representing, i.e. the US dollar, Euro, or whatever. So the whole thing is not so much about some stablecoin versus Bitcoin but rather a good old question of a fiat currency versus a cryptocurrency

And I guess you already know the answer to that question

It seems that that coin only has small advantages which is to avoid volatility of cryptocurrency. But this concept is not right. I think we don't need cryptocurrency like that. What we need is a cryptocurrency which  really backed by gold or silver where the creation of that coin will be supervised by global institution. So by coin like that we can really replace fiat. In USDT case actually it still useful to guide new investors. I mean is it can attract people who don't have enough braveness to invest in crypto which the price movement is very extreeme. So they will feel more comfortable to use Cryptocurrency.

[wuvdoll]

Even if it was 1 to 1 backed by the corporations that claims they are backed by real fiat (which some even came clear about not being 1 to 1 backed anymore so I don't know why they are worth like that) its still not the same with bitcoin. There is always risk of printing more, there is always risk of centralized issues of withdrawing money from the market, and the biggest threat of all there is always an issue of "lol gotcha" of the corporation that reeped the benefits of it and than leave as an exit scam.

Why would anyone prefer stablecoins over bitcoin I don't know, if you want to use regular fiat just use fiat anyway, there is no one stopping you to use dollars for example, that is what many people do, if you want to use bitcoin than use bitcoin but if you use tether for example that is neither as safe as bitcoin nor as accepted as dollars so whats the point.

[Ozero]

Even if it was 1 to 1 backed by the corporations that claims they are backed by real fiat (which some even came clear about not being 1 to 1 backed anymore so I don't know why they are worth like that) its still not the same with bitcoin. There is always risk of printing more, there is always risk of centralized issues of withdrawing money from the market, and the biggest threat of all there is always an issue of "lol gotcha" of the corporation that reeped the benefits of it and than leave as an exit scam.

Why would anyone prefer stablecoins over bitcoin I don't know, if you want to use regular fiat just use fiat anyway, there is no one stopping you to use dollars for example, that is what many people do, if you want to use bitcoin than use bitcoin but if you use tether for example that is neither as safe as bitcoin nor as accepted as dollars so whats the point.

About five months passed, during this time the idea of ​​creating a stable Libra coin came up, they began to actively discuss this idea and, I see, the general attitude towards stable coins has changed for the better. Yes, and statistics say that the stable USDT coin in terms of trading volume exceeded the trading volume in bitcoins. Cryptocurrency users still began to understand certain advantages and conveniences of stable coins. Of course, stable coins are necessary for people and useful for cryptocurrencies, since they attract attention and interest to it. Stable coins and a common cryptocurrency will occupy each its niche in human financial activity.

[Sithara007]

I don't really understand the purpose in having all these stable coins. If you don't like the volatility of the cryptocurrencies such as Bitcoin and Ethereum, then just convert your coins to fiat currency. Why bother converting them to stablecoins such as USDT or TUSD?

The answer is easy

If you convert your cryptocurrencies to fiat (like dollars or whatever), you may have to pay hefty fees trying to withdraw the fiat proceeds (and wait for days until you receive the funds). But with centralized stable coins, say tethers, you can completely bypass the fiat system (read, banks and all that pain in the ass that comes with them) and move your tethers either to your Tether account (or how it is called) or to another exchange where they are accepted. Essentially, these coins are working like fiat while without making use or having to use the banking system (under whatever name)

But withdrawing to Tether is of no use, right? If I want to purchase something, and I need fiat currency for that, then obviously I need to cash out these Tether tokens using any of the exchanges or peer2peer platforms. And once again, this process is going to cause unwanted delays. The conversion to Tether will be adding another unnecessary layer and the delay associated with it.

One advantage of Tether that I could think of is for usage in countries where crypto to fiat trade is prohibited. And this is one of the reason why the majority of the trade volumes originate from China. And another advantage is that in some of the countries capital gains are not computed when you convert one cryptocurrency to another. You can avoid paying the capital gains tax, as long as you don't sell your crypto for fiat cash.

[timerland]

I don't really understand the purpose in having all these stable coins. If you don't like the volatility of the cryptocurrencies such as Bitcoin and Ethereum, then just convert your coins to fiat currency. Why bother converting them to stablecoins such as USDT or TUSD?

The answer is easy

If you convert your cryptocurrencies to fiat (like dollars or whatever), you may have to pay hefty fees trying to withdraw the fiat proceeds (and wait for days until you receive the funds). But with centralized stable coins, say tethers, you can completely bypass the fiat system (read, banks and all that pain in the ass that comes with them) and move your tethers either to your Tether account (or how it is called) or to another exchange where they are accepted. Essentially, these coins are working like fiat while without making use or having to use the banking system (under whatever name)

But withdrawing to Tether is of no use, right? If I want to purchase something, and I need fiat currency for that, then obviously I need to cash out these Tether tokens using any of the exchanges or peer2peer platforms. And once again, this process is going to cause unwanted delays. The conversion to Tether will be adding another unnecessary layer and the delay associated with it.

One advantage of Tether that I could think of is for usage in countries where crypto to fiat trade is prohibited. And this is one of the reason why the majority of the trade volumes originate from China. And another advantage is that in some of the countries capital gains are not computed when you convert one cryptocurrency to another. You can avoid paying the capital gains tax, as long as you don't sell your crypto for fiat cash.

I know a lot of people that use tether as a great way to keep their assets when they don't want to be gambling with the BTC prices, or they want out of an altcoin.

It's actually a great way to hold coins, especially when you don't want to actually cash out, trading from tether to BTC is a lot easier then going from USD or your regular fiat currency to BTC, and doesn't carry a lot of the fees that fiat conversation has.

[deisik]

I don't really understand the purpose in having all these stable coins. If you don't like the volatility of the cryptocurrencies such as Bitcoin and Ethereum, then just convert your coins to fiat currency. Why bother converting them to stablecoins such as USDT or TUSD?

The answer is easy

If you convert your cryptocurrencies to fiat (like dollars or whatever), you may have to pay hefty fees trying to withdraw the fiat proceeds (and wait for days until you receive the funds). But with centralized stable coins, say tethers, you can completely bypass the fiat system (read, banks and all that pain in the ass that comes with them) and move your tethers either to your Tether account (or how it is called) or to another exchange where they are accepted. Essentially, these coins are working like fiat while without making use or having to use the banking system (under whatever name)

But withdrawing to Tether is of no use, right? If I want to purchase something, and I need fiat currency for that, then obviously I need to cash out these Tether tokens using any of the exchanges or peer2peer platforms. And once again, this process is going to cause unwanted delays. The conversion to Tether will be adding another unnecessary layer and the delay associated with it

Whether withdrawing to Tether is of any use to you personally depends on your use case

Indeed, if you want to purchase something, then withdrawing to Tether doesn't make a lot of sense unless your seller is willing to accept tethers. But this is not what tethers and, more broadly, stable coins (both centralized and decentralized) are used for. There are two major uses for stable coins. The first is to effortlessly move funds between exchanges without exposing yourself to volatility, while completely bypassing the banking system as a nice bonus of sorts. And the second use is about preserving the dollar value of your cryptocurrency stash without exposing yourself to third party risks (that mostly refers to stable coins based on cryptocurrencies like DAI)

[Pearls Before Swine]

If we are assuming, as you say, that these stablecoins are fully backed up by fiat currency, then all you are doing is pushing the problem of printing out of thin air and inflation back a step. Instead of the crypto itself being printed out of thin air, the fiat currency that is pegged to is instead. The end result for the crypto in question is still the same - devaluation.

Don't know who bumped this thread since I haven't finished reading it yet but I'm glad they did, since I obviously missed it.  You make an excellent point about the case where a stable coin is pegged to an inflationary currency.

Traders generally dont hold stable coins for the long term, do they?  Ive always thought they were simply intermediate cryptos used instead of cash when they trade their bitcoin or other *real* crypto for a cash equivalent.  There would be no real need to own a stable coin that I can see, since you can't spend it and can't do much with it aside from buying other cryptos.  That might change if and when Libra is introduced, but as of right now those stable coins are just a proxy for fiat.  Right?

That these so-called stable coins are just a crappy substitute for fiat, with fiat being a better option if you want to pull out.

All right, I guess you just answered my question then.  I hear so much about them that I've often wondered what the big deal is.  Their trading volumes are higher than btc if I'm not mistaken, but that makes sense if there are pairs of crypto that trade with USDT or another stable coin.  I wouldn't assume that any trader really wants to own any of the stable coins for the long term. 

[deisik]

That these so-called stable coins are just a crappy substitute for fiat, with fiat being a better option if you want to pull out.

All right, I guess you just answered my question then.  I hear so much about them that I've often wondered what the big deal is.  Their trading volumes are higher than btc if I'm not mistaken, but that makes sense if there are pairs of crypto that trade with USDT or another stable coin.  I wouldn't assume that any trader really wants to own any of the stable coins for the long term

You're welcome, bro

The problem with stable coins is that they are not tested in extreme market conditions yet. That mostly refers to stable coins based on cryptocurrencies since we don't really know how stable they are going to be when the underlying cryptocurrency loses like 90% of its value overnight (or just fast enough). In other words, putting your entire wealth in one such coin is like playing with dynamite. If things go massively awry, you are likely to fare a lot better in the long run if you just keep the underlying cryptocurrency (say, Ethereum)

The case with centralized stable coins like Tether seems to be pretty obvious on its own as the stability of these coins depends entirely on the company issuing them (read, whether they are in fact backed up by anything). And as recent events have shown (I refer to Bitfinex "borrowing" dollars backing up tethers, which effectively meant that the latter were only partially backed up by the former), third parties cannot be trusted in these matters because it is only a matter of time till they start to abuse people's trust in them

[Pab]

Stable coins like Tether are simply very useful.Tether and other stable coin are offering easy way to exchange crypto to fiat alternative.And stable coins are widely used for arbitrage
But hold for a while because of Libra regulators begin to watch that market
Take a look at that article 
FSB chair Quarles says rise of stablecoins could pose regulatory challenges

https://www.theblockcrypto.com/linked/42046/fsb-chair-quarles-says-rise-of-stablecoins-could-pose-regulatory-challenges?utm_source=newsletter&utm_medium=email&utm_campaign=2019-10-04

[bitcon]

Stablecoin is a litte defirent than bitcoin and any other cryptocurrency because they say it is way stable and less inflation unlike fiat money that there a lot of inflation.

Many stablecoins are criticized precisely for the lack of a philosophy of "traditional" cryptocurrencies. However, they help investors to trade. For example, a trader can wait a while for one cryptocurrency to depreciate and transfer funds to stablecoin, where you can safely expect the market to grow again. In this case, you can bind not only to fiat currency but also to assets like precious metals, oil or something else.

[Sithara007]

Whether withdrawing to Tether is of any use to you personally depends on your use case

Indeed, if you want to purchase something, then withdrawing to Tether doesn't make a lot of sense unless your seller is willing to accept tethers. But this is not what tethers and, more broadly, stable coins (both centralized and decentralized) are used for. There are two major uses for stable coins. The first is to effortlessly move funds between exchanges without exposing yourself to volatility, while completely bypassing the banking system as a nice bonus of sorts. And the second use is about preserving the dollar value of your cryptocurrency stash without exposing yourself to third party risks (that mostly refers to stable coins based on cryptocurrencies like DAI)

Many thanks for the very detailed explanation. I guess Tether won't be of much use for me, because I don't move my assets from one exchange to another very often. And I don't care much about volatility, as I always measure my assets in terms of BTC (and not in terms of USD). I guess this is one of the advantages of being a long-term holder, rather than being a cryptocurrency trader.

This also proves why the government restrictions on the cryptocurrency trading is not very successful. The cryptocurrency users are always one step ahead of the government, and they have made use of the loophole by using stablecoins instead of fiat cash. The only thing that should concern these users is the frequent hacks targeting the cryptocurrency exchanges. There is always a chance of someone hacking the exchange and stealing the user funds.

[deisik]

Whether withdrawing to Tether is of any use to you personally depends on your use case

Indeed, if you want to purchase something, then withdrawing to Tether doesn't make a lot of sense unless your seller is willing to accept tethers. But this is not what tethers and, more broadly, stable coins (both centralized and decentralized) are used for. There are two major uses for stable coins. The first is to effortlessly move funds between exchanges without exposing yourself to volatility, while completely bypassing the banking system as a nice bonus of sorts. And the second use is about preserving the dollar value of your cryptocurrency stash without exposing yourself to third party risks (that mostly refers to stable coins based on cryptocurrencies like DAI)

Many thanks for the very detailed explanation. I guess Tether won't be of much use for me, because I don't move my assets from one exchange to another very often. And I don't care much about volatility, as I always measure my assets in terms of BTC (and not in terms of USD). I guess this is one of the advantages of being a long-term holder, rather than being a cryptocurrency trader

You're welcome too!

This also proves why the government restrictions on the cryptocurrency trading is not very successful. The cryptocurrency users are always one step ahead of the government, and they have made use of the loophole by using stablecoins instead of fiat cash. The only thing that should concern these users is the frequent hacks targeting the cryptocurrency exchanges. There is always a chance of someone hacking the exchange and stealing the user funds

This issue, i.e. third party risks, can also be alleviated to a degree

It is called hedging, and I explained how it works on numerous occasions already (even in this very thread). In fact, you can use hedging not only for reducing your risks in this realm (i.e. someone hacking the exchange and stealing the money) but pretty much as an effective and efficient substitute for stable coins themselves (though it is not applicable to every exchange out there). In essence, hedging allows you to kill two birds with one stone (and then pick up that stone for further bird shooting)

[TrevorS]

I don't really understand the purpose in having all these stable coins. If you don't like the volatility of the cryptocurrencies such as Bitcoin and Ethereum, then just convert your coins to fiat currency. Why bother converting them to stablecoins such as USDT or TUSD?

The answer is easy

If you convert your cryptocurrencies to fiat (like dollars or whatever), you may have to pay hefty fees trying to withdraw the fiat proceeds (and wait for days until you receive the funds). But with centralized stable coins, say tethers, you can completely bypass the fiat system (read, banks and all that pain in the ass that comes with them) and move your tethers either to your Tether account (or how it is called) or to another exchange where they are accepted. Essentially, these coins are working like fiat while without making use or having to use the banking system (under whatever name)

All right. The stable of the coin is precisely t thanks to which it is possible to quickly and with minimal fees fixed in a stable currency. However, the centralized side of these coins confuses me. It turns out that we, in the distance of cryptocurrencies, depend on two factors at once. The first is the project itself producing a stable coin, as Tezer knows, there are quite a few conflicts with the law that are still being resolved. The second factor is the exchange on which we speculate with this coin.