Wenbing (OP)
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There is gold in volatility..
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April 14, 2020, 06:55:38 AM |
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Stablecoin exists to address volatility associated with bitcoin and altcoins.
We have collaterised coins which are in form of crypto-pegged coins, commodity-pegged coins and fiat-pegged coins with the goal of bringing stability to crytocurrencies.
My question are:
1. Can this new digital solution address volatility and stop economies from having hyperinflation?
2. Which of the collaterization do you think will be feasible in achieving stability?
3. Which coins have achieved this feat so far?
4. What's bitcoin effort in trying to solve volatility problem?
Kindly, share your thought on this important subject. Thanks
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April 14, 2020, 07:13:11 AM |
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First of all it's not inflation. Inflation would mean the value drops, which is not the case for Bitcoin and such.
Keep in mind that not all stable coins are the same. They are pegged to different "values" and they should be backed by an equivalent reserve of those "values".
But not all do this, most notable example is the well-known USDT/Tether which never allowed a trusted 3rd party make a proper audit, so it's safe to assume that their coin is not actually backed. And here the problems come. If all the stable coins would be backed properly, they would not change anything at all in the price evolution of the main coins (the world would be the same - with or without them, they'd just make the arbitrage and other transactions faster). But the not-backed stable coins are dangerous. They are "made of thin air" and transfer value into the hands of the issuer by "stealing" value from the actual coins (I'm not sure how to word it better).
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mk4
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1. No. If anything, stablecoins might actually be helping speed up inflation. Because we don't even know for sure if all stablecoins currently exists are actually backed up 1:1 with the US Dollar. Some of these stablecoin companies(like Bitfinex) might actually be insolvent and are just printing out Tethers for the sake of it.
2-3. Don't expect stablecoins to help price stability by much. If anything, stablecoins just provide more market liquidity, but that itself wouldn't make bitcoin stable. We simply need more buyers and sellers, or time in general.
4. Nothing. Because Bitcoin is a protocol not a living entity. Stability will come with time. You really don't expect an 10-11 year old asset to be stable; especially in an unregulated market where manipulation occurs and people can simply dump huge amounts at will. That would simply be very realistic.
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Wenbing (OP)
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April 14, 2020, 07:49:41 AM Last edit: February 26, 2021, 01:08:33 PM by mprep |
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If all the stable coins would be backed properly, they would not change anything at all in the price evolution of the main coins (the world would be the same - with or without them, they'd just make the arbitrage and other transactions faster).
But the not-backed stable coins are dangerous. They are "made of thin air" and transfer value into the hands of the issuer by "stealing" value from the actual coins (I'm not sure how to word it better).
You made a very cogent point here that all should consider keenly: 1. Do you Stablecoins backed by other assets is not different from altcoins and bitcoin in terms of volatilities? 2. Why is the US dollar a fiat currency stable overtime? I believe one of the reasons is due to the backing of the gold standard. 3. Don't you feel that a crytocurrencies backed by fiat currency like USD will be more stable than dollars? Although, the market force is a powerful market trend force.
1. No. If anything, stablecoins might actually be helping speed up inflation. Because we don't even know for sure if all stablecoins currently exists are actually backed up 1:1 with the US Dollar. Some of these stablecoin companies(like Bitfinex) might actually be insolvent and are just printing out Tethers for the sake of it.
You mean stablecoins might help to speed inflation? Well, still pondering over it. Well stability and inflation can not take place simultaneously. The equilibrium point of deflation and inflation of coins is stability. My observation is what now make stablecoins different from altcoins and bitcoin? [moderator's note: consecutive posts merged]
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mk4
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April 14, 2020, 08:23:24 AM |
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You mean stablecoins might help to speed inflation? Well, still pondering over it. Well stability and inflation can not take place simultaneously. The equilibrium point of deflation and inflation of coins is stability.
Stablecoins are valued at 1 USD, and SHOULD be backed 1:1 with real US Dollars, but we really can't prove that it's actually really backed 1:1. My observation is what now make stablecoins different from altcoins and bitcoin?
As you can see on crypto price sites like coinmarketcap, stablecoins are pegged to the USD whereas bitcoin and altcoins are just priced through supply and demand, hence why bitcoin/altcoins can rise and fall as much as the market wants, whereas stablecoins are almost always $1.
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April 14, 2020, 08:33:30 AM |
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You made a very cogent point here that all should consider keenly:
Thank you. 1. Do you Stablecoins backed by other assets is not different from altcoins and bitcoin in terms of volatilities?
Properly backed stable coins are not much different from the assets used for backing them (no big relation to Bitcoin). They are usually different from Bitcoin and altcoins. They are usually backed by fiat currencies where the supply is not finite, while Bitcoin supply is finite and rather small. This means that the value of fiat currencies usually decreases over time (inflation) giving the impression the value of Bitcoin is rising. What I said was that if only properly backed coins would be used to buy Bitcoin its volatility could be smaller. But the current high volatility is also caused by the fact Bitcoin (and altcoins too) is a young asset and its markets/exchanges are not properly regulated. 2. Why is the US dollar a fiat currency stable overtime? I believe one of the reasons is due to the backing of the gold standard.
US Dollar is far from being stable. What tricks you is the point of reference. Remember that ancient people thought that Earth sits and Sun is travelling around it. US dollar is now about 20 times weaker than it was in 1800. See on this website the Year/Dollar Value table on that page. Or search for other ones, this was just a search result, I don't know how accurate it is, but you'll get similar results. 3. Don't you feel that a crytocurrencies backed by fiat currency like USD will be more stable than dollars?
In theory an USD backed stable coin has always the value of 1$, so it can't be more or less stable than dollar. In reality some small fluctuations happen, but I think that the reasons are fees, supply issues and maybe bigger problems. I tend to avoid USD related stable coins because of this. They don't bring me any benefit if I don't arbitrage. Although, the market force is a powerful market trend force.
Always keep this in mind, whether you talk about inflation, volatility, halving or speculation.
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Wenbing (OP)
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April 14, 2020, 09:03:18 AM |
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You mean stablecoins might help to speed inflation? Well, still pondering over it. Well stability and inflation can not take place simultaneously. The equilibrium point of deflation and inflation of coins is stability.
Stablecoins are valued at 1 USD, and SHOULD be backed 1:1 with real US Dollars, but we really can't prove that it's actually really backed 1:1. My observation is what now make stablecoins different from altcoins and bitcoin?
As you can see on crypto price sites like coinmarketcap, stablecoins are pegged to the USD whereas bitcoin and altcoins are just priced through supply and demand, hence why bitcoin/altcoins can rise and fall as much as the market wants, whereas stablecoins are almost always $1. There can't be a point of equilibrium in a free market mechanism because it's either SS>DD or SS<DD. In that case a pegged coins may likely achieve stability.
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mk4
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April 14, 2020, 10:22:31 AM |
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There can't be a point of equilibrium in a free market mechanism because it's either SS>DD or SS<DD. In that case a pegged coins may likely achieve stability.
Sure it's not perfectly 1:1 because the "prices" of these stablecoins frequently rise and drop from $1 flat to around $0.998 to $1.102 depending on how much people are buying/selling, but they're MOSTLY really close to 1 USD. And of course they're stable, that's the point of stablecoins. They're pegged to the USD. It's pretty much just a blockchain version of the USD.
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April 14, 2020, 11:23:32 AM Last edit: April 14, 2020, 11:38:40 AM by tranthidung |
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1. Can this new digital solution address volatility and stop economies from having hyperinflation?
No. Even stable coins are under investigation of inflation. For example, they said one USDT is backed by one US dollar but in reality can we have proof of this? 2. Which of the collaterization do you think will be feasible in achieving stability?
If there is a collateral that can help price stable, it is something relates to physical stuffs, such as gold. However even gold has its extremely high volatile period like last month. I know it does not often occur with gold but I take it as an example for the statement, there is nothing can play as a collateral to help other assets more stable. 4. What's bitcoin effort in trying to solve volatility problem?
The scheme of bitcoin block rewards does it. When there are not significant available mineable bitcoin left, the price will become more stable. You can see the curve will become more flattening since the coming halving. The bitcoin network has still moved till next four years to see the real flattening phase but we have been so closely to that phase. There are 87.26% of bitcoin total supply has been mined as of writing (18,324,150 has been mined per 21,000,000 total supply of bitcoin), according to coinmarketcap. Remember, with whatever happen in the future, bitcoin will not be completely stable because we have one thing is called Market. Market means volatile. Image source: https://www.coindesk.com/bitcoin-halving-explainer
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Wenbing (OP)
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April 14, 2020, 12:52:54 PM |
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1. Can this new digital solution address volatility and stop economies from having hyperinflation?
No. Even stable coins are under investigation of inflation. For example, they said one USDT is backed by one US dollar but in reality can we have proof of this? 2. Which of the collaterization do you think will be feasible in achieving stability?
If there is a collateral that can help price stable, it is something relates to physical stuffs, such as gold. However even gold has its extremely high volatile period like last month. I know it does not often occur with gold but I take it as an example for the statement, there is nothing can play as a collateral to help other assets more stable. 4. What's bitcoin effort in trying to solve volatility problem?
The scheme of bitcoin block rewards does it. When there are not significant available mineable bitcoin left, the price will become more stable. You can see the curve will become more flattening since the coming halving. The bitcoin network has still moved till next four years to see the real flattening phase but we have been so closely to that phase. There are 87.26% of bitcoin total supply has been mined as of writing (18,324,150 has been mined per 21,000,000 total supply of bitcoin), according to coinmarketcap. Remember, with whatever happen in the future, bitcoin will not be completely stable because we have one thing is called Market. Market means volatile. Image source: https://www.coindesk.com/bitcoin-halving-explainerVery great analysis and graphical demonstration. There is no utopian market system which means the market will also be volatile. My question is what if we peg 1coin: $2-3 won't it help to solve volatility problem to a considerable extent?
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mk4
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April 14, 2020, 12:58:12 PM |
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My question is what if we peg 1coin: $2-3 won't it help to solve volatility problem to a considerable extent?
Volatility of what specifically? Bitcoin? The cryptocurrency markets in general? Or what? But the answer regardless is: no. Changing the peg really solves nothing as it's just like creating a crypto-version of a $5 bill.
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Wenbing (OP)
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April 14, 2020, 01:00:45 PM |
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Stable coin doesn't solve hyperinflation at all, because : 1. The stablecoin issuer or creator could add new more stablecoin supply anytime. It happens many times with Tether stablecoin 2. Stablecoin is only as stable as asset/fiat which backed it. If the asset/fiat experience inflation, the stablecoin also got inflated.
Thanks. We have : 1.commodity pegging such as gold standard 2. Fiat pegging such as US dollar standard. 3. Cryro-pegging such as ethereum or bitcoin standard What if we use god which is relatively stable to peg stablecoins, won't it be stable or decrease in rate of fluctuations?
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mk4
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April 14, 2020, 01:27:32 PM |
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What if we use god which is relatively stable to peg stablecoins, won't it be stable or decrease in rate of fluctuations?
We already have a cryptocurrency that's supposedly pagged to a gram of gold named Digix Gold Token(DGX). It literally does nothing to decrease the rate of volatility because what the markets need is liquidity, not new trading pairs.
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April 15, 2020, 05:59:08 PM |
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1. Can this new digital solution address volatility and stop economies from having hyperinflation? 1. Of course not. As mk4 said, stable coins are like printing fiat money. They will just speed up inflation. Stablecoin exists to address volatility associated with bitcoin and altcoins. ... 4. What's bitcoin effort in trying to solve volatility problem?
They do not exist for that reason. Volatility is not a problem to be addressed and solved. It is just a consequence of the uncertainty of the future of cryptocurrency assets. As long as this future remains unknown, as being completely forgotten or mass adopted, the price will be very volatile. You are thinking everythhing the wrong way ![Wink](https://bitcointalk.org/Smileys/default/wink.gif)
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April 15, 2020, 06:21:22 PM |
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Stable coin doesn't solve hyperinflation at all, because : 1. The stablecoin issuer or creator could add new more stablecoin supply anytime. It happens many times with Tether stablecoin 2. Stablecoin is only as stable as asset/fiat which backed it. If the asset/fiat experience inflation, the stablecoin also got inflated.
Thanks. We have : 1.commodity pegging such as gold standard 2. Fiat pegging such as US dollar standard. 3. Cryro-pegging such as ethereum or bitcoin standard What if we use god which is relatively stable to peg stablecoins, won't it be stable or decrease in rate of fluctuations? While gold is relative stable, it doesn't solve 1st problem i mentioned. Besides, the transparency of token creator/issuer and whether the gold actual exist/not is questionable.This is the biggest problem not only with stablecoins pegged to gold but with every stablecoin that is pegged to something (fiat or precious metals). There are alternatives like DAI that is keeping it's price stable with algorithm. But those stablecoins too have their own problems.
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Wenbing (OP)
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April 15, 2020, 07:42:52 PM |
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Stable coin doesn't solve hyperinflation at all, because : 1. The stablecoin issuer or creator could add new more stablecoin supply anytime. It happens many times with Tether stablecoin 2. Stablecoin is only as stable as asset/fiat which backed it. If the asset/fiat experience inflation, the stablecoin also got inflated.
Thanks. We have : 1.commodity pegging such as gold standard 2. Fiat pegging such as US dollar standard. 3. Cryro-pegging such as ethereum or bitcoin standard What if we use god which is relatively stable to peg stablecoins, won't it be stable or decrease in rate of fluctuations? While gold is relative stable, it doesn't solve 1st problem i mentioned. Besides, the transparency of token creator/issuer and whether the gold actual exist/not is questionable. There are alternatives like DAI that is keeping it's price stable with algorithm. But those stablecoins too have their own problems. How does that DAI keep its price stable through algorithm without being backed up by things with relative stability. Pls, kindly explain how that work.
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slackovic
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April 15, 2020, 07:45:50 PM |
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Stable coin doesn't solve hyperinflation at all, because : 1. The stablecoin issuer or creator could add new more stablecoin supply anytime. It happens many times with Tether stablecoin 2. Stablecoin is only as stable as asset/fiat which backed it. If the asset/fiat experience inflation, the stablecoin also got inflated.
Thanks. We have : 1.commodity pegging such as gold standard 2. Fiat pegging such as US dollar standard. 3. Cryro-pegging such as ethereum or bitcoin standard What if we use god which is relatively stable to peg stablecoins, won't it be stable or decrease in rate of fluctuations? While gold is relative stable, it doesn't solve 1st problem i mentioned. Besides, the transparency of token creator/issuer and whether the gold actual exist/not is questionable. There are alternatives like DAI that is keeping it's price stable with algorithm. But those stablecoins too have their own problems. How does that DAI keep its price stable through algorithm without being backed up by things with relative stability. Pls, kindly explain how that work. It's a simple Google search to find that answer. Here, I "googled" that for you: https://www.google.com/search?q=how+does+dai+keep+it+value+stableThere are several articles that explain that, but you'll have to read carefully because it's not that simple.
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pooya87
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April 16, 2020, 04:13:22 AM |
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that is a weird question! how can something that supposedly is pegged to something that inflates (ie. fiat) prevent inflation? if anything when these companies print more and more of their coin they are contributing to inflation. 2. Stablecoin is only as stable as asset/fiat which backed it. If the asset/fiat experience inflation, the stablecoin also got inflated.
i don't think stability of a stable coin has that much to do with what it is backed by. in fact i believe that a stable coin is only as stable as the users of that coin perceive it. for example 1 Tether is only worth $1 as long users are not willing to buy/sell it at a higher or lower price. otherwise it doesn't matter. of course the very large supply and a huge number of users contributes to that stability but in the end it comes down to that demand. if some day that demand changes we see the price change too. we have already seen it crash to $0.9 and $0.85 before.
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mk4
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April 16, 2020, 05:30:12 AM |
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i don't think stability of a stable coin has that much to do with what it is backed by. in fact i believe that a stable coin is only as stable as the users of that coin perceive it. for example 1 Tether is only worth $1 as long users are not willing to buy/sell it at a higher or lower price. otherwise it doesn't matter. of course the very large supply and a huge number of users contributes to that stability but in the end it comes down to that demand. if some day that demand changes we see the price change too. we have already seen it crash to $0.9 and $0.85 before.
Yeap. But take note that whoever is handling the supply of Tether can also print/burn supply as to keep the price at least close to $1. The $0.85-$0.9 prices occurred just because of the sudden spike of people selling their USDT, but as we see it quickly returned back to the $1 range when the Tether company interfered.
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pooya87
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April 16, 2020, 08:22:51 AM |
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~ Yeap. But take note that whoever is handling the supply of Tether can also print/burn supply as to keep the price at least close to $1. The $0.85-$0.9 prices occurred just because of the sudden spike of people selling their USDT, but as we see it quickly returned back to the $1 range when the Tether company interfered.
that could work mostly for the case where price is higher and they print more otherwise burning coins is not going to be that effective if people decided some coin is not worth $1 (lack of demand can not be covered by burning some coins that may not have even been in use). BTW i think the big drop was during the time when Bitfinex was hacked and again when FBI was looking into their affairs and again when their banks shut down their accounts, and people were worried that the company and the exchange were going to shut down.
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