Stablecoins

[Robust Crypto]

Hello

I have a question about stablecoins and how they work.

Say I want to build a crypto wallet. Now, it's not an exchange, it's a wallet, but I want to give my users the ability to trade it in-wallet.

Here's where a stablecoins comes in. Now, presume he sells $1,000 worth of BTC for a stablecoin that I issue. The stablecoin is $1. Now assume the price of BTC drops by 50%.
That means, he can buy 50% more satoshis with the same $1,000, but since I don't have any BTC reserves, how can guarantee the "stableness" of the coin?

Are there any solutions to this such as offshoring this a decentralized exchange?

Thanks!

[hosseinimr93]

Here's where a stablecoins comes in. Now, presume he sells $1,000 worth of BTC for a stablecoin that I issue. The stablecoin is $1. Now assume the price of BTC drops by 50%.
That means, he can buy 50% more satoshis with the same $1,000, but since I don't have any BTC reserves, how can guarantee the "stableness" of the coin?

100% not 50%


This stable coin is a scam. You cannot create money out of thin air.
Your stable coins must be backed by your reserves.
In simple words, when you issue 1000 dollar worth of stable coins, you must keep 1000 real dollar in reserve.

[gentlemand]

You're creating an exchange any time you offer any type of trade. It doesn't matter where it takes place.

Why would anyone trust a coin magicked up out of thin air by a total unknown? The stablecoins that have accountable heavyweights backing them and real backing are toxic enough.

[JeromeTash]

Are there any solutions to this such as offshoring this a decentralized exchange?

Thanks!

There is no shortcut.
One of the qualities of a good exchange especially an instant exchange is to have enough reserve assets Both in BTC and USD stablecoin in this case.

A part from just the token, You must have the reserve value of the stable coin in actual US Dollar in order for this to work otherwise you will be in very serious trouble with authorities such as SEC. The reserve should also be huge in order to be able to mint more stablecoin tokens whenever need arises.

If this was easy to pull off, we would be having so many legit exchanges of this sort.

[jademaxsuy]

That means, he can buy 50% more satoshis with the same $1,000, but since I don't have any BTC reserves, how can guarantee the "stableness" of the coin?

Are there any solutions to this such as offshoring this a decentralized exchange?

Thanks!

That would not possible OP. It cannot be done to have a stable coin paired by bitcoin enables you to buy more btc when btc market price drops with the same money you bought to that stable coin. It is very confusing and you only just thought of a price drop from btc. What if btc starts to increase it market price? What happen to your stable coins or your btc bought? Imagine a disaster? That would probably your stable coin you like to create.

Cryptocurrency were being back already with dollars or reserves like golds. The moment one like to acquire a certain coin definitely buying it would be more easy and that money use to buy will be put to reserve as it will be return to you when you sell the coin back.

So how could you earn in cryptocurrency?

It will depend on your patients or the market. If the coin you brought make a price increase then you can sell your coin and make a profit. Just remember that the market price of a coin depend on the demand and supply. The higher the demand for that coin then the higher market price it could have. This is why most of the coin has been used as an exchage for services and to buy products to which it could create higher demand from the consumers of that said products and services. That coin will have a significant market price increase with the demand from the consumers and vice versa if there is no demand for that coin its market price also significantly drop which could make you some losses depending on your patience or attitude towards the market of the coin you buy.

This is why bitcoin would be the most appropriate coin to start with when one would like to earn. Others could hold it for a month and then sell and others also could hold it for a month and sell just depending on the market. It could also mean losses or gain depending on the attitude of the holder.

[mk4]

Now, it's not an exchange, it's a wallet, but I want to give my users the ability to trade it in-wallet.

"If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck."

Exactly. You want a wallet with an exchange feature, then it's still considered an exchange.

Pro tip: If you really want your users to be able to exchange their coins without the need of having an actual exchange, probably just add a referral link that redirects to whatever exchange you prefer to link to(probably a non-custodial?). Some exchanges even allows integrating an API so your users wouldn't even need to move out of the app.

[jackg]

It'd probably make more sense to allow users the ability to make usdc and/or usdt available from your site. These are then able to be transferred for dollars (at least usdc can definitely be exchanged)...

Exchanges run by matching pairs of trades so you'll get a "maker" and a "taker" your maker essentially lists and offer and your taker accepts it and pays your fee on top.

If I wanted to sell 1btc at $10 000 I'd list it on the order book for that price, if Alice comes to the exchange and decides she wants to by 1btc, where my price is the most optimal in the book, she'll receive ("take") it...

Exchanged don't work with a sole middle man unless you're going to charge a large buffer and prepare to take the impact of a drop or rise. I don't think anyone actually makes money as a middleman on a small exchange space.

[pooya87]

stable coins are stable versus another stable asset usually a fiat but sometimes something like gold. for exactly when we say Tether is a stable coin it means its value is stable versus US dollar and 1 Tether is supposed to be always 1 USD and if USD tanks then 1 Tether is still 1 USD.
that also means it doesn't matter what bitcoin price does, if it goes up you still buy it with 1 X = 1 USD

so when you issue a stable coin with 1000 units you must have 1000 units of dollar (or $1000) in your reserve and you don't sell it to people yourself, it is put in the market where people trade it among themselves and you as the centralized issuer should have the "peg" equal to the amount you issued so if someone wanted to dump the centralized coin they can get their money back.

[OcTradism]

Stable coins are only a relative term. Stable coins, in theory, must be backed by something considered widely as stable asset, like fiats, golds, and any precious things. Unfortunately, fiats, gold, precious things are not truly stable. They are usually stable but sometimes, they are volatile like what we see price of gold. Fiat currencies are a big joke, and they are only stable on the paper desk, in theory. In countries with hyperinflation, fiat currencies are not stable. One fiat currency is stable today but it will be a trash paper next 6 months.

[CryptopreneurBrainboss]

That means, he can buy 50% more satoshis with the same $1,000, but since I don't have any BTC reserves, how can guarantee the "stableness" of the coin?

You can't offer such service if you don't have any reverse like others have highlighted. If mr A wants to sell back the stablecoin to get some Satoshi, it means you (your exchange) have to be the one to buy back the stablecoin and give the user the Satoshi. Automatically you'll be at lost since you're buying a worthless stablecoin that you have to add up more personal funds in case there's a drop in bitcoin price.

I would also recommend the idea of patronizing other well established stablecoin instead of creating another worthless shitcoins, we have enough of those already.

[tvplus006]

...
Are there any solutions to this such as offshoring this a decentralized exchange?
...

Even if you release a stablecoin, it does not mean that someone will decide to exchange their bitcoin for your stablecoin. A prerequisite for such an exchange is the trust of customers in your stablecoin, which is based on how much this coin is secured by the assets and reputation of your company. Otherwise, your stablecoin will be perceived as a garbage coin.

[gentlemand]

Even if you release a stablecoin, it does not mean that someone will decide to exchange their bitcoin for your stablecoin. A prerequisite for such an exchange is the trust of customers in your stablecoin, which is based on how much this coin is secured by the assets and reputation of your company. Otherwise, your stablecoin will be perceived as a garbage coin.

But let us be honest, many a crypto user is so mindless they'll assume ANY supposed stablecoin they're presented with in the wallet they're using is the real deal. I wonder how many of them realise you're supposed to have real money behind them.

[CucakRowo]

To OP.
If you want to build wallet with intra exchange features like you mentioned in your thread (especially about "what is stablecoin"), perhaps this article can help you : https://www.coininsider.com/stablecoins/

and this alternative will works also. I believe this alternative like mentioned by mk4 will make your (candidate) customer feels more comfortable and safe :

-snip-
Pro tip: If you really want your users to be able to exchange their coins without the need of having an actual exchange, probably just add a referral link that redirects to whatever exchange you prefer to link to(probably a non-custodial?). Some exchanges even allows integrating an API so your users wouldn't even need to move out of the app.

[sujonali1819]

Agreed with mk4 opinion. It really looks like a duck.

If you have not any reserve BTC then how you can create an exchange/wallet. So if you want to create any exchange like that then you must have reserved  BTC and USDT/stable coin. Another thing if you want to run you own stable coin then you have to prove it legit and you have to gain trust from the users first. Otherwise, your stable coin will not be used much.

[xZork]

Hello

I have a question about stablecoins and how they work.

Stabecoin is a stable currency and backed by real assets. Most stabecoin is seen as an asset and a means for people to hide themselves from price drops.

[l3pox]

Here's where a stablecoins comes in. Now, presume he sells $1,000 worth of BTC for a stablecoin that I issue. The stablecoin is $1. Now assume the price of BTC drops by 50%.
That means, he can buy 50% more satoshis with the same $1,000, but since I don't have any BTC reserves, how can guarantee the "stableness" of the coin?

100% not 50%


This stable coin is a scam. You cannot create money out of thin air.
Your stable coins must be backed by your reserves.
In simple words, when you issue 1000 dollar worth of stable coins, you must keep 1000 real dollar in reserve.

there are stable coins in the market like USDT, DAI and USDC that have been audited and are proved to be good options if someone wants to have tokenized dollar reserves

it's even possible to earn some compound on that using CeFi or DeFi:
http://loanscan.io/

[Kelvinid]

Hello

I have a question about stablecoins and how they work.

Say I want to build a crypto wallet. Now, it's not an exchange, it's a wallet, but I want to give my users the ability to trade it in-wallet.

What do you mean by " I want to build a crypto wallet"? Do people who called your users will deposit their money into your created and fully controlled wallet?
Maybe I'm wrong but this a kind of trick. You are not making an exchanger but you want your users to trade using your wallet. Maybe you don't scam but somehow you've foolish enough to used other hands for your own benefits. How I supposed to think that people will use your wallet rather than having their own wallet.

Better to accept that you are planning to create an exchanger for stable coins only where traders are free to make their own trade than to pretend you're not then it is clear to understand what is your intention.

[24Kt]

Here's where a stablecoins comes in. Now, presume he sells $1,000 worth of BTC for a stablecoin that I issue. The stablecoin is $1. Now assume the price of BTC drops by 50%.
That means, he can buy 50% more satoshis with the same $1,000, but since I don't have any BTC reserves, how can guarantee the "stableness" of the coin?

100% not 50%


This stable coin is a scam. You cannot create money out of thin air.
Your stable coins must be backed by your reserves.
In simple words, when you issue 1000 dollar worth of stable coins, you must keep 1000 real dollar in reserve.

That's very right. You can't just create a stable coin without backing of real asset where you want to pegged it with. Unless, you want to create a stablecoin pegged with empty promises!

[tvplus006]

...Another thing if you want to run you own stable coin then you have to prove it legit and you have to gain trust from the users first. Otherwise, your stable coin will not be used much.

This is the path followed by the Binance exchange, which released its stablecoin BUSD.And I, like many other exchange participants, trust this stablecoin, because I trust Binance, which is behind it. I can even say that I trust BUSD more than USDT

[Charles-Tim]

Stable coins are only a relative term. Stable coins, in theory, must be backed by something considered widely as stable asset, like fiats, golds, and any precious things. Unfortunately, fiats, gold, precious things are not truly stable. They are usually stable but sometimes, they are volatile like what we see price of gold. Fiat currencies are a big joke, and they are only stable on the paper desk, in theory. In countries with hyperinflation, fiat currencies are not stable. One fiat currency is stable today but it will be a trash paper next 6 months.

No fiat currency is stable today, even dollar is not stable.
Also, you have said the reason why stable currencies can not be backed by fiats, gold or any other stock.
Stable currencies are not fiats or gold or any stock and cannot be backed by them, they are like unstable currencies that are not backed by anything, only difference are the prices that are not volatile but relatively stable. Stable currencies should not be backed by anything than increasing or decreasing in the stable coin supply in relation to the demand and selling of the the stablecoin in a way to maintain relatively constant price.