What happens if a stable coin fails.

[pedro161977]

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?
 

[1714695666]

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[1714695666]

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[1714695666]

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[NeuroticFish]

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?
 

If I understood the question right then:
1. If the value of the stablecoin will drop to 0, you will end up with the same number of coins, just now they will worth 0.
2. If the coin underlying architecture (blockchain) fails then you (and everybody else) will be unable to withdraw (and also most probably the value will drop).

I am not familiar with those platforms, but why would they exchange the worthless coins into something valuable (hence lose money) because you made a bad investment?

[TryNinja]

Like it was said above, you will most likely just have a ton of tokens worth nothing. But it also depends on what the platform does with your deposits. I know some of them probably do DeFi, so there is a risk the protocol derivates the stablecoin price from other sources and liquidates the coins if their price gets dumped on the market; result: you lose your tokens (they would be worthless anyways).

In both ends, you end up with nothing unless the company has any kind of insurance that deals with this kind of risk or if someone else (gov?) bails you out (unlikely, IMO).

[Bitcoin_Arena]

Yep if the coin fails or exit scams, you also lose everything;

1. All the stable coins you see are not like Bitcoin, they are high centralized and very prone to security attacks and Government seizures.
2. Defi platforms are high centralized and also prone to hacks

Basically, you are going to double the risk of losing your money by using a stablecoin then a Defi platform to keep your stablecoin for just less than 10% APY

Solution:
Just buy Bitcoin and HODL. You get way too many gains than those risky defi platforms

[btcxz]

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?
 

If I understood the question right then:
1. If the value of the stablecoin will drop to 0, you will end up with the same number of coins, just now they will worth 0.
2. If the coin underlying architecture (blockchain) fails then you (and everybody else) will be unable to withdraw (and also most probably the value will drop).

I am not familiar with those platforms, but why would they exchange the worthless coins into something valuable (hence lose money) because you made a bad investment?

You lose it all. Simple. Stablecoins suck, they are decentralized as Fiat.

[Darker45]

Generally, yes, you will lose it all. And once it happens, no other token or fiat will save your ass. However, it depends on what happened and other factors. For example, if there's a swap or a change of token, then the old stable coin will lose its value and you will be given a new one with the same value. Or if your funds are stored somewhere where they are insured, then you will probably be refunded with it if ever a hack or any untoward incident happened.

But take note that there are a number of risks associated with a stable coin. First, it is under the control of an entity. Meaning to say, you do not really own it. Second, since its value is pegged on fiat, it is therefore going down. The value of fiat is depreciating by design. There is no point holding it. Third, since there's not much you can do with it and you decided to invest it on lending platforms, for example, you are adding another layer of risk. If that platform fails, it will certainly affect your funds.

[tranthidung]

what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc)

Stable coins are

• Altcoins
• Mostly centralized and have risks of shutdown by companies or by governments. Or PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets
• Their inflation schedules are as similar as fiat. They are minted from the air

and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?

It depends. As consequences from their inflation schedules, their values can fall to lower than $1 for 1 stablecoin (1 USDT, ie.) or to zero.

Initial stable coin can be swapped to another stable coin or another token, if the company want and still be enable to do so (without lawsuit or prison charge from governments).

Whatever the scenario is, any of which will be terrible.

[cryptoaddictchie]

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?
 

Most of here will definitely says yes because thats a possibility. Those centralized platform have the option to use it but they are out of decision whether that particular fiat coin has been under an extreme problem( rug or became scam) cause it is likely should be blame on that stablecoin company that you bought. There are cases that some asset got freeze so centralized crypto are always at risk.

[pedro161977]

Thanks everybody for the inputs. I already hold around 10% of my assets in bitcoin and will grow that over time. I was just looking for an alternative to deploy the rest on something that would give me a steady stream of passive income without much volatility. I know jack 0 about stocks and deposits in FIAT are a laugung matter...so these stablecoin deposits with 8-12% APY look good at a first glance (APY over inflation, guaranteed passive income, bla bla bla).

I just don't want to loose it all putting it in some kind of a scam altcoin. Disclaimer: I already deployed some in USDC and EURS in youhodler (mostly EURS as the EURO is what we use) and no issues so far. I am just not that confident in deploying more, when I know next to nothing about the reliability and endurance of these projects. 

[TryNinja]

I just don't want to loose it all putting it in some kind of a scam altcoin. Disclaimer: I already deployed some in USDC and EURS in youhodler (mostly EURS as the EURO is what we use) and no issues so far. I am just not that confident in deploying more, when I know next to nothing about the reliability and endurance of these projects. 

USDC should be the most trusted one, IMO. They are issue by Coinbase and Circle, both very regulated in the US and the former is ready to do an IPO worth ~$100b. However, keep in mind that this doesn't mean this is a risk free investment and you could potentially lose all your money if Youhodler scams you or loses your money (e.g Cred, which basically does the same thing as Youhodler, Celsius, Blockfi, etc... went bankrupt).

[mk4]

*snip*

I just want to add. A stable coin collapsing one way or another isn't the only risk you're taking when holding stablecoins. Stable coins(besides DAI), are custodial despite being a "cryptocurrency". It's quite a misconception that just because something is tokenized that it's automatically non-custodial just like bitcoin.

Topic: [UPDATED] PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets https://bitcointalk.org/index.php?topic=5204055

[Ozero]

This primarily depends on who owns the stablecoin. If the stablecoin is privately owned or owned by a commercial entity, an attempt may be made to sue for damages. However, depending on which country the stablecoin is registered in, the lawsuit itself can cost much more than the amount of damage. Therefore, stable coins of states should look the most attractive in this regard. It is assumed that such problems cannot arise with them at all.

[paxmao]

Good question. If it fails you would not be able to get any fiat or bitcoin back. On this matter, the so called stablecoins uses cases are basically:

a) To issue them without proper controls, to manipulate bitcoin and crypto prices and buy bitcoin with monopoly money. See here Bitfinex case for that.

b) Being able to trade crypto without passing through fiat money, thus having a tax advantage under some jurisdictions.

c) Transfer at low fees.

d) Trade them.

if you ask me, just do not even touch them. There is plenty of darkness in these.

[Dutchyyy]

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?
 

Stable coins do not guarantee your investment, they are simply used to maintain value while you invest in something else or do not withdraw your money in fiat currency.

If the value of the stable coin drops - this will reduce the value of the coins you own, and if it reaches 0$, you are also will stay with 0$.

[molsewid]

Generally, yes, you will lose it all. And once it happens, no other token or fiat will save your ass. However, it depends on what happened and other factors. For example, if there's a swap or a change of token, then the old stable coin will lose its value and you will be given a new one with the same value. Or if your funds are stored somewhere where they are insured, then you will probably be refunded with it if ever a hack or any untoward incident happened.

But take note that there are a number of risks associated with a stable coin. First, it is under the control of an entity. Meaning to say, you do not really own it. Second, since its value is pegged on fiat, it is therefore going down. The value of fiat is depreciating by design. There is no point holding it. Third, since there's not much you can do with it and you decided to invest it on lending platforms, for example, you are adding another layer of risk. If that platform fails, it will certainly affect your funds.

I'm afraid it would happen but yes one thing for sure that would happen was you will going to lose it all if all of a sudden a coin that you are holding on for a quite long while will going to lose its value in the market. Like for example if bitcoin will going to lose its value in the market, every cents or count that we are holding in a long time will be unvaluable, it would become worthless and most especially a total waste of time, investment and knowledge on how to grow this crypto.

[roosbit]

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?
  

X number of coins won't change,the quantity remains the same but what is usually affected is the value and I want to believe this is where your question was drawn from.

FYI the nature of stablecoins is different from most of the speculative coins we have, like the likes of bitcoin, SCs these are pegged to other financial instrument/assets like fiat or a precious metal so technically price can't go to zero so don't worry too much buddy but if were to happen like that then your coins we be valued at zero.

[Darktongue]

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?
  

Very hard to understand your question as a novice. One stable coin is increasing supply when the market needs more supply. Legitmate stable won't release new supply of stablecoins if demand is low. I do trust Tether and Binance USD stablecoins. We shouldn't trade with new stable altcoins. New stablecoins prices could fall within a short time.

[Twinkledoe]

the risk there is, is always present, the exchange, the defi that guards the stable coin can fail, be hacked or the stablecoin can become out of order, in these cases no one will refund us and we will lose everything

Very simple and straightforward, you will lose everything that you have. So yes, you can't trust all stable coin these days. Most of them, you don't know about their real assets backing their stablecoin. So if you want to be sure that you can't lose your money, maybe use the stable coin of binance, the BUSD. I am not promoting them, but at least with their stable coin, if something goes wrong, hacking or any of that sort, you know your funds are safe because they have insurance in place on their platform.

[guydin]

Many users still have doubts about what kind of stablecoins are generally backed by real dollars. But if there was a real threat to the security of storage, it is unlikely that stable coins in particular USDT would be so popular.

I myself quite often use Tether to safely store my assets because its rate is more or less stable and it is backed by the usual US dollar. Although now many are already switching to BUSD, due to the active development of Binance. In general, I think that stable coins are the most reliable currency in terms of rate volatility.

[batang_bitcoin]

In general, I think that stable coins are the most reliable currency in terms of rate volatility.

They won't be called stable coins if they are too volatile. That's the essence and nature of stable coins, having lesser or no volatility at all. They might go up and down a bit but those are just cents.
They are not really volatile at all. You really hold as exact value of dollars or euros as you have depending on the stable coin that you hold. Stable coins are good as plain cash but on the digital space.