Stablecoins seem like they would achieve most of the goals of the original cryptocurrencies such as Bitcoin:
- Decentralized transactions
- 24/7 access
- Low fees
- Store of value
I suppose the only drawback here is that they're issued from a centralized authority. That said, for practical purposes the vast majority of Bitcoin holders didn't mine their own coins either.
Despite this, no one on Twitter[1] seemed excited. In fact they seemed upset that Coinbase didn't announce support for their cryptocoin du jour (mostly Ripple or Cardano). This is a recurring theme on all the subreddits I've visited: People rarely care about the usage of their cryptocurrency, they're only interested in its price.
A cryptocurrency that stays the same value is not very interesting to traders and therefore most of the cryptocurrency community.
Another key drawback of USDC is that your account can be frozen by the centralized authority:
USDC tokens are ERC-20 compatible and can be used with any ERC-20 compatible digital wallet. However, a global blacklist is maintained by CENTRE for USDC, which prevents tokens from being sent into or from blacklisted addresses. Reasons for blacklisting could include known fraudulent or illegal activity, or a legal order or process. Reserves associated with USDC balances held on blacklisted addresses may be wholly and permanently unrecoverable.
How bad this is is yet to be seen. Anyone who has experience with PayPal freezing their account knows that it can be very frustrating when a company freezes your accounts for some unknown reason and then does not communicate with you.
"Rebuilding the current regulated banking system" just with different people in charge can be quite lucrative if you are one of the new builders who is now in charge.
The cost of regulation is a decrease in both convenience and innovation. By eliminating regulation, you get a whole host of new startups that were previously held back, some of which solve genuine problems that have no existing solution. Consumers flock to these startups because right now, in this moment, they solve problems better and are more responsive to customers than the existing regulated incumbents.
Many regulations solve problems that only appear at scale, so as long as the new startups are small and voluntary, regulators take a hands-off approach and let these startups enjoy their competitive advantage. It takes time for regulators to catch up, so for several years, these new solutions can grow and get new adopters. Eventually all the bad behavior that caused the regulations in the first place appears, and there're calls for regulation, and the new boss starts to look an awful lot like the old boss. But people don't make their purchasing decisions based on what's going to happen in 20 years, they make their purchasing decisions based on what they need now.
You see this with a lot of dot-com era startups. People knew in 1997 that Amazon was going for monopoly and was just going to jack up prices when they achieved it; hell, Jeff Bezos even told investors as such. But consumers didn't care: we wanted convenience and low prices now, and even if we did without, other people would give Amazon their business, and all we'd succeed at is disadvantaging ourselves. Similar with Facebook; most people knew they were trading away their privacy (Zuckerburg's "dumb fucks" IM was made public in 2010, and he said it in 2004), but goddamnit, people wanted to see what their grandkids were up to.
Thank you for pointing out one of the big upsides to entrepreneurial bubbles. (Not necessarily all "speculative" bubbles.)
The simplified form is that a "gold-rush" mentality in an entrepreneurial bubble, even though it misprices risk generally, incentivizes builders to go build things more than they would, and since on balance building things is good, a hyper period of new venture formation still leads to net gains even if most are failures.
But nostrademons has a next-level mechanic here -- the idea that stage and scale are not fractal, and hence that rebuilding an ecosystem de novo (perhaps in a sort of sheltered petri dish) can yield big interesting beneficial outcomes because of the plasticity of things at the smaller scale and earlier stage.
(Still, I think it's a monumentally bad idea to acquiesce in the rebuilding of the financial system de novo by amateurs.)
I like your idea of time-arbitrage. I think Uber and AirBnB are good examples of startups that have created value by operating in loosely regulated areas. Still, I haven't anything emerge from the crypto space that appears to have a true value proposition and is not intimately connected to the exchange rate of virtual tokens
People knew in 1997 that Amazon was going for monopoly and was just going to jack up prices when they achieved it
Is that really the story of the past 21 years though? Instead it seems like Amazon has still not achieved monopoly in retail, and they still aren't getting amazing margins from it.
How do you fix our current monetary system??? You cant... its also generally much easier to make change by starting from scratch rather than trying to move an entire establishment. If the innovation catches on, the old establishement will crumble.
This all comes down to "MV=PQ", a description of the relation between money supply and real economic activity. Normally as the real economy expands (+Q) the amount of money is increased to keep it growing (+M). Without that either the quantity of transactions falls (-V) or the price level falls (deflation, -P).
Alternatively, think about what price stability really means. If a loaf of bread costs $1, an hour of work $10, a barrel of oil $50, and a house $500k today ... how do you really ensure that they cost exactly that in 50 years when you come to retire? You can't. In a real economy there are real reasons for shifts in the price level.
If you have a fixed money supply that is infinitely divisible, prices would be expected to fall due to deflation and increased purchasing power. Relative values of bread, hour of work, barrel of oil and a house should remain the same (with the caveat that their real values actually change - eg if we become an electric car economy then the relative price of oil in big macs will change). This makes no difference to anything of substance, it is just mathematics and psychology. The only real substantive issue is with debt repayments with deflationary currency, in which case I'd advise thinking hard about your loan terms.
I think your point about infinite divisibility is an interesting one. But the main downside is that there is no incentive to exchange the currency (a pizza or ownership in a business) when you know that the currency will be more in a year than it is worth today.
Inflation is a desirable feature in a currency. A currency should be a medium of exchange. Deflation encourages people to hold currency rather than exchange it.
I don't find it at all desirable that some people have the right to devalue my holdings. It is farcical to think that people would hold the medium of exchange forever if it kept increasing in value because at some point they would either have so much that they would prefer to convert (some of) it into material wealth or chase something with a higher rate of return. Alternatively they would have so little that they would have no choice but to convert it to survive. You cannot eat the medium of exchange.
There must some ironic meaning of "economy" that I'm not aware of. Societies have gone through many recessions and depressions. Is that what you're advocating?
Don't take this the wrong way, but you sound illiterate since you clearly don't understand the words I wrote in context "medium" and "exchange". The statement "You can't eat the medium of exchange" implies that it is to be spent.
There already many ways to exchange cash for assets that are likely to appreciate in value (gold, real estate, equities, bitcoin). Won’t a depreciating asset like cash always make for better incentives to participate in trade than an appreciating one?
Please explain the advantages you see in the simplest terms you can.
The features that make cash good as a medium of exchange are not appreciation or depreciation, but all of the other features of divisibility, fungibility, transferability, common acceptance etc. A good medium of exchange need to be valued such that it can be reliably exchanged. Ideally you don't want it going up too fast nor down two fast, but stable enough to make trade. It just happens that Bitcoin is/ was very small relative to the global economy. It also has the benefit that it can't be debased, which makes it a better money - even for trade as well as saving. I just wouldn't consider it "investing" despite the fact it still has room to grow as a currency. It still needs much more work on the fungibility side.
If the primary medium of exchange is an inflating currency then possessors are incentivized to exchange it. If debt is owed in a deflating currency than the burden of all debts will only grow. Could you address these points rather than simply dismiss them as irrelevant?
Please note that I haven't dismissed any point you have made despite your initial dismissal of me.
To your point, is a currency is inflating then you are incentivised to not hold it. But who has the right to benefit from the inflation of the supply? How do you fairly determine that? Often inflation is conflated with the rise in prices rather than strictly the inflation of supply, so strictly referring to the latter - inflation occurs, while at the same time economic growth is also occurring, so it isn't 100% clear that the incentive scheme for devaluing a currency will work as it must balance against this growth. Even if it is not balanced, and successfully devalues for your incentive, what is the appropriate rate? Is VEF too much, USD just enough? Wouldn't it make more sense to just have a fixed/known rate of currency supply - eg Bitcoin - decreases to 0, Monero decreases to small.
The problem isn't so much the inflation, it is the unpredictable nature of the debasement and the fairness of who benefits from it. A currency doesn't need to incentivise people to spend it so long as it can always be available as a medium. Infinite divisibility ensures this. Having the medium be a universal standard measure as a unit of account by virtue of being a stable and accessible medium is also essential. Bitcoin achieves this. As for debt burdens growing, this is not always true. If I take a low interest BTC loan for mining equipment and have measured my risk and profit correctly I should be able to pay it off since I am working in this currency. If I borrow USD to start a Venezuelan corner store, I might be in for a bad time.
Inflation benefits borrowers more than hoarders. Your example is strange because in the one you compare a base currency to economic activity in that currency and in the other you take a loan in one currency in order to transact in another. If you borrow bolivars to start a Venezuelan corner store, at least your debt would lose value as rapidly as the currency you receive from your customers. If the price of BTC continues to rise indefinitely, you would be in for an even worse time if you borrowed BTC to start your Venezuelan corner store.
I also don't see how infinite divisibility helps. It's still deflation. Let's say the world converts to BTC. Now if I take a loan of 1 BTC to start my corner store, the value of that 1 BTC will continue to increase, but if the goods selling do not increase in price, I will have to charge less and less for them over time. There's the same amount of space between 1 and 0 as there is between 1 and infinity.
You can rephrase that as inflation benefits borrowers more that savers. And borrowers benefit lenders. In the opposite paradigm, savers benefit savers and savers benefit investors. Think of a scenarios that is made up of an economy of a single currency, that is deflationary and everybody saves as much as they can, but they have to eat, so trade still occurs. Those that can save more accumulate more purchasing power until they think it wise to invest and get a greater return. Assuming all perfect investment execution, wealth would tend to aggregate as we see, but overall everybody benefits and see the rising tide lift all boats.
Savers can choose to loan their currency to a bank for some guaranteed returns, they can loan it to corporations and public institutions in the form of bonds, or they can purchase ownership of real estate and businesses through equities. They can buy bitcoin if they consider it a wise investment. Only lenders and the people who insist on hoarding cash suffer from inflation.
Historically deflation has resulted in economic stagnation and depression. The reason is that there is no incentive to borrow or spend money on a risky investment when increasing value of currency over time is guaranteed. What exactly is supposed to be different this time?
That's not really something that can be taken as anything other than an insult. On HN we like points to be made without personal swipes. Aside from making this place a more pleasant place to be, points are often more persuasive that way.
You can just deliver the counterpoint, explanaining how you think the parent was mistaken, without the personal insult. “The key point this comment fails to recognise is [useful new info]” might work well.
Thanks Tom, I felt bad making the retort as well as I like HN to be a happy place. For the record, I am majored in finance, mathematics and cryptography well before these things were linked. I discussed Bitcoin with Hal Varian in 2011 and staked our differing positions. It may be too early to call, but Bitcoin seems quite successful so far, and has served me well. I prefer not to rely on my credentials to make a point about economics since this is a logical fallacy.
If Ethereum successfully migrates to proof-of-stake then it won't be bottlenecked by proof-of-work any more ;-)
It may end up rebuilding the current regulated banking system. But if the regulated banking system and the unregulated banking system are sitting next to each other using tokens that are interchangeable with smart contracts, that seems like it could be useful.
If a regulated banking system mixes with an unregulated banking system everything becomes an unregulated banking system.
Also proof-of-stake has been promised for so long I would be embarrassed to talk about it if I worked at the Ethereum Foundation. Delivering things that work isn't their strong suit.
Division of tasks, and specialization naturally trend to hierarchical organization for the same reason divide and conquer algorithms are so efficient. Separation of concerns is powerful.
There is much different of 5-6 shoemakers picking the same person to handle their finances so they can focus on making shoes. But, how many shoe makers can offload their finances until you have a bank?
I always look at askance to USD-in-a-bank-account backed stablecoins. There's no innovation in them.
Their value also depends on how many USD's stored in that bank account (not transparent to ordinary people), and the inherent problem with USD - that the FED, a central authority prints it, remains still.
There are other - in my opinion more honest - crypto-only stablecoins, like Dai (of MakerDAO) or Augmint, which are not freezable by any authority, nor cheatable by bribed auditors. They are backed solely by crypto assets, all transparent.
Crypto assets are only valuable insofar as they can be exchanged for real world goods and services (mostly people seem to want US dollars). Purely crypto backed stable coins lack a stable relationship to the real world.
Those crime bosses eventually want to buy a new mansion, Porche, a yacht, jewellery/stuff for their wife/gf, you know, anything to actually enjoy their life in real world. They eventually need to exchange their ill-gotten gains for real money. They can't stay in BTC forever. Basically they want to turn the BTC they got from their criminal activities to a clean cash not linked to crime. There are various way they might go about it, basically similar techniques as money launderers use.
You could certainly accept bitcoin for black market transactions and spend bitcoin on black market transactions, but wouldn't most participants want to transport their gains to the real world eventually?
Same drawback applies to Bitcoin. Send BTC from Coinbase to a blacklisted entity and see how quickly CB, Gemini, etc. shut down your accounts.
Then you’re left with your local client but you can’t trade anywhere... and speculation is crypto’s only use case today.
At least according to this document, when your USDC account is blacklisted you may no longer send or receive tokens from it. With Bitcoin, even if Coinbase blacklists you, you can still send your Bitcoin to other accounts and exchange it for things. I'm sure it's a huge pain but your Bitcoin will not just be lost forever.
> With Bitcoin, even if Coinbase blacklists you, you can still send your Bitcoin to other accounts and exchange it for things
This is not so. Coinbase and Gemini (I haven't checked others but I'm sure they're the same) will freeze your assets entirely if required by law or if you violate the user agreements in some flagrant way [0] [1].
I think they mean if you are using your own wallet to store your bitcoin, then coinbase and gemini have no control over what you do with it, except not using their own services
Then back to my original point: If no exchanges allow you to deposit BTC, what are you doing with it?
Once you've shamir-secret-split your multi-sig cold-storage private keys, laminated them, placed them in fireproof envelopes and dug them deep in the ground in 5 different continents... what exactly do you DO with your BTC?
Your original point was that _Coinbase and Gemeni_ had prevented you from exchanging your BTC for fiat currency. There's nothing preventing you from taking your BTC to some other exchange, or just some guy that accepts BTC for goods or services. That's the beauty of this whole decentralized thing.
No, you misread. "et cetera" is latin for "and the rest"... I put that there because exchanges are all tied. A ban on one leads to a ban on another, depending on the severity of your crime.
> There's nothing preventing you from taking your BTC to some other exchange
I've already showed you that exchanges can freeze your assets, so yes they can prevent you from sending to other exchanges.
> some guy that accepts BTC for goods or services. That's the beauty of this whole decentralized thing.
If your marker for decentralization is currency adoption, then USD is the most decentralized.
I thought we were passed this whole "Bitcoin is not created by humans" meme...
That's not actually true. If you attempt to send a transaction from Coinbase to an address they have blacklisted they will immediately suspend your account. You will be allowed to withdraw your funds before the account is closed.
Why the hell would I buy Bitcoin to buy stuff on Amazon through a proxy site that sells my BTC for me instead of just... buying on Amazon like a normal person? BTC will be way slower and more expensive than just using my credit card... Plus Visa will refund me in the case of fraud.
Like I side, speculation is the only thing you buy BTC for (moon!!!111), and the exchanges will prevent you from doing this if you are related to blacklisted accounts.
15% sounds about right to offset the fraud risk, volatility risk, exchange fees, network fees, network congestion, transfer delays, fork risk, catastrophic bugs, and theft risk :)
We all have narratives, buddy. Mine just doesn't hinge on gambling and crypto-anarchic utopia.
edit: Perhaps the lesson here is the more useful something is, the less freedom you have in using it. After all, why would regulators care if you can "use bitcoin" when "use" means "play with my private keys".
Transfer the bitcoin from your wallet to any other non Gemini/Coinbase wallet. Most crypto people have private wallets. You can also use something like localbitcoins or Bitcoin ATM. Or you can literally meet with a person selling something for a coffee, transfer BTC to their wallet, they wait few minutes for on chain confirmation, give you stuff you bought, done.
That seems like a huge disadvantage. If people are doing what the crypto community likes to call "tethering", they're probably going to lean toward a decentralized smart contract token. Tether has not always been a favorite due to auditing concerns, so I see the need for something more reliable. But it doesn't seem like being able to freeze tokens is an attractive quality even if Coinbase is more "trusted" and releases frequent audits.
Does anyone have the token contract address? I am assuming the blacklist is part of the smart contract based on the above wording, though haven't had a chance to look at the code.
If it's not part of the code and only exists on exchange wallets then I see what Coinbase is doing as more reasonable.
>Improved send and receive. Two Ethereum wallets can quickly send and receive any amount of USDC at any time of day. Large transfers for business purposes become as easy as small e-commerce payments. Consumers can use the Coinbase app to send USDC to someone, while remaining confident the value is stable.
>Use in dApps and exchanges. There is a burgeoning ecosystem of crypto dApps, exchanges, and blockchain-based games. A USDC follows the ERC20 standard, which means it can be used with any app that accepts tokens based on that standard. The USDC can thus be used as a stable digital dollar to buy items in the crypto ecosystem, from Cryptokitties to tickets for blockchain-based games.
>A programmable dollar. For developers and fintech companies, a digital dollar like USDC is easier to program with. For example, given the private keys for USDC, a program can easily send and receive them back and forth using the public Ethereum blockchain.
The tokens only have value as long as your tokens are redeemable. Multiple things can make them non-redeemable:
* Your tokens can be tainted, for instance because they were once owned by a blacklisted address. The value of your tokens will be effectively 0.
* The issuer might run a fractional reserve (this is the accusation against Tether, the most popular stablecoin at the moment)
* The asset backing the stablecoin might not be backed by anything. It's not worth getting into FED policy here, but let's just say that a stablecoin denonminated in Venezuelan Boliviar is not attractive.
> Stablecoins seem like they would achieve most of the goals of the original cryptocurrencies such as Bitcoin
The original goals of cryptocurrencies (Bitcoin, to be precise) were exactly to avoid the problems that stablecoins have.
> The issuer might run a fractional reserve (this is the accusation against Tether, the most popular stablecoin at the moment)
Very important to note - a stablecoin running a "fractional reserve" in the way that people talk about would just be fraudulent/insolvent.
Modern banks have actually never operated under the "fractional reserve" model as described in economics textbooks, but it's true that they only a fraction of their assets are held as bank reserves. Very importantly though, solvent banks always have more assets than liabilities (customer deposits are a liability to the bank). Usually a lot of those assets are loans, but they also hold bonds and other investments.
If Tether has issued a single token without an asset to back it that is worth at least US$1, then that's not operating like a bank does, it's just fraud.
The “fractional reserve” model implies incorrect ideas of how banks work - either as intermediaries between depositors and borrowers, or implying the “money multiplier” model of credit creation. Those are not the case in the real world. The actual model is often called “endogenous money”.
As I said, the confusion many people have is that it is correct that bank reserves are a fraction of the bank’s assets, so the name “fractional reserve” would intuitively seem correct.
Doesn't every bank run a fractional reserve? So when Coinbase deposits those reserves in a bank, the bank will lend them and there actually isn't a guaranteed reserve.
Coinbase has a guaranteed sum available from the bank, that part is regulated. If coinbase operated as a fractional reserve with regard to cryptocurrency deposits it would be unregulated and could lead to losses for users if it goes tits up. If the bank fucks up coinbase funds are secure, if coinbase fucks up customer we funds are not.
Banks only hold some of their assets as central bank reserves, but solvent banks always have more assets than liabilities.
For a stablecoin to operate like a bank they would have to issue loans (loans are an asset to the bank to match the deposit created when they lend. A regulated bank also needs a certain percentage of owner's capital (paid up shares/retained profits) compared to how much they lend in case of delinquent loans).
A stablecoin just creating tokens with no backing would be fraud, same as if a bank just credited an account from nothing.
Parent was probably implying that the Secret Service would sieze the tainted assets and the auction them off to new bidders, thus removing the taint for the new owner. the reason for the auction instead of just funding the treasury is that the USG deals in dollars, not in securities or other obligations or paper instrumnets. Compare the actions of the US Marshalls after siezing the Silk Road Bitcoins.
> Which factors? Who'd buy them at a premium? Wouldn't any auction of >1 bidders stabilize at face value?
Think of the stablecoin as an ETF. If people need to launder money or take advantage of a programmatic bug, that would raise the stablecoin price over $1.
By default, I'd imagine the reduced liquidity and counterparty risk (relative to dollars) would cause the stablecoin to trade at a discount to cash, particularly when auctioned by the government. (You have to spend resources monitoring the auction, closing the transaction, and cashing out to complete the arbitrage.)
> Stablecoins seem like they would achieve most of the goals of the original cryptocurrencies such as Bitcoin
Correct me if I'm wrong but Stablecoins sound like the opposite type of thing that Crypto-anarchist(s) behind Bitcoin tried to achieve.
> I suppose the only drawback here is that they're issued from a centralized authority
This reads in a hilarious way. Kind've like saying "I've found a perfect way to buy a car - I suppose the only drawback is that I'll actually be buying a lawn mower"
>> I suppose the only drawback here is that they're issued from a centralized authority
> This reads in a hilarious way. Kind've like saying "I've found a perfect way to buy a car - I suppose the only drawback is that I'll actually be buying a lawn mower"
Assume bitcoins are an attempt to bring back the older technology of coins, but on the internet.
Coins are issued by a central authority, though that isn't necessarily a large part of their value. (Even when coins are made of precious metals, their standardization does increase their value somewhat over their pure value by weight.)
The problem with USDC isn't that it's issued by a central authority. That is an asset, in that it allows for a more stable value. The problem is that you can't transfer the coins without recognition from USDC. If you've got a golden dinar, you can give it to someone else no matter what the Caliph would like to say about it.
And, because until and unless there is a prevailing adoption of the surrogate coin in place of its pegged reserve (that is, everyone just assumes and "knows" a USDC is worth a USD), the sponsor has to stand ready to maintain the peg, that is, buy it for $1.00 no matter what.
Even the golden dinar would have the problem if it were nominally worth, say, one silver shekel, and the Caliph switched to demanding jizyah in shekels. All of a sudden, absent a massive bank keeping the 1:1 dinar:shekel peg, the dinar would drop in value and the shekels would rise relatively.
The problem is, of course, compounded when the coin becomes a slip of paper, and again when the paper becomes a mere number...
Look at MKR token, which is the governance token of Dai. It more than doubled in price during the last months. Because it's sparse and used up when making new Dai's (by collaterizing crypto assets).
Buying MKR and supporting Dai might be a good strategy.
Day trade between BTC and USDC rather than between BTC and USD. This can happen at many more exchanges because trading USDC is a lot easier than trading USD.
Advocates of cryptocurrency tend to promote applications of it, not just promote decentralization as a platonic ideal.
Supposedly this should make it more desirable to regular users. But for users attracted to applications who don't actually care about decentralization, a stable coin will seem better and will be hard to compete with.
So, it seems like the true believers should be worried about having fewer persuasive arguments for adoption?
This is wrong on several levels. Decentralization was not for transactions, it is for censorship resistance. These exchange stable coins fail this requirement. As anyone who has been licked out of an exchange account knows, your funds are never yours when they're on an exchange, much less if the only place to redeem those coins is a place that has locked you out.
Your observations about the community is flawed. Many are just speculators but there are many, like myself, who care about the technology and the core principles. For the latter, you need to be reading a place like bitcointalk.
>For the latter, you need to be reading a place like bitcointalk.
BitcoinTalk is the launchpad of virtually every ICO that has violated these core principles.
I am very skeptical of your claim that it's a haven for those who care about the technology and its principles when they have boards solely dedicated to announcement of new ICOs: https://bitcointalk.org/index.php?board=159.0
bitcointalk is the canonical location for most of the discussion regarding cryptocurrency and has been for years. They have a lot of ancillary boards, but the foundation of the board is the tech.
Coinbase's observation is that the cryptocurrency ecosystem is filled with many different players, with many different goals, and by facilitating commerce between them they can profit off all of them.
Your goal may be to accumulate Bitcoin and develop the technology until it takes over as the world currency. An (honest) ICO's goal is to take Bitcoin or Ethereum, convert it into fiat, and use that money to fund development of an interesting new technology. A day-trader's goal is to get rich off short-term price movements. An arbitrager's goal is to get rich off of price differentials on different exchanges.
So your goal might manifest itself in the strategy of "Always buy when I have fiat available, never hold money on an exchange, and invest in promising ICOs that look like they actually have a product and interesting technology." You buy Bitcoin monthly on Coinbase, immediately move it off Coinbase into your own wallet, and buy promising ICO tokens on IDEX as you become aware of them. This makes the price of Bitcoin on IDEX lower than on Coinbase (since you only buy on Coinbase and sell on IDEX), so an arbitrager buys on IDEX and sells on Coinbase. Your purchase was a net buy of Bitcoin relative to fiat, which makes the price rise, so a day trader takes note of that and decides he's going to sell and park his money in USDC until the arbitrager comes along and sells on Coinbase. Eventually everything evens out, and Coinbase makes a profit off every transaction.
You didn't have to deal with USDC at all, and only with Coinbase as a regulated U.S. exchange where you can exchange $USD for Bitcoin. But the other participants in this market have no moral issue with censorship or centralization, and they're all too happy to take their profit and park it in USDC while they're looking for buying opportunities.
The article says USDC is an ERC20 coin, which means you can keep it in your own wallet (i.e., not the exchange). You are still trusting the centre consortium to maintain the coins value.
According to USDC's documentation, accounts can also be frozen by a centralized authority.
USDC tokens are ERC-20 compatible and can be used with any ERC-20 compatible digital wallet. However, a global blacklist is maintained by CENTRE for USDC, which prevents tokens from being sent into or from blacklisted addresses. Reasons for blacklisting could include known fraudulent or illegal activity, or a legal order or process. Reserves associated with USDC balances held on blacklisted addresses may be wholly and permanently unrecoverable.
Ah interesting. While that's a bit disconcerting, it does offer some advantages. You get the flexibility of an ERC20 token, but the (potential) benefit of the consortium being able to give you back tokens that get stolen (blacklist theif's account, issue you new coins). Might be a good middle ground between the wild west/code is law state of crypto currency and the protections of traditional banking.
> Despite this, no one on Twitter[1] seemed excited
Because most people think that in order to solve the problem of a cryptocurrency, they have to also solve the problem of who gets money when you print it.
Far too many people conflate the need for electronic cash versus the need to improve upon how systems like the Federal Reserve and their International equivalents work.
Honestly, as a software engineer who understands some basic economics, I think cryptocurrency becomes far more interesting when it's not trying to solve the problem of who gets money when it's printed.
I also think that the Federal Reserve, and its international equivalents, work very well for me! I think that trying to come up with a currency that improves upon the Federal Reserve System, or equivalent, needs to be a separate technical problem than just trying to have an electronic form of cash.
In my opinion, most of the people who were excited about cryptocurrency were scam artists, the kind of people who just don't understand how money really works, or engineers who don't really understand scaling.
If there is a need for electronic cash backed by USD and controlled by a central party, why use crypto/blockchain at all? To solve that problem a central database on a controlled network could do just fine?
Decentralized transactions are distinct from decentralized issuance. Decentralized issuance doesn't matter to most people in the cryptocurrency ecosystem. They have been happy to participate in ICOs where coins are issued from a central authority.
That said, I haven't yet heard anything on how transactions are actually verified (ie. Proof of work vs Proof of Stake)
If a centralized authority can blacklist addresses, it is not actually decentralized.
Or rather, it's "decentralized transactions" in the same sense that Paypal users are decentralized when they initiate transactions. You ask, and Paypal decides whether to send the money.
In this case, you ask, and CENTRE decides whether to include the transaction in the blocks they mine. Same thing, But With Blockchain™.
Of course, it's illegal to operate as an unlicensed money transmitter, and trading bearer bonds does not change that, so if it was truly decentralized they would be going to jail once the SEC got around to paying them a visit. People have been trying to get around such laws for ages and the law takes a very dim view of it.
Yes, but once I have acquired dollars and wish to send them to you I must involve a third party. Not involving that third party would be the sell here.
I have no position in any cryptocurrency and am not trying to argue that USDC is better than USD. I'm just saying that stablecoins achieve most of the goals of a decentralized currency yet despite this they are not appealing to today's cryptocurrency community.
> once I have acquired dollars and wish to send them to you I must involve a third party
Cash.
(There is no way to send electronic dollars without involving a third party, though more money is laundered using dollars and euros than cryptocurrencies. I'd argue leaving a permanent, public record of transactions is a poor price to pay for decentralized electronic transmission, particularly given the centralized issuer and guarantor problem.)
And if you're going to split hairs by saying DHL, USPS, and FedEx are considered third parties, then so are Comcast, Verizon, and other ISPs who provide you the means to transact.
> There is no way to send electronic dollars without involving a third party
Yeah but that third party is everywhere, available to all (US isn't the only country in the world you know?) and isn't aware you are using his service for sharing cryptocurrencies or simply reading Hacker News.
The current third parties for transferring money, well they all fail one or multiple of theses while cryptocurrencies dosen't.
Cryptocurrencies have an advantage over electronic U.S. dollars in decentralized electronic transmission. I don't think that's a big deal, but the advantage exists.
Stablecoins, on the other hand, have zero advantages over U.S. dollars. Backer goes bust, someone steals the dollars, someone freezes their accounts, et cetera and your currency is worthless. A trusted third party rests at the centre who is less regulated and guaranteed than a bank.
(I'm sceptical that these schemes will pass AML muster. Using a stablecoin over U.S. dollars makes sense if you're (a) incompetent or (b) laundering money.)
With access to an oracle for the USD value, you could make a pretty decent stable coin in Ethereum. You could also create options that trigger on USD-ETH values. This would allow for some hedging against price-moves of ETH without being full-on pegged to the dollar.
>once I have acquired dollars and wish to send them to you I must involve a third party.
Isn’t that the same as bitcoin and every other cryptocurrency? You need a cryptowallet (third party); a device (third party); and internet access (third party).
stablecoins achieve many of the original goals of bitcoin, but not any of the most important goals. the important goals are censorship resistance, and fixed monetary policy. Nothing in the crypto space addresses these goals better than Bitcoin.
But they can't be used over the internet without permission.
It could be argued that this requires permission as well since there will be 'know your customer' laws that surround buying and selling them, but to what extent they will require permission might remain to be seen.
Ok, I see. Still it seems like the dream of cryptocurrency was total decentralization. If the supply is centralized does it matter if the transactions aren’t? It’s still a single point of failure.
> I suppose the only drawback here is that they're issued from a centralized authority. That said, for practical purposes the vast majority of Bitcoin holders didn't mine their own coins either.
I think the key difference is that Bitcoins are mined into existence according to a fixed mathematical law, whereas stablecoins are backed by something which can be printed into existence whenever the central authority pleases.
> I suppose the only drawback here is that they're issued from a centralized authority.
That's only true for this type of "vouchers" stablecoins, where coins are redeemable for some physical asset.
There are whole other classes of stablecoins that seek to achieve price stability through decentralized means, either using other cryptocurrencies as collateral[1], or using algorithmic bond-issuance mechanisms[2]. Multicoin did an in-depth article about this back in January[3].
>Despite this, no one on Twitter seemed excited. [...] A cryptocurrency that stays the same value is not very interesting to traders and therefore most of the cryptocurrency community.
That's the thing, the "cryptocurrency community" is currently overwhelmingly comprised of loud investors and ICO marketers. The way smaller and discreet nucleus of researchers, developers and idealists, you don't see replying to Coinbase tweets and hanging out in Reddit.
There's no mainstream usecase for cryptocurrencies as they are now, so the "enthusiastic users" community you see in more established fields doesn't really exist yet.
There is a decentralized stablecoin, DAI that's backed by Ethereum holdings and smart contracts. I think if ETH is doing ok you can swap a DAI for $1 worth of ETH. If it ETH crashes I presume you get given the ETH which you can sell. It relies on 'oracles' to give the ETH/USD exchange rate to the smart contracts. https://medium.com/@james_3093/the-dai-stablecoin-is-a-game-...
Stablecoins do absolutely nothing that bitcoin does. In fact it is just the opposite. Not to be rude, but you have a fundamental misunderstanding of the technology.
The difference in between the two is a matter of trust. Maintaining a 1:1 peg with the USD requires that users trust that the dollar reserves actually exist. Presumably, Coinbase will be seen by many as a more trusted 3rd party than Tether.
Stable coins exist to solve the problem of moving money in and out of cryptocurrency introduced by KYC/AML. Bitcoin represents an attempt to create a system of censorship resistant transactions with an absolute minimum amount of counter-party risk. Outside of the open cryptocurrency context, its unclear if something like stable coins would be allowed to exist. Certainly when you go back in history and look at things like ecash or the liberty dollar the answer seems to be no.
>I suppose the only drawback here is that they're issued from a centralized authority.
you know what they say: "those who do not remember the past are doomed to repeat it".
>A cryptocurrency that stays the same value is not very interesting to traders and therefore most of the cryptocurrency community.
the reason most of the cryptocurrency community is traders, is because of the price volatility.
now that that is fixed, people can actually use crypto-currency as a currency and hopefully we can have an actual useful tool for an economy rather than a FOMO-fueled get-rich-quick hype-machine.
There are two main requirements for using Venmo:
You must be physically located in the United States
You must have a U.S. cell phone that can send/receive text messages from short codes (please note that this phone number can not be on file with another Venmo account)
Your definition of the term exactly doesn't seems exact at all.
I can use USDC as much as I want yet I'm Canadian and that's true for any country in the world, whoever you are, whenever you are, however you do it.
Why are you sending US Dollars between yourselves as Canadians? You can’t spend them in Canada, why not use a free and instant Interac e-Transfer? If you want to hold USD (as a hedge against CAD) open a US Dollar denominated account at any major Canadian bank but that’s an investment not a store of value. Or open an interactive brokers account if you want to trade currencies. And if you want to move money to another country where they also can’t spend USDC Funbux without cashing them out just use TransferWise or whatever compareremit.com recommends, it’s really cheap and easy these days. No need to find an exchange that’ll sell you funbux and let your recipient cash them out. This is just useless.
This is not solving a problem that isn’t otherwise solved except money laundering and skirting AML/KYC rules. Look I may well be wrong, but can you suggest a use case I haven’t considered?
>Why are you sending US Dollars between yourselves as Canadians? You can’t spend them in Canada, why not use a free and instant Interac e-Transfer?
Sorry I didn't see your message until 10 days later. Did you know that the internet is worldwide? I do use an e-Transfer to transfer cash in Canada but more than likely, a transfer on the web will need to be done internationally. A stablecoin is a way to make sure the value is secured, at least as much as what it's backed on and the company holding it, for the duration of the transaction.
Any Canadian Exchange (and not a specific provider) could hold that stablecoin and many people will do arbitrage over it which will make sure I will be able to buy it easily for a minimum of fee.
That's specifically for me as a Canadian in a first world country too. A stablecoin allow that in ANY country, no need to do a case by case.
I don't have an informed opinion on this whole stablecoin thing, but...
There isn't a single country in the world today where you can't spend a US dollar. Canadians will happily take them, especially at a 1:1 exchange rate.
At a discount maybe, and only along the border, try showing up in the north and waving around some USD. That’s a pretty naïve attitude, to think you can show up anywhere and demand they accept your USD at face value. I think this all further proves my point.
Having spent some time in YT, I've found Canadians to be extremely agreeable. If you opened your wallet in a shop in Dawson City and said "Drat, I only have USD. Can you work with me?" I can pretty much guarantee they'll take your money - perhaps at a small discount to compensate them for the trouble.
I've traveled pretty far and wide. You really have to look hard (or piss someone off) before they'll reject USD. It spends easily.
> There isn't a single country in the world today where you can't spend a US dollar.
The strongest argument I think I can construe from your statement is that every country has at least one place where you can spend a US dollar but I don't think that's very useful.
If you bring a 20 USD bill to Europe, head to the center of a major city and try to spend it, I think you'll have a pretty hard time handing it to a shopkeeper. You'll have trouble spending it at all save for exchanging it for the local currency and handing that to a shopkeeper.
> This is not solving a problem that isn’t otherwise solved except money laundering and skirting AML/KYC rules. Look I may well be wrong, but can you suggest a use case I haven’t considered?
I could see a decent amount of usage for dApp developers or anyone who wants micro transactions on their platform. That being said, “stablecoin” is probably quite useless outside of that very narrow use case.
People don’t really want micropayments as it turns out because people get decision fatigue. It’s why Netflix feels good and the iTunes Store video rentals don’t. The latter may have saved you money but you don’t want to keep deciding on whether something’s worth it.
Only if both wallets implement it, isn’t it silly not all wallets support all stable coins? Nope, it isn’t.
Moreover there seems to be a misunderstanding, square cash allows you to instantly move money between bank accounts, via your bank, have at it, totally interoperable because dollars.
If I want to send money to someone via square cash, they have to have the square cash app.
Same with Venmo, and PayPal, and everything else...
Venmo and PayPal are even owned by the same company. Have you ever asked why they're not interoperable?
The ACH system underneath links all US bank accounts, but it's so slow and burdensome that private companies need to build apps on top of it that abstract away all of its problems.
None of them work together because regulation makes the operation of money so difficult that you need an entire company to run such an app, and they're all walled gardens applying their own versions of KYC/AML.
When you have a unified protocol, all of that melts away and the opportunity for money to have a higher velocity and greater ease of use is upon us.
This is what blockchain, and in this case USD Coin based on it, provide.
It seems silly to me that such a system would not become popular. Interoperability and protocols are good. They are something HN is typically in love with.
When google tried to remove basic support for one protocol for contacts from Gmail, people were up in arms because it broke interoperability.
Imagine being in that world with money. I don't know why you wouldn't want it. It's superior by all measures.
And it would be silly for anyone in that world to create a wallet that didn't support such currencies. It would be like creating an email client that only lets you read email from other users of the same service. That's not email, that's just a private messaging platform.
I think you have to look towards the future and see how, if adopted, things like this would make money easier to use. Rallying against that is silly indeed.
Zelle works quite nicely between (bank) apps and has been as fast as Venmo etc in my experience (in the US). https://www.zellepay.com/
I think the interoperability is nearly solved for the quick transfer world as well. Cross-border is solved through remittance schemes as mentioned up/down thread.
> ACH system underneath links all US bank accounts, but it's so slow and burdensome that private companies need to build apps on top of it that abstract away all of its problems
ACH is for cheap, remote batch transfers. Fedwire is for real-time, remote transfers. Cash is for cheap, real-time, in-person transfers. (FX exchanges, as centralized databases, are faster and safer than stablecoins.)
> A system which makes no distinction between any of these use cases and treats them all the same sounds very appealing to me
It's a bad compromise. If you want the cheapest transfers, you batch them. (This is the logic of Lightning.) If you want the most reliable transfer, you wire it. If you want to be sneaky, you use cash. (There are other reasons to use these modes.)
Batching being cheaper and slower than RTGS is fundamental to payment economics, irrespective of whether in an electronic database, armored car or blockchain. I go into this in a comment from about a year ago [1].
> That modern economics has programmed in accountability for slow, large payments doesn't mean the system wouldn't be better off if it changed
It's more fundamental than accounting. If a transaction costs X, aggregating N transactions into a single transaction reduces the per-transaction cost to X/N. The latter, batched process will always be slower and cheaper than the former.
(If a transaction costs Y%, aggregating bilateral transactions allows for "netting out," thereby reducing costs while increasing latency. For example, suppose Bank A sends Bank B $10, Bank B sends Bank A $5 and the Bank B sends Bank A $2. Real-time systems would see 3 transactions of $17. Net-settlement systems would see as few as 1 transaction for $3.)
Payments are generally batched because individual payments are slow and/or have restrictions applied, like time of day they can be sent or received, which are easier to reason about when aggregated.
If you remove these burdens by having a technology that is cheap and nearly instant for all payments, then there's no real need to batch.
We're not quite at cheap + instant with crypto, but there's nothing preventing it in principle. And when we get there, there's no reason batching needs to continue to be part of the equation, at least not with the same tradeoffs.
> Payments are generally batched because individual payments are slow
They're slow to enable batching. Fedwire is time-limited, but many other real-time payment networks are not.
> If you remove these burdens by having a technology that is cheap and nearly instant for all payments, then there's no real need to batch
Yes, there is. To make payments even cheaper. For any given transaction price and speed pair, there's a market that cares more about price than speed. You'll always be able to layer a net settlement layer on top of an RTGS network to serve that market at lower cost.
In any case, if we're arguing for RTGS, it will always be faster and cheaper to transfer money via database operations than on a blockchain. Fast and cheap are not–and should never have been–cryptocurrencies' selling points.
Venmo and Cash use push-to-debit, which is instant, and fall back on ACH only if the bank you use doesn’t support it. There’s your common unified protocol.
Think it through, that’s true only if you already have the USDC, you still have to buy them somewhere and sell them somewhere, with the same limits. Also I just picked US services, Canada has Interac e-Transfer and other countries have similar products too. The whole EU has SEPA. There are competitors in the African market even like mpesa. And if you want to move money to another country international remittances are already cheap and fast. Most people just don’t have the problem of needing to send tons of money to each other across borders all the time.
Apple isn’t rolling up to the Wells Fargo and accepting a 5% spread. If you personally want to exchange a ton of money open an interactive brokers account and you’ll pay 0.08 basis points (0.0008%) minimum $1. If you don’t want to trade that much, check out compareremit.com and see what people are paying retail, it’s actually very competitive. In the popular USD-INR corridor you could pay close to mid market rates plus zero commission. This is a solved problem.
Isn’t it funny CoinBase wallets don’t support ERC20 out of the box. They pick and choose what ERC20 tokens the support.
Hey wouldn’t you know it they support their own stablecoin, but not others...pretty sure that’s the type of centralization cryptocurrency/Blockchain was trying to avoid.
Sorry for the confusion, I’m using your bank account as your wallet analog, and saying both services can interact via your bank account if necessary. Whereas not all wallets will support USDC.
Unfortunately, its value is inalienably attached to the dollars that it can be redeemed for. And so long as Coinbase has to take legitimate AML and KYC measures, many people who need access to the redemption market will not have it (e.g. poor families using it for international remittances, and cartels).
Did you know international remittances are already really, really cheap? Check out compareremit.com if you don’t believe me, they rank different services. Some corridors like USD-INR are almost mid-market, zero fees. I thought this was a huge opportunity too until I researched it.
I don't know the exact numbers, Eternal September has probably happened two or three times in the cryptocurrency community by now, but there was a time where the majority of people involved didn't give a rats ass about their "investment", but the ideology behind cryptocurrency itself.
If the coins weren't issued from a central authority, I would welcome the USDC stablecoin as an addition to the crypto market.
It's worth mentioning the KUSD project by Kowala Tech https://www.kowala.tech/ which is a stablecoin that tries to achieve the 1:1 price relation by controlling the coin supply depending on the exchange price (by using oracles).
Store of value? Not necessarily. stable coins pegged to an inflationary asset like the dollar will not preserve your value. You need a stable coin pegged to something like gold or bitcoin.
Edit: curious, why downvotes? Was just pointing out a technical mistake...
The downvotes are because you're being pedantic. Most of the world uses USD or currencies easily exchangeable with USD. Therefore USD is stable.
I cannot buy a car with a gold bar. They would laugh me out of the dealership and I'd have to sell the bar for USD. People want cryptocurrencies they can hold for more than two days that won't lose 50% of their value.
The value here is ability to conduct transactions, not necessarily a stable store of value.
Yeah, but the point of "storing value" is storing the purchasing power of a dollar today for future purchasing. You don't do that by saving the dollar, you do it by investing it or by buying something whose value will hold with time.
>I suppose the only drawback here is that they're issued from a centralized authority.
Doesn't that defeat the whole purpose of cryptocurrencies though? After all this authority could selectively blacklist some coins from ever being converted back to their peg currency, effectively rendering them worthless, couldn't they? You couldn't easily launder it away because this authority could decide that if these coins are used in any transaction then the "bad" coins would contaminate the outputs proportionally to their amount in the inputs, so it would mean that people would double check their inputs not to get "bad" money. So it would be effectively like trying to spend fake dollar bills (except that the authenticity verification would be quick, automatic and completely impossible to fake).
That means that on top of trusting the authority to fairly issue the coin you also give it the power to effectively censor transactions.
It does, but "centralized cryptocurrencies" are still useful in that their similar technology makes interoperability with "proper" cryptocurrencies easier.
It's money with a standard API. Whether the actual "value" part of it is centrally controlled or not, many tools made for one will work with the other.
>Doesn't that defeat the whole purpose of cryptocurrencies though?
Depends who you ask. The cryptocurrency community thus far have been happy to participate in ICOs in which cryptocurrencies are issued from a central authority.
- Decentralized transactions
- 24/7 access
- Low fees
- Store of value
I suppose the only drawback here is that they're issued from a centralized authority. That said, for practical purposes the vast majority of Bitcoin holders didn't mine their own coins either.
Despite this, no one on Twitter[1] seemed excited. In fact they seemed upset that Coinbase didn't announce support for their cryptocoin du jour (mostly Ripple or Cardano). This is a recurring theme on all the subreddits I've visited: People rarely care about the usage of their cryptocurrency, they're only interested in its price.
A cryptocurrency that stays the same value is not very interesting to traders and therefore most of the cryptocurrency community.
[1] https://twitter.com/coinbase/status/1054764504259543041