Altcoins Talks - Cryptocurrency Forum
Cryptocurrency Ecosystem => Stable Coins Forum => Topic started by: Peter90 on February 18, 2024, 10:58:59 PM
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What are Stablecoins?
(https://www.investopedia.com/thmb/poG7kEILxAVypOwEjzrC6jfwq0A=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/terms_s_stablecoin_FINAL-89e1671b1f24486b84b74cebe6836573.jpg)
Why are Stablecoins important?
When people get paid, they want the certainty that the money they’ve received will be worth the same tomorrow or next month. In other words they want to avoid the risk of losing their earnings through the devaluation of the currency they received as payment.
Secondarily, when people save money - keep in mind the difference between saving and investing (https://www.investopedia.com/articles/investing/022516/saving-vs-investing-understanding-key-differences.asp) - they want their savings to keep their purchasing power over time.
Stablecoins aim to be the solution to both these problems.
6 Types of Stablecoins (based on what they are backed by)
1. Stablecoins backed by fiat currencies
Fiat-collateralized stablecoins are the simplest type of stablecoins: for each stablecoin there is a fixed amount of fiat currency in a bank account backing it up.
2. Stablecoins backed by hard currencies :D
SC backed by gold or silver. (Depending on the definition of precious metals, platinum, palladium and others can be considered precious metals too)
3. Stablecoins backed by cryptocurrencies
4. Stablecoins backed by financial products
SC backed by Treasuries, bonds, stocks, loans, derivatives, ETF, futures... Think of USDT (https://www.altcoinstalks.com/index.php?topic=314971.msg1500629#top) or USDC (https://www.blackrock.com/cash/en-us/products/329365/).
5. Commodity-backed Stablecoins
SC backed by real estate, oil, natural gas, aluminium, copper, steel, beef, grains etc... „Traditionally, such commodities were restricted only to the financially privileged class. However, commodity-backed stablecoins create new opportunities in investment for the average person, irrespective of geography.“ (101blockchains.com (https://101blockchains.com/types-of-stablecoins/))
6. Algorithmic Stablecoins
„Non-collateralized or algorithmic stablecoins do not have any assets or collateral for backing them. So, how are algorithmic stablecoins classified as stablecoins when they don’t have any collateral for backing them up?
The non-collateralized or algorithmic stablecoins follow an algorithm for controlling the stablecoin supply. Such a type of approach is also known as seignorage shares. With the rise in demand, new stablecoins will be created to reduce the price to the normal level. In event of considerably low coin trading, coins on the market are purchased up for reducing circulating supply.“ (101blockchains.com (https://101blockchains.com/types-of-stablecoins/))
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I think a mix of metals and cash would work well.
USDT is a mix of t-bills and gold .
I think a coin with metals and cash 💰 could be effective.
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Thank you for listing it out OP. I think the term Stablecoin just came about because of cryptocurrency right? It's not good to use with coins backed by metal or something. Mostly it will be like the numbers 1,3,4, and 5. I don't think the commodities is somewhat considered but I just know that it's always going to be because it's backed by something.
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I think a mix of metals and cash would work well.
USDT is a mix of t-bills and gold .
I think a coin with metals and cash could be effective.
65% of T-bills and 3% of gold derivatives (https://www.altcoinstalks.com/index.php?topic=314971.msg1492908#msg1492908)... I wouldn't call it a mix of t-bills and gold :D
I like the idea of a mix of gold - let's leave aside silver, too volatile - and cash (cash as in cash, not as cash equivalent: Cash is only 0,3% of USDT reserves)
I say: 70% gold - physical gold, no derivatives - and 30% a mix of the most stable fiat currencies in the world:
Bahraini Dinar
Jordanian Dinar
Kuwaiti dinar
Swiss Franc
Norwegian Krone
Singaporean dollar
Omani Rial
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Thank you for listing it out OP. I think the term Stablecoin just came about because of cryptocurrency right? It's not good to use with coins backed by metal or something. Mostly it will be like the numbers 1,3,4, and 5. I don't think the commodities is somewhat considered but I just know that it's always going to be because it's backed by something.
Hi Crwth,
strictly speaking stablecoins are not cryptocurrencies
(https://www.investopedia.com/thmb/3H7VeNxZcl2kaisfTroJGRqFasg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TermDefinitions_crypto_final-940e93a6cb5341999a5d735fbf04fbfe.png)
... but since they too exploit the blockchain technology - they are blockchain based currencies - they are treated as cryptocurrencies.
Stablecoins must have a stable value: the more stable their purchasing power is, the better.
So, what guarantees at best that purchasing power stability?
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1. Stablecoins backed by fiat currencies
Fiat-collateralized stablecoins are the simplest type of stablecoins: for each stablecoin there is a fixed amount of fiat currency in a bank account backing it up.
Today I found this (credit to Sirty 143 (https://www.altcoinstalks.com/index.php?topic=316748.msg1487165#msg1487165)):
Monei Starts Conducting Euro Stablecoin Tests (https://news.bitcoin.com/monei-starts-conducting-euro-stablecoin-tests/)
"Monei, a European payment provider, recently rolled out the first tests for EURM, a 1:1 backed euro stablecoin, under the approval of the Bank of Spain’s national sandbox, which allows for introducing innovative projects with mitigated risks."
Unfortunately within the crypto community there is the widespread conviction that being a stablecoin means being backed by or pegged to the $
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Algorithmic stablecoin shouldn't even be on the list, since personally, I won't consider that as a stable coin due to its high risk.
Algorithmic stablecoin will be very hard to control, and not just that, it will also require a heavy central backing, and the company must be well trusted enough, but even with this, I don't see a way an algorithmic stable coin will survive for a very long time without ever having issues, like losing it's stability.
Seeing this, I am actually interested in finding out if there are any algorithmic stablecoin in our crypto currency ecosystem currently? Would be interesting to know as I could avoid them :)
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Seeing this, I am actually interested in finding out if there are any algorithmic stablecoin in our crypto currency ecosystem currently? Would be interesting to know as I could avoid them :)
;D
(https://i.ibb.co/zbB9Mkg/1.png)
I don't know who and why gave this algorithmic stablecoin a separate forum section.
Clearly until now it didn't attract a lot of interest.
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Algorithmic stablecoin shouldn't even be on the list, since personally, I won't consider that as a stable coin due to its high risk.
Algorithmic stablecoin will be very hard to control, and not just that, it will also require a heavy central backing, and the company must be well trusted enough, but even with this, I don't see a way an algorithmic stable coin will survive for a very long time without ever having issues, like losing it's stability.
Seeing this, I am actually interested in finding out if there are any algorithmic stablecoin in our crypto currency ecosystem currently? Would be interesting to know as I could avoid them :)
This guy would disagree with you... :D
"In a recent video titled “Legacy is Eating Crypto,” Charles Hoskinson, the co-founder of Ethereum and Cardano, voiced concerns about the growing influence of traditional finance within the cryptocurrency sector. Hoskinson’s message was a call to arms for the crypto community to push back against existential threats posed by the encroachment of legacy financial systems and the dominance of asset-backed stablecoins such as USDT and USDC.
Hoskinson pointed out a stark reality: despite stablecoins representing only about 10% by value of the crypto market cap, “they dominate the on-chain transaction volume – about 70% of all transaction volume.
So, from a crypto perspective ETH and Bitcoin take a backseat to USDC and USDT. These are, by volume, the value transfer mechanisms of our industry. They represent the huge majority of on-chain traffic and value transfer in our industry now.”
This dominance, he argues, centralizes control within the crypto space, as these stablecoins are asset-backed and therefore subject to regulations and controls of specific jurisdictions. This centralized influence, according to Hoskinson, could dictate the direction of defi economies, undermining the decentralized essence of crypto.
Hoskinson suggested that algorithmic stablecoins, which are governed by onchain algorithms and free from central authority influence, might offer a solution. These stablecoins, he argues, are more aligned with the decentralized ethos of cryptocurrency."
news.bitcoin.com (https://news.bitcoin.com/charles-hoskinson-signals-alert-of-legacy-finances-creeping-influence-in-crypto/?source=pmbug.com)
So, Stablecoins dominate the on-chain transaction volume.
Who knew...
People don't imagine it because they are focused on market cap instead of on transaction volume.
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Unfortunately many think that there are only $-backed SC
(https://i.ibb.co/NVQK96d/3.png)
That's not true.
Here are for example two SC backed by €, EURM and EURS (whereas EURM is still in its test phase)
EURM (https://monei.com/blog/testing-of-eurm-begins/)
"The project admitted to the regulatory Sandbox, led by the General Secretariat of the Treasury and International Finance, is supervised by the Bank of Spain.
Its operation is simple: the user enters his phone number, and after checking his identity through video identification, he can load the wallet with a maximum of 10 real euros via Bizum. He then finds as many EURMs as he has loaded and can send the token to all other registered users. Thus, there is always the same number of EURM as euros backing them up, and they can be exchanged back at any time. The total of "fiat" euros are deposited in an account of a Spanish financial institution of reference."
EURS (https://stasis.net)
"STASIS issues EURS, the sound Internet money for the EU and beyond. This is the most transparent European-based and operated stablecoin.
STASIS has an EU & Switzerland legal setup with a 5-year successful track record. Strict regulatory compliance since day one & treasury management tools allow STASIS to serve customers in 175 countries.
STASIS infrastructure allows you to on-/off-ramp your fiat on 6 most popular blockchains — such as Ethereum, Polygon, XDC, XRPL, Algorand and Stellar — “bridge” assets to shortcut financial efficiencies, get the best rates for your targeted crypto, and leverage extensive arbitrage opportunities across the Web3 sector."
To be honest EURS' relevance - both in term of market cap and of trading volume - is still minuscule - even in Europe - when compared to the two $-backed juggernauts, USDT and USDC
One big difference between EURM and EURS is that while EURM is backed by Euros ("The total of "fiat" euros are deposited in an account of a Spanish financial institution of reference") - so it belongs to #1 (Stablecoins backed by fiat currencies) - EURS is backed by "collateral" i.e. it belongs to #4 (Stablecoins backed by financial products) of my classification.
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I think a mix of metals and cash would work well.
USDT is a mix of t-bills and gold .
I think a coin with metals and cash 💰 could be effective.
Yeah, but it is mostly cash, only very few gold
Reserves Breakdown
84.58%
Cash & Cash Equivalents & Other Short-Term Deposits
0.05%
Corporate Bonds
3.62%
Precious Metals
2.91%
Bitcoins
3.89%
Other Investments
4.95%
Secured Loans
(None To Affiliated Entities)[/quote
https://tether.to/en/transparency/#reports]
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Stablecoins: Crypto's Killer App?
Stablecoins, particularly those pegged to the U.S. dollar, have risen as a critical component to facilitate trading digital assets like Bitcoin. Designed initially for cryptocurrency traders, these stablecoins facilitate 24/7 trading and near-instant settlement on blockchain networks, offering a more efficient alternative to traditional financial systems. Their utility extends beyond trading, serving as reliable value storage and a bridge between crypto and traditional banking, while offering benefits in cost, security, utility and efficiency in comparison to physical cash.
The global adoption of dollar-linked stablecoins has seen exponential growth. In 2022, they processed transactions close to $10 trillion on public blockchains, rivaling traditional payment giants like PayPal and even Visa. This has prompted major financial service companies to adapt. For instance, Visa’s integration of Circle’s USD stablecoin (USDC) on Solana and PayPal’s introduction of its PayPal USD (PYUSD) illustrate the shift towards embracing blockchain efficiency in payments and cross-border transactions
(https://www.morganstanley.com/content/dam/im/web/images/infographic/insights/10543396_Display_1.png)
morganstanley.com (https://www.morganstanley.com/im/en-us/financial-advisor/insights/articles/digital-dedollarization.html#:~:text=As%20CBDCs%20become%20more%20widely,currencies%20such%20as%20the%20dollar.)
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Paolo Ardoino, CEO of Tether, the issuer of USDT
about the raison d'être of stablecoins
a) protecting from inflation
b) serving unbanked and underbanked (https://www.altcoinstalks.com/index.php?topic=191920.msg1503349#msg1503349)
(https://i.ibb.co/pPQRY2J/1.png)
I partly disagree about a) because USDT loses purchasing power just as the USD
I agree 100% about b)
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Stablecoins backed by fiat currencies
I think that support with ordinary fiat currencies such as the euro and dollar is enough. The most important thing is that this support is correct. Well, since now it is about half of the stable coins, you need the correct support of these currencies and nothing else is needed.
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I think that support with ordinary fiat currencies such as the euro and dollar is enough.
Hi Wise
if stablecoins must protect from inflation, support with fiat currencies isn't enough.
Look how much purchasing power stablecoins supported by the USD has lost since 2000
(https://wolfstreet.com/wp-content/uploads/2022/04/US-CPI-2022-04-12-dollar-purchasing-power-since-2000.png)
In order to protect from inflation a Stablecoin must be supported by a hard currency
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I think that support with ordinary fiat currencies such as the euro and dollar is enough.
Hi Wise
if stablecoins must protect from inflation, support with fiat currencies isn't enough.
Look how much purchasing power stablecoins supported by the USD has lost since 2000
(https://wolfstreet.com/wp-content/uploads/2022/04/US-CPI-2022-04-12-dollar-purchasing-power-since-2000.png)
In order to protect from inflation a Stablecoin must be supported by a hard currency
So you don’t take into account at that moment that even hard currency is valued everywhere using the fiat currency of the same dollar or euro; there is no difference in supporting a stable coin with gold or directly directly with dollars or euros
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So you don’t take into account at that moment that even hard currency is valued everywhere using the fiat currency of the same dollar or euro;
Hi Wise,
the fact that hard currencies are valued in fiat currencies doesn't matter.
Let's make an example
the CHF (Swiss franc) is harder than the USD.
The fact that the CHF is valued in USD doesn't matter.
Why?
Because the USD can be valued in CHF too!
You can value gold in USD
and you can value USD in gold
You can value gold, USD and CHF in silver
you can value gold, USD and silver in CHF
you can value USD, CHF and silver in gold
etc.
The unit of measure that people use in order to value something is meaningless.
You can chose any unit of measure that you like.
Since the USD has been the world most used currency, it's easier to use it as international unit of measure.
That makes comparisons between assets... countries... time periods... easier.
That means nothing.
even hard currency is valued everywhere using the fiat currency of the same dollar or euro;
That's not true.
Did you ever heard about the gold/silver ratio?
It values gold in silver - and conversely, silver in gold.
It shows how much gold do you need in order to buy a gram (or an ounce... a kilogram... a ton...) of silver.
It shows how much silver do you need in order to buy a gram (or ...) of gold.
There are precious metals traders that use the gold/silver ratio, not the gold/fiat currency ratio in order to trade gold vs silver.
The unit of measure that people use in order to value something is meaningless.
You can chose any unit of measure that fits your purpose.
there is no difference in supporting a stable coin with gold or directly directly with dollars or euros
Of course there is a difference
A stablecoin representing 1 US dollar loses purchasing power just like 1 USD does.
A SC representing 1 CHF loses PP just like 1 CHF does.
Since CHF is a currency harder than USD, the SC representing 1 CHF loses less PP than the SC representing 1 USD.
Big difference!
A SC representing 1 apple loses (or gains) PP just like 1 apple does:
if that apple is more valuable tomorrow (e.g. today you can exchange it for 1 banana, tomorrow for 2 bananas), the stablecoin representing that apple has gained purchasing power.
A stablecoin representing 1 gram of gold loses (or gains) purchasing power just like 1 gram of gold does.
Compare how much purchasing power 1 USD has lost in the last 20... 50... 100... years... with how much purchasing power 1 gram of gold has lost (or gained) in the same period of time
Big difference!
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Stablecoin Volumes Are Tracking A Record $15 Trillion On Ethereum Alone
Stablecoins are demonstrating their prowess as payment tools.
Transaction volumes are tracking new highs this month, running at ~$15 trillion annualized on Ethereum alone.
The efficiency gain is clear – instant and final settlements mean that your late-night coffee and donut purchases bypass the need for credit intermediaries.
zerohedge.com (https://www.zerohedge.com/markets/stablecoin-volumes-are-tracking-record-15-trillion-ethereum-alone)
(https://cms.zerohedge.com/s3/files/inline-images/stablecoin%20volumes%20on%20fire.jpg?itok=VItjte9V)
Stablecoins' volume is increasing not because people invest in them but because they get adopted as the most efficient means of payment