What do you think is a more effective approach for stable coins?

[NERFEDARTIST]

Do you think what we currently have with USDT pegged 1:1 with the US dollar is better or are you also a part of the school of thought that thinks $USUAL approach pegging USD0 1:1 to Real-World Assets (RWA) is a better option?

[MrSpasybo]

Do you think what we currently have with USDT pegged 1:1 with the US dollar is better or are you also a part of the school of thought that thinks $USUAL approach pegging USD0 1:1 to Real-World Assets (RWA) is a better option?

You're probably trying to compare traditional and algorithmic stablecoins. To me, they don't have many functional differences, but their mechanisms are very different.

Traditional stablecoins like USDT and USDC are price-backed by the issuer's assets and exist outside the crypto market. These assets include government bonds, gold investments, commercial paper... This is considered the safest mechanism to date.

Algorithmic stablecoins are automatically pegged to assets within the crypto market and use various limits to ensure value. UST failed but DAI is still very successful, meaning the operating model is really important for algorithmic stablecoins.

Personally, I only approach and use traditional stablecoins such as USDT and USDC. I have no need to experience risk with algorithmic stablecoins.

[electronicash]

^
i think he is aware that USDT is not hundred percent backed by real world USD bills which Tether had this issue bout not audited. but then regardless of it being backs by RWA or not, its the digital USD still so its not very different at all to the traditional USD money, its just being digital USD.

algorithmic stablecoins is the approach of the developers who doesn't have the real USD. it is however easy to see whether the stablecoin is backed by the token as well.
USDT and USDC stablecoin are already in used by many of us and its an effective approach and accepted by the majority, nothing more to change.

[hugeblack]

USDT is not pegged 1:1 with the US dollar, They have stated several times that they have assets that are much less than the value of USDT tokens and little liquidity if any problems occur.


In short, even the USD was tied to gold and now trust, high liquidity and trust are what lead to trust in USDT.


There are decentralized ways to achieve stability, some of which are based on BTC like Luna so I don't think we will see similar examples anytime soon.

[MrSpasybo]

USDT is not pegged 1:1 with the US dollar, They have stated several times that they have assets that are much less than the value of USDT tokens and little liquidity if any problems occur.

In short, even the USD was tied to gold and now trust, high liquidity and trust are what lead to trust in USDT.

There are decentralized ways to achieve stability, some of which are based on BTC like Luna so I don't think we will see similar examples anytime soon.

You can refer to Tether recent financial reports: they have a total asset value greater than the amount of USDT on the market. This means that each USDT on the market is "backed" by an asset value greater than 1 USD held by Tether. In case customers want to burn USDT for USD, Tether is fully capable of providing enough USD for customers.

Tether is expanding its business and gaining both profit and reputation. I think Tether is big enough for me to no longer worry too much about its collapse risk. I can hold USDT and focus on market analysis and investing to seek profits ^^

[Stompix]

You can refer to Tether recent financial reports: they have a total asset value greater than the amount of USDT on the market. This means that each USDT on the market is "backed" by an asset value greater than 1 USD held by Tether. In case customers want to burn USDT for USD, Tether is fully capable of providing enough USD for customers.

Tether is expanding its business and gaining both profit and reputation. I think Tether is big enough for me to no longer worry too much about its collapse risk. I can hold USDT and focus on market analysis and investing to seek profits ^^

This is the problem with assets, their value can plunge at any moment and from having twice the reserve as collateral you have half.
We had just recently two examples, both crypto-related, and I'm not talking about Luna, it was Celsius which had prior assets worth far more than necessary but went to dust, FTX which went bankrupt despite what do you know actually having illiquid assets and if we go into traditional banking related to crypto we had SVB, that lost 15 billion in securities, not because it was hacked just because those securities turned negative in their balance sheet.

Tether has less than 1% in cash and liquid funds and 80% in treasury bills, a huge bank run at the wrong moment would crash them just like any others!

[_act_]

UST failed but DAI is still very successful, meaning the operating model is really important for algorithmic stablecoins.

DAI is backed 75% or so by USDC which is backed by fiat. So we can say that DAI is indirectly backed by fiat. Example of algorithmic stable coin right now that is new but common is USDE. Not only UST that failed in the past, there are three or more algorithmic stable coin that failed before UST. Some companies still create algorithm stable coin and it is getting successful than before but I can not still say that I trust any.