A Visual Explanation of Algorithmic Stablecoins

https://medium.com/dragonfly-research/a-visual-explanation-of-algorithmic-stablecoins-9a0c1f0f51a0

by is0tope • 4 years ago

1 6 4 years ago

In a full-reserve bank, each liability is matched 1:1 with assets in reserve. If someone with a digital dollar asks for the cash back, the holder is given the physical dollar and the corresponding digital liability is destroyed. This is how Tether, USDC, and every other fiat-backed stablecoin works.

Tether is fully backed with physical dollars?

is0tope• 4 years ago

Guess thats the claim anyway.

jqpabc1233• 4 years ago

Tether is fully backed with physical dollars?

Even Tether has backed away from that claim. It has also backed away from the idea that Tethers are redeemable for physical dollars.

But somehow, it maintains it's peg just fine! It's worth 1 USD because we say so --- trust us.

kwertyoowiyop2• 4 years ago

And yet, people still act as if those things are true. It's so strange. Mental musical chairs? "It's fine if I still believe it, as long as I'm not the last one to still believe it"?

jqpabc1233• 4 years ago

Hocus pocus, smoke and mirrors, yadda yadda.

Bottom Line: In most cases, there is no meaningful independent auditing or regulation of any kind.

With few exceptions, no one gets to look behind the curtain and see what is *really* going on. All the details and techno-magic explanations are basically irrelevant because you're still totally at the mercy and whim of the exchanges and those running the "stable coin" to follow them.

In the exception cases, it's pretty much just another bank account with all the same operating rules and procedures but without FDIC insurance and watch out for those transaction and withdrawal fees.

A Visual Explanation of Algorithmic Stablecoins

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