> Stablecoins enjoy a one-to-one ratio. For Nigerians, this means stablecoin prices are pegged to a certain ratio with the U.S. dollar.
I'm new to stablecoins and trying to understand the situation. Is this not the same thing Brazil did with the URV [0] -- that is, replacing their ruined state currency with a temporary one pegged to the USD -- only coming from the private sector instead of the government?
> Other benefits of buying into stablecoins include: (snip) ...has no central authority which could breach payment... (snip)
How is it possible to "peg" one currency to another without a centralized issuing body? Bitcoins can be mined by anyone with enough computing power, and stability is only achieved via an engineered stalemate between miners, node operators, and exchanges. How do these "stablecoins" achieve their stability without controlling issuance of coins at the top level?
My understanding is that altcoins derive their value from their fungibility with Bitcoin; that's why when Bitcoin tanks, it brings the entire ecosystem down with it. How are these stablecoins any different? If Bitcoin's value fell by 80% tomorrow, bringing down Ethereum, LTC, and Doge, what keeps these stablecoins' value from falling down with it?
- centralized issuing authority backs the coins with dollars, here although the trust is the same as in a central authority, for people in Nigeria and Brazil, its asymmetric compared to people in the US. For Americans, a central authority is a central authority. For Nigerians, a central authority in US (or Carribean etc) is vastly different from a central authority in Nigeria. Example: USDC, USDT, PAX
- Seigniorage-style stablecoins, these coins try to algorithmically issue or reduce the total coins to keep the price stable. This seems to have never worked. Most stablecoins in this design failed.
- collateralized stablecoins - These stablecoins try to hold a certain amount of collateral in 'unstable' currency (like ETH/BAT etc) and try to maintain that collateral. If the price of the stablecoin moves away from $1, then it creates profit opportunities for people to benefit from it and help bring the price down. For example: Dai, Havven. These are experimental but seems to be working well.
I'm new to stablecoins and trying to understand the situation. Is this not the same thing Brazil did with the URV [0] -- that is, replacing their ruined state currency with a temporary one pegged to the USD -- only coming from the private sector instead of the government?
> Other benefits of buying into stablecoins include: (snip) ...has no central authority which could breach payment... (snip)
How is it possible to "peg" one currency to another without a centralized issuing body? Bitcoins can be mined by anyone with enough computing power, and stability is only achieved via an engineered stalemate between miners, node operators, and exchanges. How do these "stablecoins" achieve their stability without controlling issuance of coins at the top level?
My understanding is that altcoins derive their value from their fungibility with Bitcoin; that's why when Bitcoin tanks, it brings the entire ecosystem down with it. How are these stablecoins any different? If Bitcoin's value fell by 80% tomorrow, bringing down Ethereum, LTC, and Doge, what keeps these stablecoins' value from falling down with it?
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[0] https://en.wikipedia.org/wiki/Unidade_real_de_valor