‘Stability’ of Stablecoins
How long do we actually need Stablecoins to stay ‘stable’?
Here is what he said:
“Let’s define ‘Stability’ of a Stablecoin by looking at duration:
1. During a single transaction: Easy
2. During a fixed predefined period to facilitate a compound transaction: OPPORTUNITY. No need to be stable across multiple compound transactions, just during each one separately.
3. During an indeterminate period: Hard, since it needs to be a universal frictionless value metric.”
Here is my opinion:
I think 3P Stablecoins need to shoot for the Default from the get-go: 100% Stablility by having a plan to be the World’s Reserve Currency. I think 100% Stability is needed because it’s very possible many of these 3P Stablecoins will be used by millions of people in high-inflation countries in the next 10 years. These people all have a smartphone so they will just use an eWallet on their phone as their bank acct- storing their life savings in a 3P Stablecoin on their phone’s eWallet because they can trust it more than their own high-inflation currency & they believe they can trust it more than BTC because it has ‘stayed stable so far’.
So if a 3P Stablecoin is NOT the World’s Reserve Currency by 2025, then their pegs will start to fail as 2P Stablecoins are released (‘Digial Fiat’ aka ChaseCoin/WellsFargoCoin). When that happens, millions of people who have depended on the 3P Stablecoin’s stability over the last decade will have their life savings destroyed as that 3P Stablecoin’s peg fails and people in those countries are the last ones to receive the information and get out, so they are left holding the bag.
“People from Third World countries without stable currencies are the ones who understand and appreciate the benefits of stablecoins the most. Meanwhile, First World academics are still stuck debating Bitcoin.
In my country, people trade USDT with each other over-the-counter for Vietnamese fiat even though very few of them will ever get to redeem the USDT for actual USD. However, the fact that USDT still hasn’t blown up, yet, and the existence of high secondary market liquidity mean that USDT is good enough for Vietnamese citizens who are increasingly using it for payment and remittance. There are large FB groups for OTC trading of USDT with tens of thousands of members. I suspect that other developing countries also share similar trends.
My little cousin in Vietnam wants me to send him USDT now instead of Western Union because he’s charged a lot of fees with WU when instead he can just sell USDT to someone else for a lot less in spreads.”
WOW. So ‘developing countries’ like Vietnam are already storing some of their wealth in 3P Stablecoins. USDT is not a bad choice, for now. I’ve said it is the one I will believe to last the longest when having to compete with 2P Stablecoins. What this means is nations less-developed than Vietnam, and having more inflation of their currency than Vietnam, will probably be storing a lot/all of their wealth in these 3P Stablecoins. THAT’S the reason I think 3P Stablecoins need to be built (and have a plan) to be the World’s Reserve Currency from the get-go. There will be millions of people’s life savings riding on it, people who can least afford to lose it all.
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