The Game Theory on Banks Attacking Startup Stablecoins’ Pegs

“Chess pieces on a board in a dark room” by Javier Grixo on Unsplash

Banks will perform $T ‘peg-attacks’ because they are the true competitors to Stablecoin Startups….not other Stablecoin Startups.

When Banks have their own Digital Fiat offerings, they have every incentive to destroy users’ trust in every other Stablecoin in order to accelerate the market’s adoption of their own Stablecoin (the Digital Fiat).

This means the Big Boys (WellsFargo, Chase, and BoA) will use whatever they have to short/manipulate/break the pegs of any other Stablecoin that is competing against them.

Because if the Market cannot trust independent Crypto Startup Stablecoins to hold their $1 value, then those Stablecoin users might as well switch over to the ‘more trustworthy’ Digital Fiat that the banks are offering. (‘More Trustworthy’ in the sense that users can always walk into any Bank Branch and redeem the Digital Fiat for $1 of Physical Fiat.)

As soon as a Stablecoin’s peg is broken once, some people leave, making it easier to break a second time, when more people leave, making it even easier to break a third time, when everyone leaves.

Nubits only took 2 breaks of the peg to permanently kill it, so I am being generous in alotting 3 breaks.

So if the peg of an independent Crypto Startup Stablecoin is destroyed, the user’s of that Stablecoin will transition over the the ‘more trustworthy’

What does ‘More Users’ of their Bank-Issued Digital Fiat (Stablecoin) mean for the Bank?

1. Larger # of Customers.
2. More Fees they can levy on those customers.
3. More Money on Deposit from their new customers that can be used to issue new loans, which allow the bank to profit on the interest of those new loans.
4. All 3 above contribute to the Ultimate Goal: HIGHER SHARE PRICE(which is only thing that ACTUALLY matters).

So yes, the incentives are present for banks to use a small percentage of their balance sheet to screw with the pegs of all the Crypto-Startup Stablecoins because it will lead to a higher ROI on the back-end: a Much Higher Share Price.

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