A True Stablecoin
Pegging a cryptoasset to gold, rather than the USD or other government monopolized fiat, is the way to go if we really want a stablecoin.
USDT and DAI are interesting concepts. They are cryptoassets which are pegged to the USD. There’re a number of different cryptoassets that are pegged to different fiat, government issued currencies. They are labeled “stablecoins.” But this label is incorrect. As I’ve mentioned before, the USD is not stable. It is a sh*tcoin that loses its value over time, and whose purchasing power is transferred away from the masses, and to the financial industry, via inflation.
I honestly don’t mind inflationary crypto. Inflation often drives continued usage, while deflation generally leads to hodling and speculating, which is not healthy for any currency. Indeed, I use the term “cryptoasset” specifically because most of the digital tokens that are used in the crypto world, do not fit into the category of money or currency. They are not widely used as an intermediary of exchange, and they are not widely accepted for a wide range of goods and services.
Purchasing power stability is important for long term decision making, borrowing, using, and so on. If a currency is stable, we’ll know that if we spend 100 units now, and get 100 units 10 years from now, we’ll still have the same purchasing power returned to us. Uncertainty is always a risk and we don’t necessarily want it. Deflationary cryptoassets might seem like a good idea, but they are driven out of circulation by inflationary cryptoassets. Why? Because why would we want to spend 100 units on a pound of wheat now when in a week from now we can buy 110 pounds of wheat? Unless we have no choice but to spend that specific currency, we’ll look for others to spend first.
Inflationary currencies aren’t necessarily bad. A mildly inflationary cryptocurrency is probably the most healthiest option. High inflation isn’t good, because it can lead to wage declines and other problems, as wages will not generally rise to meet the high inflation rates. The real issue that I have with inflationary assets like the USD is that the inflation causes a shift in purchasing power, from the masses, to the financial sector. That’s why the…