11 sats \ 1 reply \ @om OP 31 Dec 2022 \ parent \ on: Fiatjaf asks the right questions about stablecoins bitcoin
I have written my concerns about this in another comment, I'll paste it here:
The problem with Bitcoin-backed stablecoins is that Ethereans already tried Ether-backed stablecoins and failed, and the problem is not specific to Ether.
At some point the demand for the stablecoin exceeds the supply of BTC/ETH that people are willing to provide as backing, and at that point you have to either find some other backing or depeg. DAI chose the former and is now about 50% backed with USDC. But if Circle can destroy your stablecoin with a press of a button, wouldn't it make more sense to just use USDC directly?
write
preview
10 sats \ 0 replies \ @timechain 31 Dec 2022
I'm not sure if that was the reason for the switch, as much as ETH's volitility;
https://www-coindesk-com.cdn.ampproject.org/v/s/www.coindesk.com/tech/2020/03/17/makerdao-adds-usdc-as-defi-collateral-following-black-thursday-chaos/?amp_gsa=1&amp_js_v=a9&outputType=amp&usqp=mq331AQKKAFQArABIIACAw%3D%3D#amp_tf=From%20%251%24s&aoh=16725056470090&referrer=https%3A%2F%2Fwww.google.com&ampshare=https%3A%2F%2Fwww.coindesk.com%2Ftech%2F2020%2F03%2F17%2Fmakerdao-adds-usdc-as-defi-collateral-following-black-thursday-chaos%2F
(Article explains that DAI, which, at the time was only using ETH and BAT, chose to add a third asset, USDC following "black Thursday" (March 12, 2020), where the price of eth dropped 30% in one day.)
But yeah, Circle can kill DAI, so "defi" using DAI has the same problems of defi using usdc, which wasn't the case once. Add to that the controversial choice to custody the USDC with Coinbase (a few days before the founder was found dead) and you have a centrally held asset that can be seized by both its custodian and the issuer of one of its main collaterals, not to mention the fact that both Coinbase and Circle operate primarily in the US. There are a few trusted third parties that ALL must 'give the green light' for a DAI transaction to work.
reply