Creating a Bitcoin moving average price "stablecoin" - is it possible?
23 sats \ 2 comments \ @saunter 25 Apr 2022 bitcoin freebie
I was lately thinking of this idea. I've seen mentioned it a couple of times, even Adam Back discussing it on Twitter, but so far haven't seen a wide discussion about it. Today found out there's a project on RSK trying to create SMA1458 BTC price "stablecoin" (https://github.com/FoundationCryptoLabs/XSS/blob/governance/Docs/zBTC-stablecoin-system.pdf).
My suspicion is that this kind of product needs to have bets betting on both price directions underlying, in order to maintain it's peg. Anyway, I think if an asset like this would appear, it could be potentially attractive to many people who can't stand bitcoin's price volatility.
Is it possible? What's your take?
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20 sats \ 0 replies \ @cryptocoin 26 Apr 2022
I don't follow these speculative products much.
I'm trying to grasp this one though.
So the goal is to create some stablecoin that is not USD, not gold, not bitcoin, but instead something that has "purchasing power" stability.
To reduce this to its simplest -- let's say a trading partner of mine will accept zBTC only. I would then convert bitcoin or USDT or whatever I use into zBTC and pay my trading partner. So zBTC would be used in commerce or whatever in the same manner as any other stablecoin.
When there is a growing demand for zBTC in circulation, that will cause the price of it to rise (all else being equal). And that rise in price is what will (or should) cause more zBTC supply to be minted. Who mints more zBTC? Speculators who put BTC into collateral and borrow newly minted zBTC using that collateral), that's who.
So I, as a speculator, see this zBTC/USD has risen faster than BTC/USD, and I don't think that is deserved. So I move some rBTC (which is 1:1 with BTC) and lock it in as collateral (CDP). I can then borrow zBTC (which causes that zBTC to be created), in an amount up to a certain fraction of the collateralized rBTC I had. So let's say I locked 1.5 rBTC into collateral, and then I am able to borrow 1.0 zBTC. I will pay a "stability fee" (interest) on that zBTC, which accrues continuously.
Because the zBTC/USD was high, and I think it is going lower, relative to BTC/USD, I am going to sell my 1.0 zBTC on an exchange. (i.e., I essentially short sell my zBTC). Then tomorrow, for example, I might see that I was right, and then buy back the 1.0 zBTC, giving me some USD profit. I might then repay my 1.0 zBTC loan (plus the stability fee / interest). This repayment of the loan causes that borrowed zBTC to be destroyed. I can then, with no zBTC loan outstanding, withdraw my 1.5 rBTC from the CDP / collateral. The gain for me was the USD remaining on my exchange, as I sold zBTC high, and then bought it back the next day at a lower price.
If I am close with all that, great. Makes sense to me. Except for one part.
If I am paying the stability fee (interest) in zBTC, then there exists the scenario where there is more zBTC owed than actually exists. Which can bring problems.
Or am I missing something?
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0 sats \ 0 replies \ @moel 26 Apr 2022
I've initiated similar discussions in the past, both here and on Twitter.
#1628
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