There was no discussion topic for stablecoins so I made one!
I agree that stablecoins are and will continue to be very important for DeFi and trading. I think they will be mass adopted before other forms of crypto and are more likely to be the first experience of crypto for the mainstream.
I don’t get why Tether is being so evasive about the cash reserves backing USDT- unless there’s something to hide. If they would just let one of the big 4 firms fully audit their claims it would dispel their shady reputation and more people would trust and use USDT. As it stands if I had to use a centralized stablecoin I’d be more inclined to trust USDC as at least they have to be fully compliant with US regulations.
My real question though is: should stablecoins be pegged to the USD? Would gold be a better peg choice in the long run?
It makes sense right now to peg stablecoins to USD as they are the world reserve currency, but… the chance of a global financial meltdown is growing. The debt bubble will burst at some point, even if the current pandemic does not trigger it. In a scenario were the USD is experiencing significant inflation (money printer goes BRRRRR!!) pegging a stable to the USD may no longer make sense. All fiat goes to zero eventually.
Gold backed stablecoins like Digix are another alternative, but again there’s the difficulty of proving, and continuing to prove, these coins are actually backed by the physical gold they claim to be backed by. They aren’t trustless. True decentralized stablecoins like DAI can be verified mathematically because they exist entirely in the blockchain and are collaterialzed by assets that also exist entirely on the blockchain.
So if we want stablecoins that actually have a stable absolute value, not just relative value, then pegging to fiat currency is not such a good idea.