Justin Sun's latest hijacking is in trouble. This is not coming as a surprise to most.
The king of copy/paste figured he would dominate the stablecoin market with the introduction of USDD. Basically mirroring UST, Sun believed he could simply toss something together and make it the top in the industry. As many are aware, this was his modus operandi from the start.
Now USDD is de-pegging, causing people to conclude that we might be seeing a repeat of UST. Honestly, since it was built upon nothing, it is more than likely this is the outcome.
This underlines the entire issue with the approach to stablecoins. All are looking for the shortcut, not realizing what it takes to truly create a successful currency.
It is something that takes time. Sun figured he would ascend to the top in 60 days. Sadly, this is not how it works.
Source
The Lesson From Bitcoin
Bitcoin is now more than a dozen years old. It starts way back when the Great Financial Crisis was still fresh in our minds. Barack Obama has just entered the White House.
At the start, there was one miner, the mythical Satoshi. The hashrate started at zero before working its way up from there. Today, we see miners throughout the world with hashrates continually reaching new highs.
While not much changed with the technical attributes of the network, a ton was advanced. One of the big things Bitcoin acquired was resiliency. As the network grew, it passed the point where vulnerability existed.
There was great fear that China's ban on cryptocurrency mining would take the network down. While there was a setback for a few months, a peak above the previous high in hashrate was quickly achieved. The miners simply moved their operations to areas more friendly to it.
The point is the evolution. We might not be telling the same story if Bitcoin mining was banned in 2013 by the Chinese. Fortunately, it was not. We see how all of this took time to evolve and grow.
Bitcoin's success comes from the dedication and persistence from many people. Advocates helped it along in the different ways required to make the system resilient.
Ultimately, there were no shortcuts.
Stablecoins Future
What will it take for a stablecoin to be successful?
Here is where we run into a lot of challenges. As with most things in cryptocurrency, people are monkeying around with the tokenomics or some other variable instead of focusing upon building. For us to have success in this realm requires the advancement of a currencies on many different levels.
Basically, there are four factors which are required to make a currency global in scale.
They are:
- infrastructure
- depth
- liquidity
- sophistication
How often do we hear this attributed discussed when it comes to stablecoins? Have you seen an article on one of the mainstream crypto media sites proposing how we need to see sophistication added to the industry before it takes hold?
Of course not. Instead, we see umpteen articles about what the backing of a stablecoin needs to be.
All mentioned here is what provides resiliency. It also takes a long time to achieve. Do you think Justin Sun is concentrating efforts in these areas?
Ultimately, this is what gives a currency value. To achieve success, all of this needs to be built out.
What Gives Value
We covered a number of areas where we could generate value for the Hive Backed Dollar (HBD). These areas covered basic utility which would add to the sophistication while also providing depth.
To recap, they were:
All of this is modeled after the US Dollar. Many believe it will simply implode. This is not going to happen due to the factors outlined. The USD dominates these areas and by a wide margin.
The value in the USD has nothing to do with the "faith and create of the US Government". That is garbage. What gives the USD enormous value is the fact that its utility is far beyond any other currency and it is global in scale.
What is the USD backed by? Many will say nothing. That is untrue.
The USD is backed by hundreds of trillions in transactions and assets. For this reason, stablecoins that piggyback off the unit of account will have a fighting chance. If you want to see the epitome in network effect, it is the USD.
Stablecoins: A Lengthy Process
As we can see, this is not an overnight process. A lot of effort and resources are required to even begin to dent the existing system. It is possible yet it will take a lot more than we are seeing.
The approach by the likes of Justin Sun are without foundation. Simply throwing something out on market and claiming a peg will hold because it is backed by an asset of reserves is not going to work. Without utility, there is a good chance the peg will break.
Ultimately, any stablecoin success is going to become from private industry buying into it. This is why it is a lengthy process. To prove resiliency, time is required. Something has to show it has staying power. This means riding the different market conditions along with different attacks that can arise.
Those with a strong foundation will be able to weather anything that is thrown at it. With some of the attributes described here, we can see how resiliency is the natural result. Without that, we are likely to see something that is vulnerable.
As for USDD, it looks like something that is build on sand is likely to come crashing down.
Stablecoins that are going to succeed need a strong foundation. Without that, nothing lasting will result.
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How long will it take for HBD to reach these core requirements? Are the current and proposed projects enough to push the growth HBD needs? how much do we need find new sinks or uses to get there?
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A long time. We need to see a lot of infrastructure built and then entrepreneurs start to build on top of that.
It is going to be up to the Hive community to implement HBD wherever they can. This is something that the users need to demand from applications. At the same time, developers and project teams need to think of ways of implementing it into what they are producing.
This all starts with constant discussion about it and what really takes place with banking and currency. Once people start to understand, then we can start to build a "HBD financial network".
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Well the Peg Broke and it‘s still somewhat around 1Buck. I feel like BUSD is working wonders, maybe we should trust CEXs to handle the emission of stable coins with actual reserves in the pegged asset and meanwhile on the other front let algo coins depegg with grace. If there is an algorithmic force pulling with a linear strength all the time, that makes them at least very sufficient for 98% of DeFi Applications.
Pegs break all the time so this is not exclusive for stablecoins or cryptocurrency.
The key is to keep building and expanding. As we add more utility to HBD, it can start to expand in ways few considered.
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That conclusion is very good, I wonder how much of the stabilization can be done be the internal market eventually. It is extremely fast and doesn’t burn Hive or HBD in the process, that is a unique pro.
USDD seems like just another plan to dump more TRX without crashing the price.
Could be. With Sun anything is possible.
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The full form of $USDD is "United States Dollar Depeg"
Justin Sun is a known scammer!
He scammed Steem community which forked out and formed HIVE. Hive has a truly decentralized stablecoin $HBD that works.
It's obvious which one is the clear winner between HBD and USDD. We just need to push this narrative to the wider crypto community.
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How is HBD stable? It’s got the same issues. I’m team Hive all the way but HBD is not a good stablecoin. It will not sustain 20% rate. We should focus on Hive not HBD.
HBD is fairly stable on the internal exchange. That is where it is most liquid (and still not very). The price feeds on Coingecko come from Bittrex (absolutely no volune) and Upbit (completely closed exchange outside of S. Korea).
The 20% rate not being sustainable is completely false. If you want more stability, the supply is going to have to increase drastically. There is only 25 million or so HBD in existence. That is going to lead to a lot of volatility.
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“ There is only 25 million or so HBD in existence. That is going to lead to a lot of volatility.“
Exactly, meaning it’s not stable.
Much different approaches. Yes you are right that Sun is a scammer so that has to be taken into account. He has no intention on trying to create something successful. That is not true on Hive since there are many working to make things effective regarding HBD.
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USDD de pegging was a certainty as we all know he jumped in feet first thinking he could increase Tron's value like LUNA did before it crashed.
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Just a con man and a fraudster. He looks for opportunities to get his name out there and provide a quick hit. He doesnt actually solve any problems nor build anything.
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That is exactly how I see him and this is all about his ego.
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The nature of a man, that believes in copying and buying glory, sadly he doesn't learn from mistakes, even more sad for his followers.
I do agree with you on resilience for stablecoin to succeed because it is definitely going to be attacked in many ways which brings me to the stablecoin we have in HBD, we have a lot of work to build around it in ways previously discussed in you articles.
HBD stands the chance of being the stablecoin the world needs but it requires consistent strengthening.
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Yes it does. It also requires us backing it up with a lot of value directed towards $HIVE. This is key. We will need to see a lot of utility tied to that coin. If we can do that, that will provide further value on the "reserve" which is backing the HBD.
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awesome post, seeing the elimination of these shitcoins is satisfying as it is very healthy for the environment
Sometimes some projects need to fail for the learning of the industry system as a whole. It also makes investors more careful before putting their money into projects. Yields have to come from somewhere. Thank you for the post by the way!
Without a doubt. Bear markets are great for the overall health. We need to get rid of the excess.
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The most controversial stablecoins fall within this category because they use other cryptocurrencies to keep their value stable. Different mechanisms are used to achieve this.
An example is DAI, a cryptocurrency that uses the Etherum platform and the value of the ether to keep its cryptocurrency “pegged” to the dollar. In this case, users don't buy the DAI cryptocurrency directly; instead, they “generate” it in exchange for ethers, which are exchanged in the platform by way of a deposit. The stablecoin avoids volatility caused by ether fluctuations because users are required to deposit more ethers than necessary. This mechanism is called overcollateralization and involves providing excess collateral in exchange for funding in order to reduce the risk. This is how users would be able to “protect themselves” from a possible drop in the cryptocurrency value.
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I mean how is USDD different from UST and what's the guarantee that it's not going to have the same fate as that of UST?
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It doesnt have the conversion to TRON like UST had to LUNA.
But the answer to your question is a similar fate remains. I do not see how USDD stands up.
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Agree with this strongly:
I think utility is job one for cryptocurrency tokens.
I also agree that a stablecoin is like a fine wine, it takes a while to become the best in class, while acquiring necessary character traits, longevity and battle testedness.
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It truly requires the use cases on many different levels. Most focus upon the commercial applications of the USD (payment system) not realize the financial applications of the currency are much larger.
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I see this and hope more will grasp it and devlope towards this idea.
:)
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It seems like old JS might have rug pulled people into buying his shit coin. The guy has a knack for getting into things at the wrong time and losing money, I wonder when he’s going to lose his clout altogether lol.
It certainly takes time to build up resiliency with something like a stable. Hopefully we can get to a point where HBD has more resiliency than it does risk. It’s doing well now but adding some more use cases for it is going to be important for the depth of the asset.
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Yeah I am not sure why anyone gives him any attention anymore.
HBD is a long term project. We need to keep spreading things out with the utility. As stated above, commercial is just one area: the other is financial.
Generating financial utility for HBD goes a long way to providing resiliency.
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😂🤣😀
It also drew my attention. Tron copied DEFI, NFTs, and algorithmic stable coins earlier than most other networks. There is nothing wrong with the "me too" approach. On the other hand, it would be better for them to add something unique to the copied concepts. And Terra Luna incident showed that critical thinking is required before aping to the latest trends.
I'm also in favor of Hive imitating new concepts in the crypto market. But this can be done with creative additions. Hive Punks is a good example of this. In fact, Beeswap is also more user-friendly than Uniswap imitations. On the other hand, HBD may also be the best algorithmic stable coin in the market in terms of working logic. Unfortunately few people know about the Hive ecosystem. If Hive can make it to the top 100, it can easily become the new phenomenon in the crypto world.
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Certainly taking quality ideas and implementing them is smart. Open source is an industry that is based upon copy/paste.
However, Sun doesnt add any value he simply copies and then markets.
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A decentralized algorithmic stablecoin that is overcollateralized like DAI is a demonstrably working solution. The smart contracts on Ethereum that control the DAI have sensible incentives for market participants to maintain the peg and the overcollateralization is sufficient. There is no need to trust any central party.
If a mass of transactions were sufficient, then Bitcoin would be much more stable. It is true that the USD is relatively stable not because the USG somehow "guarantees" its value rather than because the dollar is legal tender in the US. It is overwhelmingly the path of least resistance to use it for transactions in the US. The eurodollar system (international dollar denominated finance) is significant but the main stabilizing mechanism is the self-regulation of its issuance through US banks.
I disagree. The USD use case as legal tender pales compared to the international markets and what it represents. In the FTX OTC market, for example, about 90% of the $98 trillion in holdings is USD. That is just one example.
There are:
And that doesnt include the Repo markets or any of the daily transaction activity (which is into tends of trillions daily).
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Why is the USD relatively stable in terms of consumer prices in the US?
Because the Fed (arguably part of US government, although it is a quasi-private entity) manages USD inflation (defined as consumer prices) to try to target 2%. If the value changes by much more than that, they adjust monetary policy to try to get back to 2%. This is not always successful (as now, with 9% inflation, not really stable at all over time if it persists), but mostly tends to be.
That's what I was talking about said but Taskmaster disagreed if I understood him correctly. The management you talk about does not happen directly but by setting the key interest rate that affects the rate at which commercial banks lend money and by open market operations in which the Fed purchases bonds.
You are right. The Fed has to manipulate and play games since they do not do money. There are no USD involved in what the Fed does anymore. There was a time when settlements were done in physical cash where they could affect things directly. This is no longer the case.
So their operations are nothing more than expectations of what is happening. The Fed front runs everything in an effort to get the markets to buy in.
They actually put out swap arrangements which is technically purchasing (with an agreed upon sale) but they are not buying with USD like you or I would.
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Interesting. This is the key point.
Or because everyone else is using USD denominations because of the extensive international financial tools in the USD based banking system and also their big f-ups themselves :p
The large trade deficit. Since the US has so many imports, it has relative stability as compared to other countries. Other countries have to deal with their local currency while having to buy and sell internationally in USD. This means currency movements really come into play.
Plus, the USD is spread over the globe (and more areas) than even the Euro, which is essentially regional.
The size, depth, sophistication, and liquidity of the USD give it a lot more stability than other currencies.
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Smack down, brutal counter. May I ask, where do you pull those numbers from?
Have to did through many different sources. A lot of them come from the Fed themselves. Few realize the Fed's website is a treasure trove of data.
Others come from research papers. Of course, when dealing with these numbers it is often guesstimates at best (who can count to 1 trillion let alone 100 trillion).
The banks put out a lot of research. Plus you can look at the market makers.
For example, I used Morgan Stanley's holding $500 billion in repledge Treasuries in one video. That came from their own filings.
For example, the FX reserves are out there by all central banks. A lot of this is just basic arithmatic.
FRED, which is put out by Federal Reserve of St Louis, is a valuable website too.
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I need to start reading these Papers from time to time too. It seems to me that understanding those is a very basic skill that I still lack.
Thanks for the explanation, I’ll start digging from those starting points.
I think it's different though in the sense that it's not linked to another coin like UST was linked with LUNA?
It's bad for the people involved with USDD but great for the crypto space in general as only the strong projects will survive!
As far as I know the collateral being used is Tron. They copied LUNA and have made some tweaks since that crashed but still is a high risk and expected to go the same way.
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I agree. The clearing out of the mess is a good thing.
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I hope HBD can persevere and make the adjustments needed to become more and more stable. Who knows. Stablecoins are a bit of a unicorn in my book, but it does make sense to strive for utopia. Just have to keep eyes wide open to pitfalls.
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The truth is that it seems somewhat unreal that in just 60 days it can dominate a market like that of Stablecoins without a good solid base to lean on, so USDD will lose strength as the days go by if it was what it was at some point it could have it. Cryptographic projects must be supported to achieve greater acceptance
The king of copy/paste figured he would dominate the stablecoin market with the introduction of USDD— Despite Sun pledging $2 billion from the Tron DAO Reserve to fight the short sellers, USDD has remained stubbornly below a dollar.
It is correct, bitcoin is taking more than 10 years to achieve what has been done so far, this currency that has not even a quarter wants to be the one that reigns in the stablecoins? as you say it is built on sand and will collapse very easily.
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Anything that has something to do with Justin Sun I don’t want it.
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Justin Sun is such a drama queen, I won't be surprised if he just cooked up this USDD crap for the attention.
Anyway, I think Algo stables in particular, still have a long way to go.
USDT and USDC exist on the premise that the USD and the US debt-based economy won't go to the shitters. For now, it's a safe bet but moving forward, it's very risky.
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Sounds like Leo's on the right track!!! And with liquidity being built up through all the pleo, phive, phbd, we're heading that way for sure!
Thanks for that awesome insight into resilience of stable coins.
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Every time I hear a crypto/gold bug say the dollar is backed by nothing I cringe. The dollar is backed by just about every asset in the world right now.
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Good breakdown of the issue with stablecoins in their current state! I was extremely skeptical of UST when I first learned about it early last year. I was an early investor in the LUNA token (sub-$3) but sold to buy BTC instead (good choice in hindsight overall).
When I saw the price of the LUNA token balloon exponentially in a short period of time, it looked like a bubble to me, even without doing a deep-dive into the tokenomics like I've been doing more of this year.
I just read @khaleelkazi's piece on USDD and watched Coffeezilla's video on YouTube. To me, this appears to be a classic case of same ole crap different project.
On one hand, we definitely need stable medium-of-exchange between cryptocurrencies and fiat currencies, but on the other hand, we cannot allow any singular entity (let alone a single person) to maintain majority control. Since Justin has printed over 90% of all USDD that are possible (something like 723M total when he's done printing, I think), there's no way that USDD should even be classified as a "stablecoin" in any sense of the word.
From where I'm standing, USDD looks like just another insider exit scam, where Justin can swap his worthless TRON tokens out for USDD, without crashing the market, furthering harming his bags he's been holding. This seems like a get-rich-quick scheme with his supposed promise of an "extremely-low risk asset" (I call bull). Nothing yielding 40% should ever be considered low-risk, let alone EXTREMELY-low risk.
It all comes across as a really shoddily-put-together marketing scam to try and capitalize off the desperation and fear that has permeated the crypto markets since UST/LUNA's implosion.
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