Critical Thinking Brain

A stablecoin is not a dollar.

Stablecoin term should be thrown out. 

Stablecoin is a crypto whose creators' goal is price stability at 1 dollar.

This can be acheived by many different techniques.

The most common currently is by backing it with real dollars or assets, or at least giving that impression. 

But what about other stablecoins- algorithmic, partially backed, etc. If these are able to achieve price stability would they be called dollars too?

How can we regulate stablecoins differently depending if centralized/ decentralized or by different mechanism?

Look at what if anything they promise. 

https://twitter.com/jp_koning/status/1427264869825486853

https://twitter.com/jp_koning/status/1427256261301649408

Calling Tether dollars is not accurate. 

How can we begin to regulate this niche of this industry if we can't even agree what is a dollar and what isn't?

Jackpot for the first issuer to create a stable successful stablecoin without taking in dollars. According to some people if you create a crypto that has a stable price at a dollar, you have created dollars.  I don't think this logic holds up. 

Perhaps they might say only stablecoin issuers that take in real us dollars to back the crypto are considered dollars. 

I think what is needed again, is to look at what they promise. And regulate according to that price. Do they promise dollar redemptions? Do they promise price stability through some other mechanism? Are they making no promises?

We do not need regulation carve out for the ill defined category of stablecoin, we need to dissect who cryptos are different and regulate based on first principles. 

Promises often equal securities. Perhaps stablecoin issuers and friendlies do not want them to be regulated based on promises, first principles, and securities laws. 

Are third world countries that are promoted as using bitcoin more about the desire to play a lottery game than it is about bitcoin helping solve human rights of third world. 

Is bitcoin in Nigeria more about lottery or more about the unbanked or because local currency is inflating or to get around capital controls?

Does Haiti use bitcoin?

Bitcoin is a legitimate honest chain letter or ponzi that people might like more than traditional lottery games. 

More research and thinking should be explore this subject.

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https://mises.org/wire/what-does-gdp-really-tell-us

Giving the benefit of the doubt to Tether is the same as making allegations that they are printing usdt for a direct note. 

Both sides are speculating or making 'allegations.' 

Why is one side considered making allegations and the other not? Both sides do not know because they are not Tether insiders.

Until Tether proves they have received real dollars in way that satisfies its critics, then its critics have an analyst duty to make allegations. 

Why trust them and give them the benefit of the doubt. These people who defend Tether are making assumptions as well.

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Notes after the recording- 

Found this tweet-

"There is absolutely no way to validate this based on an attestation.  It's not about, if the reserves are there (attestation), it's HOW the reserves got there (audit) that makes all the difference."

https://twitter.com/bccponzi/status/1425033038782779427

Staking eth is giving new coins to eth whales for free. 

Staking isn't investing, the coins aren't at risk. It is a fancy way of saying airdrop. 

Eth is inflationary and benefits people who get new eth for free.

Cryptos aren't that different than stablecoins in that they are all created out of nothing.

Compare the inflation schedule of cryptos.

All of these cryptos having trading pairs which seems to me to make the price go up.

How can you create a crypto, make it look decentralized, and be the beneficiary of new tokens with little or no work.

Regulatory Capture is greatest in the crypto industry. 

In a young industry where law is trying to catch up to crypto innovation, regulators are being bribed not to understand crypto and not to talk about even a little bit of regulation and enforcement.

The crypto industry has enormous power.

Are you allowed to bribe a regulatory? 

How do we define bribe?

Why do we want crypto to have a big lobby-- don't bitcoiners hate gov?... now they are trying to push their own agenda like every other group that grows in economic power- they want political power. Part of this is the state. It pits one interest group against another. Either seize power or be denominated by those who do. Bitcoin was meant to be something that couldn't be beholden to political actions. What the crypto lobby is doing has nothing to do then with bitcoin and everything to do with niche interests in crypto that can be beholden to political actions.

Having your cake and eating it too- every single protocol on blockchain.

Look very carefully at the actors that ask other participants to help them prevent the hackers from getting away with the tokens.

Any protocol that stops this hack is acting in concert. They aren't decentralized. And if they aren't decentralized, then they are liable and responsible for their protocol. They are in fact issuing securities.

How can the little guy sue Coinbase and make the court decide wether they are selling unregistered securites?

The SEC doesn't determine what an unregistered security is, congress does through laws, which the courts apply.

What are DAOs?

Blockworks interview of crypto lawyer Preston B. 

Why are companies formed?

Do most Daos start off as a legal entity or not?

If no legal entity is explicit, one will be given to your Dao.

General Partnerships and unincorporated Daos.

Legal responsibility and liability of 'decentralized' companies or orgs.

Ownership shares as tokens

Members vs Managers in a Dao and the legal structure that is often broken

Managers of daos should have more liability than just members

If interacting with a Dao has no gates since on the blockchain nothing can be accepted or signed.

A UX url frontend to a a Dao doesn't prevent a member from interacting with it. 

A dao isn't just some smart contract.

People write code.

People make up companies.

All of this is going to be challenged in the courts very very soon and I can't wait.

Counterpartyrisk

Are Paypal ious that trade a security?

Why does Coinbase and other exchanges allow massive counterparty risk through ious from outside entities to trade?

Stablecoin sound money vs unsound money

For next time- If we spend so much time thinking about whether Tether takes in a dollar for each token it makes, then all partially backed stablecoins are a fraud and should be called out.

Why do bitcoiners like and rejoice about unbacked stablecoins- bc it serves their own ends. 

We need a mechanism that links every dollar taken in by a stablecoin issuer to each and ever token they create.

When Coinbase allows for ious of stablecoins to make up trading pairs, they do not take on the risk of whether Tether can pay out dollars for each tether, they push this onto their customers.

Correction in episode - I say CDO I mean MBS. Mortgage backed securities.

After episode I went to Paypal terms of service and discovered I was indeed correct about Paypal balances.

https://www.paypal.com/us/webapps/mpp/ua/pp-balance-tnc

"Any balance in your Balance Account represents an unsecured claim against PayPal."

PayPal isn't creating dollars and lending them out. Stablecoins issuers aren't either. But they are creating tokens and lending them out...

Paypal is not creating new dollars. In exchange for their service, you send them dollars they create an iou for you - this is shown as a balance, but shouldn't be thought of as one. You can transfer this iou to someone in the Paypal network that accepts the iou. Dollars aren't created still, even if Paypal invests the dollars 'backing' these ious. The dollars have just been transferred. When someone wants to get these real dollars and turn in the iou they make a withdrawal to their bank and Paypal sells assets to raise dollars.

Paypal didn't create a product like a stablecoin. They just created ious which aren’t dollars either- ious are a promise. Banks can create new dollars, paypal can’t. Both banks and Paypal make promises.

Is a stablecoin an iou? Well if they are then why can the issuer just create these tokens unrestricted? Remember new tether is created but not assigned - that is their famous phrase. So, no, stablecoins are just tokens, which can be created without any iou associated with it. Stablecoins might also take on the additional role of an iou that can be traded, but it doesn't matter that they trade often at a dollar, they still are not dollars, they are a crypto token. 

Tether has 49% of its reserves in commercial paper according to a CoinDesk article.

Commercial paper is defined as an unsecured promissory note. Unsecured lending is considered highly risky because it doesn’t require collateral.

Why would Tether and USDC be doing this with dollars they actually collect first? My question for the companies getting these unsecured loans would be are the loans being paid out in the stablecoins or in real US dollars. We could learn a lot with the answer to this question.

I would like proof they are making these loans in real US dollars.

If they are giving these loans out in their own stablecoin then that would mean that they are going into the market and buying their own stablecoin with dollars that they have first and then lending out the stablecoin. Because when they issue a stablecoin they have the dollars, not the tokens. Or they aren’t going into the market to buy back their own stablecoin with real dollars, instead they are creating new stablecoins and giving them to the borrower in exchange for a note. They can still say these notes back their token, because a new token was traded for a note.