Critical Thinking Brain

Stablecoins are inflationary as far as they inflate their own supply.

Inflation is expansion of the money supply whether the Fed is creating dollars that are 'backed' by treasuries or whether stablecoins are 'backed.' The backing needs to be thought of separately.

Stablecoins are substitute dollars, not dollars themselves, and will never be dollars.

Stablecoin issuers gain the most by being able to create something for nothing and sell them for real assets. 

Stablecoin partners who get the tokens first get the same advantage of the banks that get the dollars printed first.

Stablecoins are inflating faster than bitcoin and ether and most other cryptos.

Stablecoins are mainly used to buy other cryptos.

Stablecoin issuers that take in a dollar in exchange for token, aren't creating more dollars, they are creating more tokens. No dollar is created, it is just transferred.

PayPal isn't creating dollars out of thin air and lending them out. They aren't doing what banks are allowed to do. 

Stablecoin issuers create token products out of thin air that are instinctually worthless.

Stablecoins are then 'backed.' This can be a promissory note, dollars, or equity.

The backing should be thought of separately from the creation. 

The dollar creation and economy should be thought of separately from the stablecoin substitue money economy. 

Massive cognitive dissonance for bitcoiners that have bitcoin and want the price to go up, but also believe in 'sound' money.

Thoughts for next time-

The reason that money is meant to be a commodity is because money should be a real thing that has a utility and a relationship (price) to other commodities.

Dollars aren't worth anything intrinsically- they aren't a commodity. 

Cryptos aren't worth anything intrinsically- they aren't a real commodity.

Money in the sound sense, must be a real commodity.

Gold is also priced in dollars, because currently dollars are considered money, they just aren't 'sound.'

Gold priced in dollars, while it will affect the price of gold in dollars, gold still has an independent relationship to other commodities because it is useful and intrinsically valuable. 

Cryptos can only be thought of in terms of dollars and not other commodities because it is intrinsically worthless.

Money, sound money that is, must have a utility, and have a relationship to other commodities otherwise the new money like dollars or crypto as it is created will present an exchange of nothing for something. Sound money- gold, as it is brought into the economy is an exchange of something for something.

Bitcoin mining, while it does take resources or capital to do, does not give the bitcoin independent value. Mining is spending dollars on something that is inherently worthless. Spending dollars does not automatically mean that you created something of value. 

Bitcoin mining is wasting resources to create a product that is intrinsically worthless. I get that bitcoin has a price, but regardless of price, what is the relationship to other goods? What utility does it provide? What can you do with it? And transferring it to someone doesn't count- that is a service that requires more than just the tokens you control.

Inflation creates all kinds of industries that would otherwise never exist. It creates mal investments and false signals.  If inflation is defined as expansion of the money supply, and bitcoiners think that stablecoins are a substitute money, then what do they think of the inflation or expansion of the stablecoin market?

Unpacking the Ponzi Scheme label

Ponzi schemes involve the greater fool theory

Ponzi schemes also involve fraud or lies

How do we determine what is fraud

How can a decentralized blockchain like bitcoin punish those that lie or mislead? We can't because decentralized means no one is responsible or no one has any liability

What is considered an investment, gambling, or speculating

Bitcoin is better described as a greater fool game, not necessarily a ponzi

Every asset could have elements of zero sum game on top of fundamentals. Gold market for instance. 

Gold has consuming demand, or a utility, bitcoin does not. 

Zero sum games aren't illegal. People like gambling. 

A lot of misleading information about the crypto industry that makes an already hard to understand abstraction like crypto even more confusing to understand- like this statement 'bitcoin is better than real estate- which is never challenged. 

When do misleading statements about what bitcoin is become fraud? I'm not sure the answer to this question, but I'm confident that if bitcoin isn't labeled a security, no one is responsible and soon Michael Saylor will be saying bitcoin is better than food. But is it a lie or just dumb? It isn't a crime to be dumb.

Stablecoins effectively cause inflation

Stablecoin issuers create usdc or usdt for an asset and this asset backs the newly created stablecoin product

Stablecoin issuers can take dollars in for every issued stablecoin or

they can take an asset on the books, just like the Federal Reserve that buys a treasury bond

Time deposits vs demand deposits

Stablecoins aren't creating dollars since they aren't dollars

Stablecoins benefit from secondary trading market

If you want crypto to go up increase the amount of stablecoins

Stablecoins allow for connected people to benefit at expense of others

Stablecoins might be a legal way to create illusionary inflation outside banking

Stablecoins vs other cryptos.

Stablecoin issuers make promises. 

Stablecoin issuers are price fixing (or trying to).

Stablecoins are a better bitcoin for payments

Tether's PR problem. They should define the term customer and define whether their stablecoin can be resold.

Regulatory capture in crypto?

What is a security?

What is money transmission?

Are there different rules if you start a crypto business?

Stablecoins are different from other cryptos in that they make certain claims.

All cryptos are representative money, representing some fiat money, or other assets if asset backed.

All cryptos have counterparty risk.

All digital money has counterparty risk, including bank balances and Paypal balances. 

Physical cash in your hand does not have counterparty risk. Cash is not intrinsically valuable, but it is the thing itself (money).

Bitcoin or any other crypto you control still has counterparty risk- because they are not dollars themselves. They get their value from some price in another thing (currency). 

Regulatory issues for stablecoins. Are they securities? 

Follow up questions not discussed- Are Tether's customers re-issuing a different security when they sell tether on the secondary market since the rights or claims of tether issued by Tether are not transferred? If part of the SEC 's mandate is to protect consumers why do they appear to not be interested in protecting the secondary buyers of tether who often are US citizens who purchase tether from Tether's direct customers. 

How are the staking products by Kraken that give a reward (investment return) different from BlockFi interest bearing accounts, which are securities according to several state securities regulatory boards?

Contact info:  [email protected]