RE: HBD: Argentina Is Showing The Path For Stablecoins

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RE: HBD: Argentina Is Showing The Path For Stablecoins

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x9ed1732b in LeoFinance • 9 months ago

If an algorithmic stablecoin can be pegged to anything, why are most of them pegged to the value of the US dollar which also suffers from inflation rather than to a unit of the cost of living, for example to the price of a basket of groceries?

Asset backed stablecoins have a calming effect on the mind and some of them have their governance and minting distributed to multiple parties making their operation less vulnerable for takeovers but still the deposited backing asset is always something rather physical which could be seized by force. Algorithmic stablecoins don't have this problem if they are implemented in a manner to prevent such actions.

9 months ago in LeoFinance by x9ed1732b

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taskmaster4450le 9 months ago

for example to the price of a basket of groceries?

And what happens if there is a drought and the price of groceries skyrocket due to food shortages.

The idea that inflation and price increases are the same is mistaken. Prices can go up or down for a variety of reasons.

It is another fallacy that the economics profession pushed on people misleading them into believe every time there are price increases it is due to "money printing".

Asset backed stablecoins have a calming effect on the mind and some of them have their governance and minting distributed to multiple parties making their operation less vulnerable for takeovers but still the deposited backing asset is always something rather physical which could be seized by force.

It is even worse. The asset backed are tied to the banking system through their backing (either cash or treasuries). This means we are not dealing with a separation.

So algos, in my view, are the only way to get free of it.

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x9ed1732b 9 months ago

And what happens if there is a drought and the price of groceries skyrocket due to food shortages.

Your balance buys the same amount of food as before keeping your stomach equally filled and satisfied and keep that aspect of your living standard stable. This was a rough example which could be improved by adding indices of other living expenses into the basket.

The idea that inflation and price increases are the same is mistaken. Prices can go up or down for a variety of reasons.

I think the definition of the word 'inflation' varies by the topic and the user. In some cases inflation seems to mean the loss of purchasing power or at least that's what they would want to protect against.

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taskmaster4450le 9 months ago

I would agree the definition has changed.

However, what is the loss of purchasing power happens when the currency is actually deflating i.e banks are not lending.

The business cycle always means that the loss is seen during the expansion and the reverse after the peak is reached.

That is the same regardless of what form of money is used.

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