I have a love and hate relationship with all stablecoins and here's why

We sometimes love to talk about stablecoins specifically where DeFi is part of the discussion. Usually we'd stress on how decentralized stablecoins are going to rule the “web3” economy but what I find disturbing is that all stablecoins are systematically doomed(the holders really) if what we “envision” for crypto in the broader spectrum becomes a reality but nobody seems to be talking about.

It all boils down to what I've been discussing in the past days and that is the flaws in building a supposedly “scaling layer on top of the faulted structure that needs scaling”.

Now that I typed that out, it just hit me that “child chains” are a more fitting name to “side chains” for all layer 2 blockchains given that they are designed to rely on the parent chain for transaction finality.

A proper sidechain should not need the parent chain for Jack or at least not something so crucial for security, but I get it, we can't expect people to be good at developing complex systems like this and still be good at giving names.

History shows that they really never are that good on that side.

But that aside, back to stablecoins.

Stablecoins are effectively layer 2 and layer 3 currencies, the layer 1 in this case is really simply the fiat currencies it tracks its price value from.

Layer 3 stablecoins are algorithmic stablecoins that have a second asset in the mix that they attain stability with the USD by tracking.

So oracles are basically passing messages around for these currencies to attain stability to the USD.

As simple as that sounds, they are the most complex and risk-on currencies within crypto and this is because buyers simply “assume” stability and security when buying stablecoins unlike the “realized risks” that comes with buying volatile assets like Bitcoin.

UST crash proves this.

Crypto is simply passing value to USD

This is something many will not want to acknowledge but with things like stablecoins, we are by a large margin passing value onto the USD because the ultimate “use-case” of the USD is being perceived as a viable “unit of account” and crypto simply went with it by default.

If the USD goes out of the picture, we simply have to move onto the next fiat system unless we can summon the courage to develop our own unit of account that should be respected and leveraged by the crypto ecosystem.

The thing about the default unit of account is that it should not be centrally managed, else the government would just pull it down. I particularly find it funny how people seem to believe that when or if the USD crashes, that crypto wins. How fam?

Stablecoin holders are rekt in similar way by this crash and beyond this:

What's the universal default unit of account? What's inflation tested against? What determines the value of goods and services? Your Bitcoins? ETH?

It frankly doesn't matter if your crypto goes up in price value when that happens, stocks goes up in value in the same way, it just shows that people are flooding in to hedge against the crash. We solve nothing in the process as holders, we only get slightly richer(by current market values) and hedged against the crash but we will pay for these goods and services at full price as everyone else when the time comes.

It won't matter if we're paying in fiat or crypto, USD will be the unit for pricing.

So you see, praising stablecoins is simply praising the USD. The last time I asked someone respected around here on these topics if it was possible to break away from it, the answer was a negative and I can see reasons why this is the sentiment.

Posted Using InLeo Alpha