Coinbase is launching support for the USDC stablecoin(blog.coinbase.com) |
Coinbase is launching support for the USDC stablecoin(blog.coinbase.com) |
In doing so, I think they gravely underestimate the kind of meat-grinder they're putting their hand in (as in: the kind of liability they're taking on).
How is this implemented?
The difference between securities in the abstract and a trustworthy, 100% reserve stablecoin is that the value of the latter is both known ($1) and stable (at least in USD terms).
Yeah, stablecoins really are as simple as naming it a stable coin and pledging 100% real currency backing, so long as you can convince traders you are trustworthy. E.g., I have some confidence Coinbase is trustworthy; I have zero confidence Bitfinex is trustworthy.
- Decentralized transactions
- 24/7 access
- Low fees
- Store of value
I suppose the only drawback here is that they're issued from a centralized authority. That said, for practical purposes the vast majority of Bitcoin holders didn't mine their own coins either.
Despite this, no one on Twitter[1] seemed excited. In fact they seemed upset that Coinbase didn't announce support for their cryptocoin du jour (mostly Ripple or Cardano). This is a recurring theme on all the subreddits I've visited: People rarely care about the usage of their cryptocurrency, they're only interested in its price.
A cryptocurrency that stays the same value is not very interesting to traders and therefore most of the cryptocurrency community.
USDC tokens are ERC-20 compatible and can be used with any ERC-20 compatible digital wallet. However, a global blacklist is maintained by CENTRE for USDC, which prevents tokens from being sent into or from blacklisted addresses. Reasons for blacklisting could include known fraudulent or illegal activity, or a legal order or process. Reserves associated with USDC balances held on blacklisted addresses may be wholly and permanently unrecoverable.
https://support.usdc.circle.com/hc/en-us/articles/3600160603...
How bad this is is yet to be seen. Anyone who has experience with PayPal freezing their account knows that it can be very frustrating when a company freezes your accounts for some unknown reason and then does not communicate with you.
Their value also depends on how many USD's stored in that bank account (not transparent to ordinary people), and the inherent problem with USD - that the FED, a central authority prints it, remains still.
There are other - in my opinion more honest - crypto-only stablecoins, like Dai (of MakerDAO) or Augmint, which are not freezable by any authority, nor cheatable by bribed auditors. They are backed solely by crypto assets, all transparent.
Does anyone have the token contract address? I am assuming the blacklist is part of the smart contract based on the above wording, though haven't had a chance to look at the code. If it's not part of the code and only exists on exchange wallets then I see what Coinbase is doing as more reasonable.
* Your tokens can be tainted, for instance because they were once owned by a blacklisted address. The value of your tokens will be effectively 0.
* The issuer might run a fractional reserve (this is the accusation against Tether, the most popular stablecoin at the moment)
* The asset backing the stablecoin might not be backed by anything. It's not worth getting into FED policy here, but let's just say that a stablecoin denonminated in Venezuelan Boliviar is not attractive.
> Stablecoins seem like they would achieve most of the goals of the original cryptocurrencies such as Bitcoin
The original goals of cryptocurrencies (Bitcoin, to be precise) were exactly to avoid the problems that stablecoins have.
Very important to note - a stablecoin running a "fractional reserve" in the way that people talk about would just be fraudulent/insolvent.
Modern banks have actually never operated under the "fractional reserve" model as described in economics textbooks, but it's true that they only a fraction of their assets are held as bank reserves. Very importantly though, solvent banks always have more assets than liabilities (customer deposits are a liability to the bank). Usually a lot of those assets are loans, but they also hold bonds and other investments.
If Tether has issued a single token without an asset to back it that is worth at least US$1, then that's not operating like a bank does, it's just fraud.
Correct me if I'm wrong but Stablecoins sound like the opposite type of thing that Crypto-anarchist(s) behind Bitcoin tried to achieve.
> I suppose the only drawback here is that they're issued from a centralized authority
This reads in a hilarious way. Kind've like saying "I've found a perfect way to buy a car - I suppose the only drawback is that I'll actually be buying a lawn mower"
> This reads in a hilarious way. Kind've like saying "I've found a perfect way to buy a car - I suppose the only drawback is that I'll actually be buying a lawn mower"
Assume bitcoins are an attempt to bring back the older technology of coins, but on the internet.
Coins are issued by a central authority, though that isn't necessarily a large part of their value. (Even when coins are made of precious metals, their standardization does increase their value somewhat over their pure value by weight.)
The problem with USDC isn't that it's issued by a central authority. That is an asset, in that it allows for a more stable value. The problem is that you can't transfer the coins without recognition from USDC. If you've got a golden dinar, you can give it to someone else no matter what the Caliph would like to say about it.
Supposedly this should make it more desirable to regular users. But for users attracted to applications who don't actually care about decentralization, a stable coin will seem better and will be hard to compete with.
So, it seems like the true believers should be worried about having fewer persuasive arguments for adoption?
Your observations about the community is flawed. Many are just speculators but there are many, like myself, who care about the technology and the core principles. For the latter, you need to be reading a place like bitcointalk.
BitcoinTalk is the launchpad of virtually every ICO that has violated these core principles. I am very skeptical of your claim that it's a haven for those who care about the technology and its principles when they have boards solely dedicated to announcement of new ICOs: https://bitcointalk.org/index.php?board=159.0
Your goal may be to accumulate Bitcoin and develop the technology until it takes over as the world currency. An (honest) ICO's goal is to take Bitcoin or Ethereum, convert it into fiat, and use that money to fund development of an interesting new technology. A day-trader's goal is to get rich off short-term price movements. An arbitrager's goal is to get rich off of price differentials on different exchanges.
So your goal might manifest itself in the strategy of "Always buy when I have fiat available, never hold money on an exchange, and invest in promising ICOs that look like they actually have a product and interesting technology." You buy Bitcoin monthly on Coinbase, immediately move it off Coinbase into your own wallet, and buy promising ICO tokens on IDEX as you become aware of them. This makes the price of Bitcoin on IDEX lower than on Coinbase (since you only buy on Coinbase and sell on IDEX), so an arbitrager buys on IDEX and sells on Coinbase. Your purchase was a net buy of Bitcoin relative to fiat, which makes the price rise, so a day trader takes note of that and decides he's going to sell and park his money in USDC until the arbitrager comes along and sells on Coinbase. Eventually everything evens out, and Coinbase makes a profit off every transaction.
You didn't have to deal with USDC at all, and only with Coinbase as a regulated U.S. exchange where you can exchange $USD for Bitcoin. But the other participants in this market have no moral issue with censorship or centralization, and they're all too happy to take their profit and park it in USDC while they're looking for buying opportunities.
Because most people think that in order to solve the problem of a cryptocurrency, they have to also solve the problem of who gets money when you print it.
Far too many people conflate the need for electronic cash versus the need to improve upon how systems like the Federal Reserve and their International equivalents work.
Honestly, as a software engineer who understands some basic economics, I think cryptocurrency becomes far more interesting when it's not trying to solve the problem of who gets money when it's printed.
I also think that the Federal Reserve, and its international equivalents, work very well for me! I think that trying to come up with a currency that improves upon the Federal Reserve System, or equivalent, needs to be a separate technical problem than just trying to have an electronic form of cash.
In my opinion, most of the people who were excited about cryptocurrency were scam artists, the kind of people who just don't understand how money really works, or engineers who don't really understand scaling.
This was not the goal of bitcoin. The goal was to remove the need for trusted intermediaries from electronic payments. https://bitcoin.org/bitcoin.pdf
That said, I haven't yet heard anything on how transactions are actually verified (ie. Proof of work vs Proof of Stake)
Edit: It appears to be an Ethereum-based token: https://support.usdc.circle.com/hc/en-us/articles/3600154713...
I think the key difference is that Bitcoins are mined into existence according to a fixed mathematical law, whereas stablecoins are backed by something which can be printed into existence whenever the central authority pleases.
That's only true for this type of "vouchers" stablecoins, where coins are redeemable for some physical asset.
There are whole other classes of stablecoins that seek to achieve price stability through decentralized means, either using other cryptocurrencies as collateral[1], or using algorithmic bond-issuance mechanisms[2]. Multicoin did an in-depth article about this back in January[3].
>Despite this, no one on Twitter seemed excited. [...] A cryptocurrency that stays the same value is not very interesting to traders and therefore most of the cryptocurrency community.
That's the thing, the "cryptocurrency community" is currently overwhelmingly comprised of loud investors and ICO marketers. The way smaller and discreet nucleus of researchers, developers and idealists, you don't see replying to Coinbase tweets and hanging out in Reddit.
There's no mainstream usecase for cryptocurrencies as they are now, so the "enthusiastic users" community you see in more established fields doesn't really exist yet.
[1] https://vimeo.com/247715549
[2] https://www.basis.io/basis_whitepaper_en.pdf
[3] https://multicoin.capital/2018/01/17/an-overview-of-stableco...
Satoshi's main reason for developing Bitcoin is the economic model, the other stuff just facilitates this model.
This is one of the reasons why Bitcoin has the value that it does, because the supply emission curve is known and cannot be altered.
Mistaking the things that you list as core to Bitcoin's purpose is missing the bigger picture about why Bitcoin exists.
The supply emission curve is key to understanding Bitcoin and the reason people hold it.
The lack of a central authority was the entire reason Bitcoin was successful where previous cryptocurrencies were not.
Nitpick: there is at least one decentralized stablecoin: Dai https://makerdao.com/
Stable coins exist to solve the problem of moving money in and out of cryptocurrency introduced by KYC/AML. Bitcoin represents an attempt to create a system of censorship resistant transactions with an absolute minimum amount of counter-party risk. Outside of the open cryptocurrency context, its unclear if something like stable coins would be allowed to exist. Certainly when you go back in history and look at things like ecash or the liberty dollar the answer seems to be no.
you know what they say: "those who do not remember the past are doomed to repeat it".
>A cryptocurrency that stays the same value is not very interesting to traders and therefore most of the cryptocurrency community.
the reason most of the cryptocurrency community is traders, is because of the price volatility.
now that that is fixed, people can actually use crypto-currency as a currency and hopefully we can have an actual useful tool for an economy rather than a FOMO-fueled get-rich-quick hype-machine.
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I can use USDC as much as I want yet I'm Canadian and that's true for any country in the world, whoever you are, whenever you are, however you do it.
You can send USDC to/from any wallet that implements it.
This is a benefit of the blockchain, a protocol for money.
If the coins weren't issued from a central authority, I would welcome the USDC stablecoin as an addition to the crypto market.
I cannot buy a car with a gold bar. They would laugh me out of the dealership and I'd have to sell the bar for USD. People want cryptocurrencies they can hold for more than two days that won't lose 50% of their value.
The value here is ability to conduct transactions, not necessarily a stable store of value.
Doesn't that defeat the whole purpose of cryptocurrencies though? After all this authority could selectively blacklist some coins from ever being converted back to their peg currency, effectively rendering them worthless, couldn't they? You couldn't easily launder it away because this authority could decide that if these coins are used in any transaction then the "bad" coins would contaminate the outputs proportionally to their amount in the inputs, so it would mean that people would double check their inputs not to get "bad" money. So it would be effectively like trying to spend fake dollar bills (except that the authenticity verification would be quick, automatic and completely impossible to fake).
That means that on top of trusting the authority to fairly issue the coin you also give it the power to effectively censor transactions.
It's money with a standard API. Whether the actual "value" part of it is centrally controlled or not, many tools made for one will work with the other.
Depends who you ask. The cryptocurrency community thus far have been happy to participate in ICOs in which cryptocurrencies are issued from a central authority.
No currency peg has ever been defended indefinitely.
And pegging crypto to USD doesn’t solve the problem it was created for in the first place.
If you can make peer-to-peer transactions with it, then the coin operators are definitely not complying with Know Your Customer and Anti-Money Laundering laws. This will pretty reliably get the US Feds to raid your offices, seize your website and servers, arrest the principles responsible, and prosecute them. See also: Liberty Reserve.
On the other hand, if you can't make peer-to-peer transactions with it, it's basically a "blockchain" in name only. There's little advantage over traditional bank account systems. Maybe the programmability and verifiability helps? I just don't see that sort of thing doing a lot compared to the whole money-laundering use case, though.
Oddly, there's nothing about regulatory compliance (AML/KYC) or fungibility in the announcement.
Based purely on the article, one might get the idea that USDC can be traded between individuals without any third party oversight and in a censorship-resistant way.
It's highly unlikely this will be the case, given the potential for money laundering.
So... USDC users get a form of digital dollar that's more difficult to use than PayPal and the numerous alternatives because unlike those systems, the user must secure cryptographic material. Alternatively, the user will simply deposit USDC onto an exchange and gain absolutely nothing over PayPal and friends.
Even worse, should the user decide to make an on-chain USDC transaction, a permanent public record will be logged on the Ethereum block chain, which can be used in various ways with any information lost by Circle/Coinbase due to the inevitable data breaches (legal and illegal) to come.
I'm all for innovation in this space, but caveat emptor couldn't be more relevant.
But then again, if the fees are low enough (if my $1 truly gets me one token, and one token gets me $0.9999 back) these tokens are going to be useful in themselves without needing to be traded on seedy exchanges.
It would be great for taking micropayments on online services.
The thing I worry about is how these tokens are set up. If there is central control, can the governing bodies at any time decide to deactivate my tokens? I'd like to see the actual "contracts" behind these tokens. And even then, the contracts can change and be updated. Obviously there are some regulatory protections, but that won't fix people hacking these contracts.
I guess what I'm saying is, "hmm, interesting, I'll check it out in a few years." Until then I'll likely just use it for hedging against other cryptos while speculating if/when I decide to get back in the market.
http://www.shirky.com/weblog/2009/02/why-small-payments-wont...
The real model here is Patreon. Patreon is (well, was) about bundling payments to make recurring micropayments practical. Their execution has issues (it's also highly successful) but the fundamental idea of recurring micropayments is totally sound. Audiences are receptive to it, and creators can legitimately support their work with this kind of aggregate payment.
https://github.com/centrehq/centre-tokens and https://github.com/paxosglobal/pax-contracts give you some idea. There is obviously an external system minting and burning these tokens.
Happy to answer any questions that people have — also, just wanted to make a plug that we're hiring. If you're interested in building an open financial system for the world, shoot me a note at jpollak@coinbase.com. Especially interested in iOS & Android engineers!
A fiat-world analogy to this would be to imagine if spending Euros required you to hold US Dollars to pay the transaction fees.
Why not just use Chaumian ecash [0] - which is perfectly suitable for this purpose and doesn't require mining?
[0] - http://sceweb.sce.uhcl.edu/yang/teaching/csci5234WebSecurity...
David Chaum probably asked exactly the same question, and starting working on his own own blockchain and cryptocurrency[1] in 2015[2]. I'm a bit sad he didn't call it eCash 2.0.
[1] https://www.prnewswire.com/news-releases/announcing-david-ch...
[2] https://www.prnewswire.com/news-releases/global-investors-ba...
https://medium.com/poa-network/poa-network-partners-with-mak...
Here's the website: https://www.centre.io/usdc
Here's the whitepaper: https://www.centre.io/pdfs/centre-whitepaper.pdf
There's very little about who actually has custody of the paid-in money and what guarantees it gets paid out if "stablecoin" outflow exceeds inflow. The "smart contract" machinery doesn't really do much about that part.
Tether has been vague about that, too. Tether has been trading at a discount to the dollar, lately about 3-5%.[1]
The usual failure mode is that whoever has custody of the money starts investing it. They don't have to pay the profits to the coin holders. Then they start making risky investments. Then they lose money. Then they start faking it. In the real brokerage world, they go to jail for speculating with customer funds.
[1] https://cryptocoincharts.info/pair/usdt/usd/kraken/1-month
This represents an odd level of trust. The user trusts Circle and Coinbase enough to purchase USDC at facevalue. The user doesn't trust Circle or Coinbase enough to keep private transaction histories.
I understand the position of fully trusting the third party (Visa, Paypal, Stripe) when combined with legal protections. I understand the position of fully distrusting third parties (bitcoin, etc). I do not understand why someone would prefer this mixed level of trust.
For example, if the keys issuing the USDC has ever been compromised, new assets can be issued instantly by an attacker, compromising fungibility and causing other problems. Whereas if Maker/Dai smart contract proves secure over time, there's no centralized issuing entity/keys to compromise. Afaik the only centralized privilege controlled by MakerDAO is the global settlement, which merely refunds everyone their ether.
We're also hiring! See https://circle.careers/
Unlike more seedy exchanges, Coinbase is based in a state with useful regulators (in this case, the US). Like others have said here, expect them to stomp the shit out of this.
Unrelated: has anyone audited the contract?
(Granted, there's a huge difference, since WellsFargoCoin is backed by the FDIC... (Edit: maybe there is not so much of a difference; see the reply by omarchowdhury. I really don't know.))
Isn't FDIC backing capped?
- Transmitting money overseas. This should be way cheaper. - Vendors who are tired of paying 2.5% to credit card companies giving a discount to using crypto.
Curious to know if this will follow AML laws. Imagine you send a USDC coin to a person overseas. It then is sent to a few other people and then someone tries to cash it out in the US again.
Couldn't Coinbase decide that the chain of send/receives is illegal with chain analysis?
The US government should launch their own stablecoin. A digital US dollar is a national need that shouldn’t be managed by a corporation in my opinion.
One scenario I can think of is a decentralized e-reader and e-book marketplace:
- you have an e-reader app that is capable of decrypting books stored somewhere, as long as the content was encrypted with your public key
- authors publish their books to contracts that accept payments via an ERC20 stable-coin
- the contract responds by encrypting a copy of the book with your public key and placing it at a location your e-reader can retrieve it
Are there inherent advantages to a decentralized book store vs. Amazon though? Not sure…
When moving fiat between two exchanges can take days and flag your accounts for suspicious activity, moving the same value using Tether is much much faster (~30 mins to 1 hour).
If one observes how does USDT flows, you'll find that it flows between the 3 or 4 major exchanges that use it, with almost no use elsewhere: no major wallets, no merchant acceptance, etc..
To name a few of the problems this will mechanically bring about:
1) counter-party risk: that money will need to be stored at some institution. However small, custody carries a risk, which means the peg will drift.
2)Even assuming the audit mechanism is bulletproof (unlikely) and the custodians risk is spread on a 1000 different institutions ... what are you going to do with that huge stash of backing USD sitting idle in your coinbase/circle bank accounts? How long do you think it's going to take for someone to realize that the money can be "put to work"? Or that actually holding the full amount is a very unnecesary thing to do. Or that banks hate carrying huge idle USD deposits and will likely try to charge you for it?
There goes the peg.
Unless of course, like Tether did get away with for quite a long time, you're smart enough to let the world behave you actually have the USD backing the coin.
I'm actually quite interested in the outcome of this, especially because of transaction fees for credit card payments are so high. For some places in Asia, Japan in particular has credit card transaction fees of in the 3.6% range and going up to 4.5% for international cards.
For businesses selling services in the $2500 range, just at 3.6% of this transaction becomes $90 in fees just for a single transaction. Which, I think, is quite high just for moving a digital asset around.
While the prospects of "trading" this asset might not be as interesting, the potential for far lower transaction fees for people running a business seems very attractive to me.
Blockchain is a Semantic Wasteland: https://news.ycombinator.com/item?id=18267585
There are a few cryptocurrencies that are actually interesting. This is yet another nonsense money grab.
a distributed systems of ledgers, where banks attested to the amount of cash, in their vaults.
... ... ...
You can certainly make peer-to-peer transactions with it.
But I think you are misinterpreting the KYC laws. Circle (who operates USDC) isn't trying to be secretive about this. They are regulated as a "money transmitter" and a "money services business" - https://www.circle.com/en/usdc . IANAL but Circle certainly seems prepared to take on any legal risks involved here.
A part of KYC regulations is often also the question, "how did you get the money". So
> Everything that happens in between is not really their business.
is probably not true.
USDC seems to be more about smart contracts than crypto currency as envisioned by the early adopters.
Programmability and verifiability alone of the "old money" could open new applications, new experimentations, new use cases. It's definitely a nice initiative IMHO. It looks like an intermediate step, or another variation, to get more people interested into digitalization.
You can do that with non-stable coins too, but this would be more attractive due to the predictability of it's value.
All the while Coinbase make money off the never-ending interest. And one day they may go fractional too.
Their implementation is happening a bit slower due to the novelties but it offers the MKR which is a profit incentive for proliferation, and may be more resilient than centralized stablecoins
Who are your custodian banks (how many)?
Who are your auditors?
Will you be holding exactly one USD for one token?
Will the backing be just USD sitting in a custodian account or do you plan to invest them?
How are you going to deal with the fact that your custodians will likely be doing fractional reserve themselves?
How will you guarantee fungibility of the token?
We work with a number of banking partners around the world but generally don't publicize this information.
Circle will begin publishing its USDC-related reports on centre.io after public launch. We have engaged Grant Thornton LLP to apply on a monthly basis certain agreed-upon procedures to assist management regarding the accuracy of USD reserve balances for the USD stablecoin tokens issued as set forth by the Company.
We will hold exactly one USD for one token. In the future, we may also invest these fiat funds in highly-liquid, AAA-rated fixed income securities.
The coins minted by both Circle and Coinbase are mutually fungible. You could acquire USDC from one and redeem it at the other. Support for multiple issuers is an important differentiator for USDC.
More information on this is available at https://support.usdc.circle.com/hc/en-us/articles/3600152783...
Ethereum tokens have far wider support among industry players and consumers, and a far larger set of compatible applications (e.g. state channel networks that allow near-free and instant ERC20 transactions, like Celer).
>>while their token contracts are way easier to setup
Setting up an ERC20 contract is literally a copy, paste, brand and broadcast job. In any case the technical cost of setup is not a factor that's relevant to large companies.
Historically that's basically how banks have made money. Issuing bank notes while earning interest on the capital they hold. Typically they juice the rate via fractional reserve lending, ie they lend out more money than they have. However if they aren't able to do that, they still get to keep the interest from the deposits (say by buying Treasuries).
My guess is that the stable coins will continue to be more and more common, but then cryptocurrencies will rediscover fractional reserve lending, and new ideas like pegging a coin to the S & P. The pegger will charge a small service fee, the holders will be able to rapidly move money they spend, almost instantly between S&P (or other basket) pegged coins and stable coins.
There will be enough competition over being the holder of stable coins and enough competition in that system they I would expect them to offer rebates on transactions, and not have to charge merchant fees. And since they will be centrally cleared and not have to deal with mining and so on, the transactions ought to clear instantaneously.
So we invented a less efficient ETF which has the added bonus of keeping regulators and securities lawyers employed until the post-quantum world.
If that's the case I wish they were up front about that fact. I think its completely reasonable that they would keep any earned interest as compensation for managing the coin, so just be honest about it.
Coinbase needs to pivot from the pyramid scheme economics of the early coins and instead focus on transaction volume.
Probably this part will change on the fly, same as with Tether scam.
"Specifically, a household is categorized as underbanked if it had a checking or savings account and used one of the following products or services from an alternative financial services provider in the past 12 months: money orders, check cashing, international remittances, payday loans, refund anticipation loans, rent-to-own services, pawn shop loans, or auto title loans."
I used a money order a few years ago, so that year I was officially underbanked, despite being educated/wealthy (I have a PhD and I'm an accredited investor.)
[0] https://www.fdic.gov/householdsurvey/2017/2017report.pdf
In part they don’t have bank accounts because they’re poor, so they don’t have money to put in them. If they weren’t broke they’d have bank accounts. IMO this is more a function of wealth inequality in the US than of banking.
Think about it, you’ve got $0. Now I give you a fee free bank account. You’ve still got $0. You’re no more included in the financial system.
Finally, all the popular stable coins are literally indexed to the US dollar, so you can’t say USDC/USDT is great then whine about the USD right?
C'mon. We all know why the Fed targets a relatively consistent rate of inflation. It's because deflation suppresses consumer spending. Not what you want in a consumer economy.
Most of the cryptocurrencies out there have lost that much value since January.
For a stablecoin to operate like a bank they would have to issue loans (loans are an asset to the bank to match the deposit created when they lend. A regulated bank also needs a certain percentage of owner's capital (paid up shares/retained profits) compared to how much they lend in case of delinquent loans).
A stablecoin just creating tokens with no backing would be fraud, same as if a bank just credited an account from nothing.
Even the golden dinar would have the problem if it were nominally worth, say, one silver shekel, and the Caliph switched to demanding jizyah in shekels. All of a sudden, absent a massive bank keeping the 1:1 dinar:shekel peg, the dinar would drop in value and the shekels would rise relatively.
The problem is, of course, compounded when the coin becomes a slip of paper, and again when the paper becomes a mere number...
Buying MKR and supporting Dai might be a good strategy.
>Improved send and receive. Two Ethereum wallets can quickly send and receive any amount of USDC at any time of day. Large transfers for business purposes become as easy as small e-commerce payments. Consumers can use the Coinbase app to send USDC to someone, while remaining confident the value is stable.
>Use in dApps and exchanges. There is a burgeoning ecosystem of crypto dApps, exchanges, and blockchain-based games. A USDC follows the ERC20 standard, which means it can be used with any app that accepts tokens based on that standard. The USDC can thus be used as a stable digital dollar to buy items in the crypto ecosystem, from Cryptokitties to tickets for blockchain-based games.
>A programmable dollar. For developers and fintech companies, a digital dollar like USDC is easier to program with. For example, given the private keys for USDC, a program can easily send and receive them back and forth using the public Ethereum blockchain.
The people buying ICOs are looking to get rich quick, the people interested in decentralised money are not buying ICOs.
How do they operate, if not under the fractional reserve model?
As I said, the confusion many people have is that it is correct that bank reserves are a fraction of the bank’s assets, so the name “fractional reserve” would intuitively seem correct.
This is a good description of how they actually work from the UK’s central bank: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
Denominating in gold or lambos or USD doesn't get you around KYC/AML laws. Decentralized ERC20 tokens designed to transmit money are inherently illegal, and setting one up will get you a visit from the SEC if you can be traced back to it in any way. There is no end-run around this, this behavior is literally the exact thing KYC/AML laws are designed to prevent.
(This coin gets around it because it is not decentralized - only the company can mine blocks on this chain, and they can block transactions at will and validate IDs/etc when transacting back to USD. This allows them to enforce KYC/AML. They are aiming to be a licensed money transmitter.)
[1] https://support.coinbase.com/customer/en/portal/articles/263...
Coinbase might be able to pull it back, but that doesn't prevent me from sending it at-will in the first place.
USDC tokens are ERC-20 compatible and can be used with any ERC-20 compatible digital wallet. However, a global blacklist is maintained by CENTRE for USDC, which prevents tokens from being sent into or from blacklisted addresses. Reasons for blacklisting could include known fraudulent or illegal activity, or a legal order or process. Reserves associated with USDC balances held on blacklisted addresses may be wholly and permanently unrecoverable.
https://support.usdc.circle.com/hc/en-us/articles/3600160603...
Or rather, it's "decentralized transactions" in the same sense that Paypal users are decentralized when they initiate transactions. You ask, and Paypal decides whether to send the money.
In this case, you ask, and CENTRE decides whether to include the transaction in the blocks they mine. Same thing, But With Blockchain™.
Of course, it's illegal to operate as an unlicensed money transmitter, and trading bearer bonds does not change that, so if it was truly decentralized they would be going to jail once the SEC got around to paying them a visit. People have been trying to get around such laws for ages and the law takes a very dim view of it.
Dollars can be transacted, online and offline, through a variety of means ranging from at the Federal Reserve to totally de-centralised.
I have no position in any cryptocurrency and am not trying to argue that USDC is better than USD. I'm just saying that stablecoins achieve most of the goals of a decentralized currency yet despite this they are not appealing to today's cryptocurrency community.
Cash.
(There is no way to send electronic dollars without involving a third party, though more money is laundered using dollars and euros than cryptocurrencies. I'd argue leaving a permanent, public record of transactions is a poor price to pay for decentralized electronic transmission, particularly given the centralized issuer and guarantor problem.)
Isn’t that the same as bitcoin and every other cryptocurrency? You need a cryptowallet (third party); a device (third party); and internet access (third party).
It could be argued that this requires permission as well since there will be 'know your customer' laws that surround buying and selling them, but to what extent they will require permission might remain to be seen.
Decentralised anything doesn't (yet!) matter to most people in the world who use money, but it does matter to people it matters to.
Just because you don't care about decentralised issuance doesn't mean nobody cares.
This is not solving a problem that isn’t otherwise solved except money laundering and skirting AML/KYC rules. Look I may well be wrong, but can you suggest a use case I haven’t considered?
Sorry I didn't see your message until 10 days later. Did you know that the internet is worldwide? I do use an e-Transfer to transfer cash in Canada but more than likely, a transfer on the web will need to be done internationally. A stablecoin is a way to make sure the value is secured, at least as much as what it's backed on and the company holding it, for the duration of the transaction.
Any Canadian Exchange (and not a specific provider) could hold that stablecoin and many people will do arbitrage over it which will make sure I will be able to buy it easily for a minimum of fee.
That's specifically for me as a Canadian in a first world country too. A stablecoin allow that in ANY country, no need to do a case by case.
There isn't a single country in the world today where you can't spend a US dollar. Canadians will happily take them, especially at a 1:1 exchange rate.
The strongest argument I think I can construe from your statement is that every country has at least one place where you can spend a US dollar but I don't think that's very useful.
If you bring a 20 USD bill to Europe, head to the center of a major city and try to spend it, I think you'll have a pretty hard time handing it to a shopkeeper. You'll have trouble spending it at all save for exchanging it for the local currency and handing that to a shopkeeper.
I could see a decent amount of usage for dApp developers or anyone who wants micro transactions on their platform. That being said, “stablecoin” is probably quite useless outside of that very narrow use case.
Then they'd just cash then in at coinbase, right?
As you can imagine, Circle maintains fairly sophisticated minting operations able to execute around the clock. All that is necessary for coins to be minted is for Circle to broadcast a properly signed transaction.
Now, of course, Circle can't just mint a limitless supply because we have a minting allowance set by CENTRE. While CENTRE itself can't mint coins, they do operate a minting allowance system with around the clock availability which can grant Circle a additional allowance per a ruleset to effectively manage risk.
This might seem to be getting into the weeds a bit but support for multiple minters (Circle and Coinbase here for example) is a significant differentiator between USDC and other reserve backed stablecoins.
[0] https://support.usdc.circle.com/hc/en-us/articles/3600152783...
Fair point. What I’m really interested in seeing is if they can maintain their peg.
Having spent some time in YT, I've found Canadians to be extremely agreeable. If you opened your wallet in a shop in Dawson City and said "Drat, I only have USD. Can you work with me?" I can pretty much guarantee they'll take your money - perhaps at a small discount to compensate them for the trouble.
I've traveled pretty far and wide. You really have to look hard (or piss someone off) before they'll reject USD. It spends easily.
Low income folks get wrecked disproportionately by the high fees associated with physical retail banking (including ATMs). They charge flat fees (like Cryptos incidentally) which function as a regressive tax on the poor. Digital banking, by virtue of not having to deal with real estate and physical assets is more efficient and cheaper.
If you withdrew your life savings in cash, that cash couldn’t become corrupted, unless by physical damage. Your life savings in cash would also be large enough that you wouldn’t be likely to lose it, or have the container it sits in easily stolen or accidentally smashed. You also are not very likely to forget or misplace the password to your cash.
Or, you could just use a credit card and have fraud protection.
The real kicker is whether the other criminals are willing to accept bitcoin which they know won't convert to USD.
Moreover there seems to be a misunderstanding, square cash allows you to instantly move money between bank accounts, via your bank, have at it, totally interoperable because dollars.
Same with Venmo, and PayPal, and everything else...
Venmo and PayPal are even owned by the same company. Have you ever asked why they're not interoperable?
The ACH system underneath links all US bank accounts, but it's so slow and burdensome that private companies need to build apps on top of it that abstract away all of its problems.
None of them work together because regulation makes the operation of money so difficult that you need an entire company to run such an app, and they're all walled gardens applying their own versions of KYC/AML.
When you have a unified protocol, all of that melts away and the opportunity for money to have a higher velocity and greater ease of use is upon us.
This is what blockchain, and in this case USD Coin based on it, provide.
It seems silly to me that such a system would not become popular. Interoperability and protocols are good. They are something HN is typically in love with.
When google tried to remove basic support for one protocol for contacts from Gmail, people were up in arms because it broke interoperability.
Imagine being in that world with money. I don't know why you wouldn't want it. It's superior by all measures.
And it would be silly for anyone in that world to create a wallet that didn't support such currencies. It would be like creating an email client that only lets you read email from other users of the same service. That's not email, that's just a private messaging platform.
I think you have to look towards the future and see how, if adopted, things like this would make money easier to use. Rallying against that is silly indeed.
I think the interoperability is nearly solved for the quick transfer world as well. Cross-border is solved through remittance schemes as mentioned up/down thread.
ACH is for cheap, remote batch transfers. Fedwire is for real-time, remote transfers. Cash is for cheap, real-time, in-person transfers. (FX exchanges, as centralized databases, are faster and safer than stablecoins.)
Hey wouldn’t you know it they support their own stablecoin, but not others...pretty sure that’s the type of centralization cryptocurrency/Blockchain was trying to avoid.
Then, you say that USDC is superior, because it cannot communicate with the other two.
I'm saying its superior because if adopted it would unite the two.
Almost certainly not. They would trade at a premium or discount, depending on a number of factors.
Think of the stablecoin as an ETF. If people need to launder money or take advantage of a programmatic bug, that would raise the stablecoin price over $1.
By default, I'd imagine the reduced liquidity and counterparty risk (relative to dollars) would cause the stablecoin to trade at a discount to cash, particularly when auctioned by the government. (You have to spend resources monitoring the auction, closing the transaction, and cashing out to complete the arbitrage.)
Of course they have to make more compromises to accommodate the side with the guns, than the immaterial one.
The common protocol is that they both link to your bank account (“wallet”).
Additionally, I need a debit card or bank account to use them at all. With crypto, you don't.
The cost of regulation is a decrease in both convenience and innovation. By eliminating regulation, you get a whole host of new startups that were previously held back, some of which solve genuine problems that have no existing solution. Consumers flock to these startups because right now, in this moment, they solve problems better and are more responsive to customers than the existing regulated incumbents.
Many regulations solve problems that only appear at scale, so as long as the new startups are small and voluntary, regulators take a hands-off approach and let these startups enjoy their competitive advantage. It takes time for regulators to catch up, so for several years, these new solutions can grow and get new adopters. Eventually all the bad behavior that caused the regulations in the first place appears, and there're calls for regulation, and the new boss starts to look an awful lot like the old boss. But people don't make their purchasing decisions based on what's going to happen in 20 years, they make their purchasing decisions based on what they need now.
You see this with a lot of dot-com era startups. People knew in 1997 that Amazon was going for monopoly and was just going to jack up prices when they achieved it; hell, Jeff Bezos even told investors as such. But consumers didn't care: we wanted convenience and low prices now, and even if we did without, other people would give Amazon their business, and all we'd succeed at is disadvantaging ourselves. Similar with Facebook; most people knew they were trading away their privacy (Zuckerburg's "dumb fucks" IM was made public in 2010, and he said it in 2004), but goddamnit, people wanted to see what their grandkids were up to.
It may end up rebuilding the current regulated banking system. But if the regulated banking system and the unregulated banking system are sitting next to each other using tokens that are interchangeable with smart contracts, that seems like it could be useful.
Also proof-of-stake has been promised for so long I would be embarrassed to talk about it if I worked at the Ethereum Foundation. Delivering things that work isn't their strong suit.
Division of tasks, and specialization naturally trend to hierarchical organization for the same reason divide and conquer algorithms are so efficient. Separation of concerns is powerful.
There is much different of 5-6 shoemakers picking the same person to handle their finances so they can focus on making shoes. But, how many shoe makers can offload their finances until you have a bank?
Buy Treasuries. Or shares of stock. This is the point of inflation: it forces savers to invest time into productively allocating capital.
There, we just saved you from having to go to an Econ class :P
Below is a list of 590+ failed fiat currencies, 150 caused by hyperinflation. Seems the Straw Man argument is yours alone.
Inflation does mean that the spending power of a currency decreases. No argument there. But guess what! Wages increase(d) relatively in line with inflation. If a snickers bar used to be $1 when the average salary was $10000; and now it's $2 when the average salary is $20000, then the actual cost of a Snickers bar has not changed, in simplified terms. I see no problem here. It also intuitively makes sense, that as the population of capital producing workers grows, so too does the GDP. These people need currency issued, too, otherwise, the currency would be deflationary. So new currency is issued to prevent deflation (just 1 example of why it's issued) and keep the currency in circulation in line with production.
> 150 caused by hyperinflation.
Like, for example, the Bolivar? or the Mark? That's actual hyperinflation. ~2% inflation YoY doesn't mean hyperinflation. This is Econ 101.
Below is a list 1000+ cryptocurrencies, 99.9% of which no one has heard of, many of which have lost 90%+ of their value in a matter of months.
And if you're going to split hairs by saying DHL, USPS, and FedEx are considered third parties, then so are Comcast, Verizon, and other ISPs who provide you the means to transact.
Yeah but that third party is everywhere, available to all (US isn't the only country in the world you know?) and isn't aware you are using his service for sharing cryptocurrencies or simply reading Hacker News.
The current third parties for transferring money, well they all fail one or multiple of theses while cryptocurrencies dosen't.
Stablecoins, on the other hand, have zero advantages over U.S. dollars. Backer goes bust, someone steals the dollars, someone freezes their accounts, et cetera and your currency is worthless. A trusted third party rests at the centre who is less regulated and guaranteed than a bank.
(I'm sceptical that these schemes will pass AML muster. Using a stablecoin over U.S. dollars makes sense if you're (a) incompetent or (b) laundering money.)
The real issue here is getting a USD-ETH oracle.
This is not so. Coinbase and Gemini (I haven't checked others but I'm sure they're the same) will freeze your assets entirely if required by law or if you violate the user agreements in some flagrant way [0] [1].
[0] https://support.coinbase.com/customer/en/portal/articles/190...
Just trade on all the other less regulated exchanges. Or localbitcoin. Or, you know, buy stuff.
> and speculation is crypto’s only use case today.
Or you buy stuff... For example:
* Webhallen (huge Swedish online shop)
* scan.co.uk (uk based computer online shop)
* purse.io (buy stuff from amazon)
* fastmail (emails)
* VPN/VPS/domains from various providers
* darknetmarkets
Like I side, speculation is the only thing you buy BTC for (moon!!!111), and the exchanges will prevent you from doing this if you are related to blacklisted accounts.
Because they give discounts up to 15%.
I'm sorry it doesn't fit your narrative but there are reasons to prefer cryptocurrencies.
You've ignored the rest of the list in the comment you’re replying to.
edit: Perhaps the lesson here is the more useful something is, the less freedom you have in using it. After all, why would regulators care if you can "use bitcoin" when "use" means "play with my private keys".
It's a bad compromise. If you want the cheapest transfers, you batch them. (This is the logic of Lightning.) If you want the most reliable transfer, you wire it. If you want to be sneaky, you use cash. (There are other reasons to use these modes.)
Batching being cheaper and slower than RTGS is fundamental to payment economics, irrespective of whether in an electronic database, armored car or blockchain. I go into this in a comment from about a year ago [1].
The simplified form is that a "gold-rush" mentality in an entrepreneurial bubble, even though it misprices risk generally, incentivizes builders to go build things more than they would, and since on balance building things is good, a hyper period of new venture formation still leads to net gains even if most are failures.
But nostrademons has a next-level mechanic here -- the idea that stage and scale are not fractal, and hence that rebuilding an ecosystem de novo (perhaps in a sort of sheltered petri dish) can yield big interesting beneficial outcomes because of the plasticity of things at the smaller scale and earlier stage.
(Still, I think it's a monumentally bad idea to acquiesce in the rebuilding of the financial system de novo by amateurs.)
Is that really the story of the past 21 years though? Instead it seems like Amazon has still not achieved monopoly in retail, and they still aren't getting amazing margins from it.
Ask yourself if the discount is worth the risk of experiences like this:
https://www.reddit.com/r/Bitcoin/comments/4zczow/my_experien...
We all have narratives, buddy. Mine just doesn't hinge on gambling and crypto-anarchic utopia.
How much do you lose in fees when you buy crypto? 1-2%? Plus insane volatility. If you’re low income that volatility is crippling.
It's more fundamental than accounting. If a transaction costs X, aggregating N transactions into a single transaction reduces the per-transaction cost to X/N. The latter, batched process will always be slower and cheaper than the former.
(If a transaction costs Y%, aggregating bilateral transactions allows for "netting out," thereby reducing costs while increasing latency. For example, suppose Bank A sends Bank B $10, Bank B sends Bank A $5 and the Bank B sends Bank A $2. Real-time systems would see 3 transactions of $17. Net-settlement systems would see as few as 1 transaction for $3.)
If you remove these burdens by having a technology that is cheap and nearly instant for all payments, then there's no real need to batch.
We're not quite at cheap + instant with crypto, but there's nothing preventing it in principle. And when we get there, there's no reason batching needs to continue to be part of the equation, at least not with the same tradeoffs.
They're slow to enable batching. Fedwire is time-limited, but many other real-time payment networks are not.
> If you remove these burdens by having a technology that is cheap and nearly instant for all payments, then there's no real need to batch
Yes, there is. To make payments even cheaper. For any given transaction price and speed pair, there's a market that cares more about price than speed. You'll always be able to layer a net settlement layer on top of an RTGS network to serve that market at lower cost.
In any case, if we're arguing for RTGS, it will always be faster and cheaper to transfer money via database operations than on a blockchain. Fast and cheap are not–and should never have been–cryptocurrencies' selling points.
Once you've shamir-secret-split your multi-sig cold-storage private keys, laminated them, placed them in fireproof envelopes and dug them deep in the ground in 5 different continents... what exactly do you DO with your BTC?
> There's nothing preventing you from taking your BTC to some other exchange
I've already showed you that exchanges can freeze your assets, so yes they can prevent you from sending to other exchanges.
> some guy that accepts BTC for goods or services. That's the beauty of this whole decentralized thing.
If your marker for decentralization is currency adoption, then USD is the most decentralized.
I thought we were passed this whole "Bitcoin is not created by humans" meme...
If you have some time, rent mining power with BTC, and get freshly minted totally clean bitcoin in return.
Alternatively, think about what price stability really means. If a loaf of bread costs $1, an hour of work $10, a barrel of oil $50, and a house $500k today ... how do you really ensure that they cost exactly that in 50 years when you come to retire? You can't. In a real economy there are real reasons for shifts in the price level.
Your point is well taken, however it needs to be made clear: exchanges can only freeze those assets which you yourself have placed in their control.
Isn’t the point of Bitcoin not to have private transfers?