For anyone in the nexus community who doesn't think we need to start pursuing a stablecoin construct now.
I appreciate the responses from people. I’m glad some see value in at least pursuing this in future. My access to technology is limited during the week so I try to respond with condensing my thoughts in one mode.
The most common nexus related response concerning a stablecoin was that our network effect needs to grow before we can pursue implementation of such as system. Its naive to think that the communities eventual solution to the problem could be ready before tritium mainnet comes, even with serious delay. The research and debate for a prototype alone would outpace mainnet.
Tritium is ready for the security audits by ISE, so it seemed a reasonable time to put forward ideas around the need for a stablecoin. The development of a stable currency regardless of the type takes a tremendous amount of energy/modeling. While I understand that implementing contract infrastructure for enterprises is the priority I cannot help but think that the absence of a stable currency fundamentally limits enterprise use cases. To properly build network liquidity and usability we need fuller financial infrastructure (featuring stablecoin construct) so we can attract a larger portion of the present and future commerce through distributed ledgers. I perceive this as a lengthy, important and difficult enough task to warrant serious exploration, possibly funded through the fee system once mainnet fully deploys.
In the time a working group could start at least some research around the possible options for the community to pursue longer term. I'm biased since I've looked primarily into the maker system, but their community sources a ton of information around stablecoins. https://github.com/makerdao/awesome-makerdao#critiques good place to start for any interested parties.
It’s nice that other communities are working on this problem. We can get a stronger jumping off point without fumbling in the dark as much. If your interested in the debate around these topics I respond to community members criticisms of dai below
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To keep up discussions around stablecoin mechanics, here are some perceptions around the dai system I received that don't accurately represent the mechanisms at play. Part of a comment from nustiman on slack.
“ I have a miner friend who used DAI for his ethereum stash and lost alot due to being liquidated.”
Owning dai does not require any interaction with the mechanism of dai generation (smart contract based over collateralized debt position (CDP) with eth as the only current collateral choice). Your miner friend was liquidated because the value of the eth locked in the CDP eventually fell low enough that the loan was not sufficiently collateralized. Perhaps they drew a risky amount of dai and a quick price movement forced liquidation (under 150% collateralization currently), or things just went south at the wrong time. Either way, beyond the data it creates for dai governance considerations, their loss had little to do with the stability or usability of dai as a medium of exchange. The system functioned as it should. Collateral types with volatility will force liquidation because some people try to draw maximum leverage.
From u/diskr8 on reddit:
“As for alternatives to DAI I think idealmoney.io Ether Dollar is better concept, although not implemented on mainnet yet. It doesn't have a governance token. Main reason to have a governance token is to justify ICO. No token- no ICO. Instead governance can be carried out by users of stablecoin with no fees. Maker DAO's fee system resembles current financial system where money is lent out at an interest and to settle loan more money have to be returned. Where does that extra money come from? Economy should grow like a cancer and more loans should be issued to pay interest/fees. Here is a summary of Ether Dollar advantages https://medium.com/ideal-money/why-ether-bank-when-we-have-makerdao-45e9f5a17726” https://www.reddit.com/r/nexusearth/comments/c2ydq2/necessity_of_a_stablecoin_within_the_nexus/
Maker did not have an ICO. Ether dollar seems to fail to address basic issues around smart contract loan dynamics. Automatically raising the collateralization ratio would terminate loans that were previously collateralized enough. Not even sure if the loan would even be terminated, they don't explain what happens in that scenario. This event would occur without any value change from eth, posing a hard to predict exogenous risk exposing leverage seekers. While they say liquidation penalties or stability fees only feeds the financial mechanism of mkr holders they fail to address how to prevent users from withdrawing infinite ether dollars. In their system the collateralization ratio would just continuously rise as users take as much leverage on their eth as possible, eventually halting the system.
It is not scalable since they only allow for eth as collateral and have no clear plans for another asset. Multi collateral dai is the true vision for the dai system. Collateral types (tokenized assets on ethereum) are voted in and deployed after being analyzed within the ongoing risk assessment framework necessary to model correlation risks between these asset types. This risk assessment also determines the stability fee and other parameters of the CDP. Any type of tokenized asset on ethereum (STOs, real estate, utility tokens) can (and will be) considered. This multi collateral type of system is absolutely essential to the growth of a decentralized collateral backed stablecoin and most definitely requires a full time governance commitment.
You will also be able to earn interest simply by holding dai. Paid by the stability fee, so another reason their argument falls flat. I don't see how Ether Dollar smart contracts could pay interest to their holders.
The part about stablecoins being able to adjust for inflation is fascinating, however I’m not sure what risks that poses or how to determine inflation rates. I do 100% agree that community engagement is critical. It's certainly the most important part of a decentralized stablecoin system.
I challenge anyone to come up with a safer, more efficient (mostly) decentralized stablecoin system than what makerdao is attempting. Deal with the conflicting risks at play and it's difficult to develop a different model.
