Stablecoins: The Bedrock of Decentralized Finance

Published on
January 27th, 2021
Duration
22 minutes

Stablecoins: The Bedrock of Decentralized Finance

Expert View - Crypto ·
Featuring Greg Di Prisco

Published on: January 27th, 2021 • Duration: 22 minutes

Greg Di Prisco, head of business development at the Maker Foundation, breaks down stable coins and their important role in the crypto ecosystem. He explains MakerDAO and its stable coin Dai, and he compares and contrasts this to other stablecoins, pointing out that Dai is permissionless and decentralized while other stablecoin projects are often centrally controlled. Di Prisco explains that Dai is the most integrated decentralized stable coin in the crypto ecosystem, demonstrating its extensive use in money market protocols and even in gaming. He also touches on DeFi as a whole, describing that it is still a very young development in the crypto sector, but that he hopes that it may one day replace all financial infrastructure. Filmed on January 22, 2021.

Key Learnings: Stable coins are crucial infrastructure for decentralized finance. There are a variety of stable coin types on a spectrum from centralized to decentralized. Stable coins, such as Dai, are already being used in a variety of use cases, showing a strong product/market fit in the crypto ecosystem.

Comments

Transcript

  • MS
    Martin S.
    7 February 2021 @ 13:14
    The Austrian view is definitely missing here...to say that money is “...debt we owe each other...” is a fundamental mistake that will permeate all yhe infrastructure built on that premise. Thanfully, Nick Szabo never saw it that way, which is why bitcoin will continue to succeed. Now...what is that thing with the peg that so fascinates so many in the community? Nassim Taleb would tell you that building a system (i.e. stable coin based DeFi) on the basis of an unmutable exchange rate is the perfect example of ad-hoc fragility. What people miss, in my opinion, is that stability does not stem from a fixed trade value, but from fixing the freedom to trade. If instead of pleasing regulators to let them peg a crypto currency to a fiat one on the basis of standard deviations monitoring, DeFi entrepreneurs fought for a regime with no bailouts but a solid legal framework to trade cryptos vs. fiat or physical assets, the system would be way more robust in the long term. What they are building now will eventually end in a masaive bankruptcy and regulators saying: Told you so...and all because the concept of money was misunderstood in the first place.
  • IW
    Ian W.
    3 February 2021 @ 06:55
    This was an interesting interview in that I learned how DAI isn't really meant for storing value so much as it is itself a DeFi instrument in which you get a "stable loan" against your collateral rather than US Dollars. It's a bit mind bending to me why you'd want to do this rather than just tokenize "real" dollars via something like USDC or Paxos, but I think his hint about lack of regulation is probably the answer. This strikes me as extremely suspect. The discussion on how DAI is able to stay stable was incredibly light, and a discussion of risks was entirely absent. That should be like... the most important thing to any stablecoin holder, no? I had a hard time finishing this once he stated that a diversified portfolio of collateral would have a net volatility of zero. This sounds like a misstatement of Markowitzian portfolio theory (which has plenty of other problems) which actually states that diversification brings you closer to the *market* portfolio. I am personally a bitcoin and ETH bull at the time of this writing, but there is a non-zero chance of much of the collateral backing DAI going to zero and/or having extremely high volatility. I get that there is currently a smart contract that will sell collateral etc. (breezed over) to keep the peg, but this is a massive risk to holders that Greg seems to under-appreciate. TL;DR at a minimum. DAI seems to have a lot of embedded tail risks that the community promoting it is not really acknowledging, and they seem to misunderstand portfolio theory. These risks are not present in most of the audited, regulated stablecoins.
  • BD
    Ben D.
    30 January 2021 @ 15:06
    this guy speaking about DAi has never heard of pUSD of pegnet.org, the foundation for deFi that has every govt fiat as stablecoins, along with pegged assets. no ceo, no ico, no counter parties, no collateral/reserves, REGULATION PROOF, 1/10 cent conversions, tons of exciting development with this game changing dex. swap/send any value for 1/10 of a cent
  • TV
    Tyrell V.
    30 January 2021 @ 11:58
    The concept of money as a debt obligation is so keysian it hurts! Debt is debt, and it should not be conflated with the concept of money... like confusing the concept of aerodynamics with air traffic control...
  • MJ
    Marius J.
    29 January 2021 @ 13:44
    10/10
  • TC
    Tarigan C.
    29 January 2021 @ 00:57
    Mantapz btw stable = no volatility = no good trading ??? benarkah?
  • DW
    Dean W.
    28 January 2021 @ 23:23
    Excellent, Maker is an important part of the crypto landscape, great to hear from someone directly involved.
  • LA
    Liz A.
    27 January 2021 @ 18:10
    Great explainer vid about Maker and Dai and why it's important to have stablecoins. Still fuzzy on pegging to the value of a dollar though. How will this work in times of great inflation as is projected to come in the future? Will Maker use a basket of currencies to peg to then?
    • HQ
      Helge Q.
      28 January 2021 @ 19:01
      The topic of pegging is so large it would never fit the interview format. There are several ways this can be accomplished - all have their pros and cons. Inflation should not pose a problem. A basket of currencies could be used, but most likely it is better to use synthetic assets such as EUR and CHF on the blockchain and then let users choose what they like.
  • CJ
    Christopher J.
    28 January 2021 @ 18:08
    Finally someone explains stablecoins!
  • SM
    Sebastian M. | Real Vision
    27 January 2021 @ 18:32
    Greg will be answering questions about this content on The Exchange- Click the link below to ask some questions! https://exchange.realvision.com/post/greg-di-prisco-head-of-business-development-at-the-maker-foundation-will-be--6011b1247d0799e8487e385f
  • DR
    De R.
    27 January 2021 @ 06:49
    Great, missed these short (30~ mins) vids that are straight to the point and doesn't cost 3hrs from my day, as I tend to consume every content in RV.