It’s that time of year again: The United States of America is teetering on the cliff edge of economic collapse because grandstanding politicians want to use the national debt ceiling as a bargaining chip to go after some agenda that will probably never be permanently settled anyways.
Times like this make you think about what a better alternative would look like. Don’t get me wrong; I’m not against the idea of having a government. I’m against the idea of having a stupid government. I think that we’d be better off if the government actually took some proactive steps where crypto is concerned.
Take “stablecoins” for instance – more on those in a second, but you’ll probably remember the political classes wagging their finger at them when they helped precipitate the $60 billion TerraLuna collapse that wiped out tens of thousands. They also figured in the FTX collapse because they swooned in response to the contagion there.
There were calls to “regulate” stablecoins as if there were one kind of stablecoin and one way to tackle them. Nonsense, really. If the government really knew what it was doing, here’s how they’d prevent people from getting robbed and losing everything…
“Stable” Is Just a Fable
If you haven’t guessed, I’m not actually a fan of “stablecoins,” where three guys in a basement try to create a new national currency without a nation. I mean, what is a stablecoin trying to be?
They didn’t invent the concept of the decentralized digital ledger like Bitcoin (BTC). They didn’t invent smart contracts like Ethereum (ETH), or improve them like Cardano (ADA). They’re not creating a revolutionary platform for A.I. development. They’re not doing all that much at all, except, in some cases, behaving like ticking time bombs.
The basic idea behind stablecoins is to act as something predictable you can buy and sell with in a digital currency environment. The problem is, if the stablecoin is so stable, why is anybody bothering to create them?
Let me be clear: I’m not asking “who would want stablecoins?” I’m asking “who has any reason to do the work?” I mean, think about it: how does a stablecoin make money? A good stablecoin is fully collateralized, meaning that there is guaranteed to be something of equivalent value backing it.
If that critical condition is not met, if there is no equivalent propping it up, the entire premise falls apart. Suddenly, it’s not a stablecoin anymore, it’s some kind of sketch banking setup, and highly vulnerable to bank runs. All it takes is for bad sentiment to spread, too many people to withdraw their real money, and suddenly it’s all worthless.
In other words, the stablecoin must be fully collateralized. But if a stablecoin is fully collateralized, that means the developers put as much money into the coins as they can possibly be worth. How will they make money?
By doing something sketchy, dangerous, illegal, or all three, that’s how. Something like, say, loaning out the money that’s supposed to be kept as collateral. You get things like Ponzi schemes. That’s why I think even mainstream stablecoins like Tether (USDT) can’t be trusted.
That’s also why “algorithmic” stablecoins are complete B.S. – dangerous B.S., too. We don’t need algorithms magically keeping a stablecoin’s value at $1 or €1, we need something that’s demonstrably worth $1 or €1 in an account somewhere backing the stablecoin. Algorithmic stablecoins might as well be Chuck E. Cheese tokens.
It’s a sham, as TerraLuna proved when it totally collapsed. It makes me sick and depressed to see Djed (DJED), another one of these scam projects, associated with a great crypto like Cardano.
And those are the stablecoins that can make money because they basically counterfeit value out of nowhere since the whole point of the coins is that they don’t appreciate.
The Real Stablecoin: The Dollar
At the same time, having a crypto that holds its value at $1 is actually useful. It lets you easily make trades denominated in U.S. dollars on crypto networks and exchanges. So, what’s the solution? We need a stablecoin from the same place we get our regular money: the government.
I mean, if you can’t make money on a stablecoin without getting sleazy, but we need the stablecoin anyways, naturally, the government should do it. That’s what government is for: to do all the things that society needs done but that you can’t make money off of while still doing it the way it’s needed.
We need a government-created digital dollar in this country. Leave the private crypto ecosystem to the innovators, whether that’s in blockchain itself or technologies like artificial intelligence (A.I.) that the cryptos support.
There’s no profit to be made on an honest and functional stablecoin, so leave it to the government. If I had my say, I’d create a fully digital dollar as soon as possible.
As it stands, I think America has already gotten too complacent, and already lost the chance to be first in line for the digital currency revolution. That’s going to cost a lot of opportunities. Hopefully, we can get in the game before it costs us too many more.
Either way, if I had my way, I might just outlaw private stablecoins altogether. At the very least, anyone trying to create one would be drowning in audits to make sure they actually have the collateral they claim to.