The Attack On Stablecoins

in LeoFinance2 months ago

Stablecoins are an important part of the financial ecosystem that is being developed. They are the bridge between the old and the new. The tie to fiat currency is necessary as we still operate in a world dominated by that.

Unfortunately, this has gotten the attention of the politicians and bureaucrats. The leading parasites want to take control in an effort to keep their exclusionary practices in order.

Here is a headline we see from btcmanager.com:

stablecoins.png

This sums up their intention. Stablecoins are on their hit list because they see the threat they pose to their monetary power. Hence, in their view, it is under their domain to protect everyone.

Of course, they come up with fancy names for their bills. This one is no exception.

The Digital Asset Market Structure and Investor Protection Act of 2021

Doesn't that just sound wonderful? We all like to be protected and turning to the government seems like a smart move there. After all, their track record around the world, especially when it comes to financial matters, is worthy of complete confidence.

Anyone with an ounce of sense sees what is taking place here. The only thing being protected is the existing financial system and the power of the political establishment. Nothing else is on their radar.

This bill goes well beyond just cryptocurrencies. It is meant to really hinder the progress of the entire industry. The goal appears to put it squarely in the hands of the existing power structure.

Part of this bill paves the way for Central Bank Digital Currencies (CBDC) which will give the government and political establishment a great deal of power over people's financial activity.

According to the same article, this is what the ultimate goal is:

“The term ‘digital asset trade repository’ means any person that collects and maintains information or records with respect to transactions or positions in, or the terms and conditions of, contracts of sale of digital assets […] entered into by third parties (both on-chain public distributed ledger transactions as well as off-chain transactions) for the purpose of providing a centralized recordkeeping facility for any digital asset.”

It will be considered as act of fraud to not enter ledger transactions in their centralized repository. Notice how it applies to all 3rd parties. This means any application would be responsible for doing this.

Of course, this will drive up the cost of doing business, simply so they can maintain control. This is really going to hinder innovation especially from smaller entities who might not have the means to engage in the proper legal advice to ensure they are in full compliance.

This also can be presumed to only be the beginning. We know there will other acts to increase their power. Stablecoins will continue to be a target.

Point Of Failure

The opposite of these plans of centralization is decentralization. When something is truly decentralized, there is absolutely nothing the regulators can do. The point of failure is removed. Without that vulnerability, they simply have to watch what is taking place, impotent to stop it.

It seems that the true way of accomplishing this is with peer-to-peer transactions. Throughout the age of the Internet, this is one thing that has always befuddled the regulators. Their ability to target something when it is node-to-node communication is nil, at least on a wide scale. They depend upon some third party application that has everything running through it to enforce their rules.

As stated in other articles, the epitome of this is Napster. Here was a company that introduced the world to file sharing. It did so through an application that was able to establish all the links. Of course, here was the point of failure and who do you think the establishment went after?

Yet did the demise of Napster mean the end to file sharing? Absolutely not. The reason for this is because there never was a need for a Napster to engage in file sharing. There are ways to get files direct. Here we sit 20 years later and the movie/music industry is losing billions of dollars per year due to this type of activity.

This is just one of the examples of how the governments of the world are inept against the digitization process that is taking place. If they can't stop a bunch of teen-agers from sharing songs, how are they going to approach the data when it has a monetary component.

The reality is they are impotent against stopping the peer-to-peer sharing of data. It is a fact that holds true no matter what the data is, including cryptocurrency.

Hive Backed Dollar

As these proposals by governments keep popping up, it is worthy for us to look at the Hive Backed Dollar (HBD) to see if an alternative forming.

Since the problem with many stablecoins is they present a point of failure, we need to find something that does not have this. HBD could be one of the answers.

The challenge that was confronted over the last few months was how to keep the peg. Anyone who watched this currency over the years knows that it was anything but stable. It would be subject to massive pumps, followed by the inevitable dumps.

For commercial purposes, this ended up being completely worthless.

However, a lot of attention was paid to getting the peg in order and, thus far, it seems to be doing pretty well.

Right now, with the recent market run up, the price of HBD has shot up a bit. Here is what it looks like now.

hbd.png

Over the past month, for the most part, the peg has ranged between $.95-$1.05. While this isn't ideal, it is a major step in the right direction. Hence we can say that HBD is now stablecoinish.

Why is this important?

Outside of the obvious impact it can have on the commercial aspects on Hive, it is something that is controlled by nobody. The Hive Backed Dollar is not operating on a second layer. It was not developed by a project team or company.

Instead, HBD is resident at the core layer of the Hive Blockchain. This means it operates in a fully decentralized manner. All transactions can take place on a peer-to-peer basis. One wallet can transfer HBD to another, without the need of any third party.

We are doing a bit of forecasting here but it could be that something like this becomes more important as the regulators keep cracking down. It is evident the attack on stablecoins is not going to end anytime soon. As stated earlier, we are only at the beginning stages of this trend.

Recently, the Maker Foundation took steps to dissolve itself and turn the control of MKR and DAI over to a DAO. This could be completely coincidental or perhaps they did some reading of the tea leaves.

Either way, the next phase is to create stablecoins that are outside the reach of the established system. The answer is decentralization and it is evident that HBD already achieves this end.


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It is most fortuitous that Hive is currently flying under the radar. Hive should have time to decentralize further. The infrastructure of Hive should be more decentralized as in less reliance on Amazon, Cloudflare and other large players. Hive needs a better global distribution of full nodes and API nodes.

I agree completely. Flying under the radar and getting more nodes spread throughout the world is vital. That way the point of access is reduced.

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Made a graphic for this very idea I had as well. You can use it if you like.

hiveworld.gif

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The only thing being protected is the existing financial system and the power of the political establishment. Nothing else is on their radar.

Oh, how true!!!

And aren't they supposed to have the 'public good' in their mindset? Ahh, guess we don't live in a perfect world after all.

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Their goal is simply to get reelected and, collectively, keep growing their power base.

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What sucks the most is me wondering why it took them so long.

I dont think they understood it.

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HBD will always be an alternative and I am pretty sure they can't regulate DAI as well. And to be completely honest, we don't need a lot of the stables that are widely used now. I'll let them have USDT if they really want to.

All I can say to the regulators is good luck with this.

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That is true. Do not need many stablecoins to be effective.

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I love how they try to say they are protecting us when all they want to do grab on to their power and never let go.

That is true. Their hypocrisy knows now bounds.

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@taskmaster4450le And longer they are in office the more entrenched it is! And it's sad too because they are influencing people to be afraid to get involved. Scary that they'd rather listen to lying politicians than take the time to learn more on their own.
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Good article. All of the main powers to be are working on some kind of CBDC but you cannot laugh more than to the EU attempt (Them saying: crypto are bad, and stablecoins are the worst, but we give you the solution, the safest crypto ever, Digital Euro, for a small price, your soul!) Beat this. !PIZZA

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Well yes the hypocrisy is legendary. But then that is nothing new for the political establishment so this time is not going to be any different.

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the battle lines are clearly drawn and we are up against the tyranny of centralization. It's going to be a rocky road ahead. But as it becomes clearer that cryptos aren't just about fiat money, but are the future of our economic system and constitute a shift in the power structures of societies, this movement should gain steam

We need to keep getting the numbers on our side. The more people involved in cryptocurrency, the less then can pull their antics.

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250 million people with crypto and growing fast.
All the US will do if it passes this law is cut itself out of the greatest financial revolution in world history.

It will accelerate the demise of the USD as the world's reserve currency and its replacement with BTC.

Many other countries, including some of the US's closest allies have contrary interests to the US on this issue.

Like you said, the government and regulatory bodies can't control sharing of file, especially when it's pair to pair and totally seamless. Truth is, stablecoin might feel like a direct threat as people might see more need to store their wealth with stablecoin rather than fiat.

To me, HBD is definitely doing well, we will wait to see to terrible dip in the market to see if it will withold. For now, it's doing well.

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Yeah we havent seen it respond to major moves yet. This push higher in the markets is a nice test for HBD. It seems to be holding pretty strong, the peg that is.

We will see how the next few months go.

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This push higher in the markets is a nice test for HBD

You're definitely correct, I think it's about waiting to see the test of time on the peg..

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Their favorite tool is the life savings and life destroying legal harassment.

They have a lot of tools and none of them good for us.

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I think the attacks on stable coins were expected since they want full control over the fiat circulating. I didn't think of the extra added cost but it makes sense. If people have to do more things to comply with the rules then the end cost of this will be transferred to the consumers.

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Yes, the main challenge lies in trying to maintain the price close to $1 despite the rise and fall of other currencies.
Is this achieved by increasing the number of stable coins such as USDT or liquidity or what?


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With HBD, it is a matter of arbitrage and people making the market moves that push it up or down as required.

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HBD is looking more and more like a viable alternative. It seems to be moving towards stability, a few projects are starting to rely on it and the interest is attractive for long-term investors. I think there is some potential there.

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Yep and the SEED project is already starting to use this as an asset in the tool chest.

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I still don't get stablecoins and honestly feel like they all should be removed. I see them more as a negative then any type of positive and it just invites the SEC etc to get involved. Was only a matter of time. I thought the whole point of crypto was to get away from $ value and provide a new value that seems to have drastically changed in the last two years.

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Clearly, decentralized, trustless, autonomous networks are better, BUT the stablecoins you are protecting with this post are centralized private entities under the control of the devs.
Tether has also stated it is a centralized entity, has previously frozen funds in ETH wallets, and probably it is the same with USDC.
If there is one reason USDT is still running just because the government knows it can shut it down any time it wants.

Protecting crypto is about protecting decentralization, immutability, and financial freedom. Sadly, Tether is nothing about these features. It hasn't been transparent and nobody trusts the people behind it. We need trustless networks, not similar to the archaic banking system.

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I tried to edit this comment a couple of times, after I read the whole post again. I don't know why I can't edit it, however, I will write here what I wanted to add:
I made a mistake in the part that you were talking about Hive Dollar, while I thought you were trying to protect the centralized stablecoins Tether and USDC. For the part you explained this was about the Hive Backed Dollar (HBD) you find me in absolute agreement.
I also try to research DAI and feel that any decentralized stablecoin may be able to work better than the fiat currency itself.
Totally agree on CBDCs too.

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Hive Power Up Day - August 1st 2021 - Hive Power Delegation

About stablecoin.. a few days ago 2 of the 10 most capitalized cryptocurrencies were stablecoins

Brilliant article, stable coins making me nervous at the moment, most seem to be only linked to USD why not other currencies?

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All that we would want from HIVE now is adoption. So that we don't have to convert HIVE to BTC or BCH while paying to the nearest shop or online for buying things. That's where the HIVE needs to be pushing it's effort now. :)

I've always been slightly concerned something like this might be coming for Stable Coins.

I like the way you're thinking about HBD as a stable-ish solution.

Be nice to see a couple of billion flowing towards HBD... imagine what that would do for the Hive price!

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Investor Protection Act

Haven't seen anything with naming like this actually helping small investors like me. It's just gate keeping of elites.

HBD

Well... can you enforce whatever regulation that comes? Pirating movies/games etc. has been illegal like forever and everywhere. That's still happening (I'm not supporting piracy here. Creators gets to decide how they sell their work).

If these gov goons couldn't stop pirating games how will they stop real decentralized stablecoin? Torrens don't even get you paid. With stablecoin you've got $$$ involved.

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