Stablecoins

do not

trust

me

do research, learn the technology,
test the product, engage with the community, compare with other projects, read the documentation, look for red flags

Too much volatility

makes a currency difficult to use

as a medium of exchange

[which it is supposed to be]

@donhylo

stablecoins

Collateralised 
Debt Position

Collateral

Dai

cryptocurrency, assets, etc.

stablecoin

@donhylo

stablecoins how to issue new stablecoins

issue dai

return dai

$1000

worth of pooled ETH

$666
$700
​fee

in pooled ETH

$1000

worth of pooled ETH

collateral

dai

$300

$180

@donhylo

stablecoins good cdp

Reference [Dollar]

Stablecoin [Dai]

stable

risky

@donhylo

stablecoins WHAT DOES STABILITY MEAN?

Users

They hold Dai

They use it as a medium of exchange

They value stability

They need Dai to be accepted

investors

They borrow Dai

They are risks seekers

They use see Dai as an investment

They want to make profits

They value reliability and responsibility

@donhylo

stablecoins WHY WOULD ANYBODY PLAY THIS GAME??

Dai [market price]

Reference [dollar]

CDP

100 Eth

25 Dai

Dai < Dollar

Dai is cheaper than it should be. Users should probably buy now.

If I had a CDP open and I close it now, I'll have to pay less than what I would normally have to (i.e when Dai = $1).

With the demand for Dai increasing and the supply decreasing, Dai price should increase.

Dai > Dollar

Dai is more expensive than it should be. Users shouldn't probably buy now.

I should think about opening a new CDP now as I'll get Dai worth more than what it would normally be worth (i.e when Dai = $1).

With the demand for Dai decreasing and the supply increasing, Dai price should decrease.

100 Eth

30 Dai

@donhylo

stablecoins market forces

Reference [Dollar]

Stablecoin [Dai]

stable

unstable

risky

@donhylo

stablecoins WHAT DOES STABILITY MEAN?

collateral

dai

$200

$180

@donhylo

stablecoins risky CDP 

If the market price of the Collateral is close to Dai

The CDP must be liquidated

So the system sells the collateral for Dai

And then close the CDP

By force liquidate a CDP, a fee and a penalty must be paid

@donhylo

stablecoins CDP force liquidation  

Right now, there is only one type of colateral: Pooled–Eth (PETH)

1 PETH

1 ETH

=

Because half the fees are paid in PETH and then burnt,
the supply of PETH decreases, so 1 PETH can claim more than 1 ETH

1 PETH

1,5 ETH

=

@donhylo

stablecoins 

collateral

dai

$150

$180

@donhylo

stablecoins UNDERWATER CDP

If the price of the Collateral is less then Dai

The CDP is underwater and must be covered

So the system sells the remaining collateral for Dai
and mint new PETH

And then close the CDP and pay the fees and the penalty

@donhylo

stablecoins cover underwater CDP 

1 PETH

0,66 ETH

=

By minting new PETH, the supply of PETH increases, so 1 PETH can claim less than 1 ETH

@donhylo

stablecoins cover underwater CDP 

Set the Sensitivity Parameter

Trigger Global Settlement

Risk Parameters for each CDP type:
Debt Ceiling, Liquidation Ratio, Stability Fee, Penalty Ratio

Modify Sensitivity Parameter

Modify Target Rate

Choose the set of trusted oracles

Modify Price Feed Sensitivity

Choose the set of global settlers

Governance Active Proposal

@donhylo

stablecoins MKR, THE GOVERNANCE TOKEN

Target Rate Feedback Mechanisms

Gets activated in the event of severe market instability.

It consists of a Target Price and a Target Rate.

TRFM is not engaged

Target Rate = 0%

Target Price doesn't move

Dai is pegged, equal to $1

TRFM is engaged

Target Rate becomes positive when Dai price is too low

Target Price can fluctuate

Dai is a free floating currency

@donhylo

stablecoins STABILITY MECHANISMS

Feedback is welcome.

Thanks.

Stablecoins

By Laurent Hardy

Stablecoins

Stablecoins are sometimes depicted as the holy grail of blockchain. I disagree with this view as I see stablecoins as one amongst several building blocks that will, along with others, be used in most projects. Stablecoins are tokens that remain stable in price regardless of the volatility of the underlying assets of the blockchain on which it sits. The challenge of course is in the design of decentralised stability mechanisms that ensure the price stability feature of the token.

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