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Drew

Stable coin as iou on xrp ledger

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Couldn't any "jurisdiction" create a stable coin on the xrp ledger and with trading boots, trust and arbitrage mechanisms, pin it to that "jurisdictions"  fiat value?

Thoughts...

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1 hour ago, DavyJones said:

Isn't that exactly what all the Gateways like Bitstamp or Gatehub for example do? They issued their own IOUs on the XRP ledger afaik and you can simply cash out at their exchange.

That happens on the fiat side but my understanding - depending on the type of wallet, hosted or non hosted, xrp is xrp. I may be wrong.

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I thought you could create anything on the ledger and issue it as well as set the value, so long as people "trust" you can back it...so you can list company shares through to cows in the paddock..

 

mmmm I'm going to issue Cow coin... backed by my cows which are registered in a National database

Edited by kiwixrp
cow coin ico incoming

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I guess my quandary is more along the lines of the stable part.

How do you build a "stable coin" without it being a walled garden?

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Doable, I've debated this aginst myself. 

Option 1:  Fiat IOUs issued by a CB on XRPLedger.

Option 2: CB's stand up their own ledger to host their own fiat CBDC, and some intermediaries re-issue the fiat CBDC on XRPledger.

There are pros and cons, and I havent thought through all of those enough to satisfy myself yet. This is where I stopped on the How xPool write up, but I haven't really thought through it throughly.

https://a16z.com/2018/12/20/stablecoins-why-matter-what-how-daos-maker/ this seems to me like a recipe for a disaster. 

Edited by KarmaCoverage

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2 hours ago, kiwixrp said:

 

mmmm I'm going to issue Cow coin... backed by my cows which are registered in a National database

Would be Interesting if the cows produced shitcoin airdrops

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8 hours ago, kiwixrp said:

I thought you could create anything on the ledger and issue it as well as set the value, so long as people "trust" you can back it...so you can list company shares through to cows in the paddock..

 

mmmm I'm going to issue Cow coin... backed by my cows which are registered in a National database

Would Cow Coin holders be entitled to claim Milk, kind of like Neo/Gas?

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13 hours ago, Drew said:

Couldn't any "jurisdiction" create a stable coin on the xrp ledger and with trading boots, trust and arbitrage mechanisms, pin it to that "jurisdictions"  fiat value?

Thoughts...

Yes.

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I'd imagine you just make the bank deposit account visible to all, with that balance verified by some authority.

The "stable" in stable coin is then rather questionable, if the underlying is the liability of a commercial bank, do they have reserve deposits or deposit insurance to back the asset you are using to create the stable coin liability? 

And if we tie up lots of bank deposits, or reserves if a bank was making stable coins out of its reserve account, how will that knowledge effect the behavior of creators of those underlying liabilities?

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I think it's also worth pointing out the tragic irony of a "stable coin", which adds a horrifying amount of complexity to an already complex system. 

If you base a token on a bank deposit, and you then build a structure of debt using those stable tokens as payments, you create some problems:

1) the supply of stable coins is based on "saving", so the underlying bank deposits are created then stored in an account and not used, which necessitates an increase in debt creation (more bank deposits) in order to satisfy payments in the structure of debt that already exists. If you have a sudden "tokenization" of bank deposits, this could actually cause serious problems with payments in the traditional payment system by reducing spending and liquidity in the traditional part of the economy, if the traditional system does not accept the tokens for payments--and why would they? The bank deposit is the bank's means of earning fee income, creating a system which uses these liabilities for payments but generates no fees for banks removes the power from the banks that created them. So the two payment systems would likely never overlap, and the pressure to tokenize (non-banks) and resist tokenization (banks) would be extremely strong given the payoffs to either party if they have it their way. An increase in tokenization should thus lead to an increase in instability by reducing liquidity in the traditional payment system.   

2) if banks know their liabilities are being tokenized, they know these liabilities won't move, so their need for reserves decreases, and they may be tempted to increase their leverage. The result would be an increase in instability due to a reduction in liquidity of banks, as they tailor their balance sheets for the new normal--less movement of liabilities on their balance sheet. 

I get that people want to improve payments and are unhappy with banks, but think about the nightmare we are creating for ourselves by creating such a simple instrument as a "stable coin" within the credit system we already have. It's a really bad idea. Write your gov and ask for CBDC, save ourselves a crisis. 

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