Inspiration
Some months ago, business guru and all around smart guy, Naval Ravikant, tweeted the following:
"crypto stablecoins: choose between blowup risk, censorship risk, and fraud risk"
He then explained:
- Blowup risk, eg: MakerDao. A sharp decline in underlying collateral will "blowup" the value of Dai.
- Censorship risk, eg: USDC (and Tether). Accounts can be blacklisted, and coins can be frozen.
- Fraud risk, eg: Tether. No one really knows how much they have in their bank account.
Are these risks endemic to stablecoins in general, or is it possible to design a stablecoin without Naval's 3 risks? Considering fundamental requirements, a stablecoin system must meet the following requirements:
- Stablecoins should always be available to buy at the peg
- Stablecoins should never be sold below the peg
USDX is a USD based stablecoin with the following properties:
- Eth sent to the USDX contract is locked, and USDX is minted into the sender's account at the current eth/usd exchange rate.
- Locked eth can be unlocked by the original sender by burning USDX at the originally minted price.
This concisely meets the above requirements of a stablecoin because:
- Anyone can mint new tokens at par
- There is demand for every USDX minted to unlock eth from the USDX smart contract.
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