Pre-Proposal: The Dash Dollar

Arthyron

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May 29, 2017
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@Ricardo Temporal -- Thank you for your pre-proposal. This is an idea that comes up now and then. The community seems to have a lot of disparate opinions about initiatives like these. While it's clear that merchants need something stable and non-volatile in which to transact, a lot of people feel that extant solutions (USD instant conversion through payment processors, Stable Coins, etc) are sufficient for this task until Dash use grows to a sufficient scale to mitigate most volatility. Others believe that the creation of secondary derivative layers like a Dash stable coin or inflationary token to offset Dash's deflationary nature are necessary to reach that scale.

I personally tend to believe that both the volatility and deflationary nature of Dash will be significant obstacles to widespread use and adoption as "Digital Cash" as we intend, and so at least some solution to these problems need to be found, but others have pointed out that in places like Venezuela where the fiat currency is even more volatile than Dash, there's an opportunity to increase the use of Dash to more stable levels without the need for a stable intermediary. I'm somewhat skeptical of their claims, but the implementation of secondary, stable derivative layer is not without its own difficulties. For example the Treasury is largely already occupied with funding Dash Core Group and some other ongoing projects in the space and it's not clear that we have the funds to uphold a schema such as this. Additionally, there are custody/taxation issues here, as any time funds are created and/or held, there are potentially tax implications depending on jurisdiction. With the advent of Dash Ventures, it's potentially feasible to develop projects that actually hold value for the network that have much smaller tax implications, but that "wing" of Dash is still under development.

It's an interesting idea, but there are definitely some logistics that need to be hammered out even if the majority of us think it's a good idea.
 
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Antti Kaikkonen

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Jun 20, 2017
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Could this negatively affect DASH when the US dollar goes to zero?

Is the exchange a centralized point of failure?

I don't like the idea of having the core team involved in this.
 

drkrooster

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cool idea for Dash dollars. but i would rather to have Dash core team to focus on Dash Evolution.
The method described in the paper seems to be somewhat similar to Basis.
I would wait and see how Basis handle it :)
 
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JZA

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No, there has been many accidents on schemes on this 'stablecoin'. we call them fiat because is value is based on a debt that keeps increasing each time. The US dollar has lost 20% of its value through inflation at 3% anual inflation. And even if this is a relative low number, like Roger Ver said, we still giving power to war hungry countries that subsidize its debt by threat of violence.
 

rosita

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Aug 6, 2018
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lol I will "abstain" from answering.
the dollar is unlikely to replace something in the near future
 

DeepBlue

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Feb 2, 2018
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I have just been made aware of this thread after I have also opened a thread on a similar subject. https://www.dash.org/forum/threads/...it-above-all-other-cryptos.43036/#post-205227

I propose that it is essential to have a stable coin however I would suggest 3 DASH stable options, USD and the Euro and a third coin that is locked to a basket of goods to ensure long term purchasing power. I explain this on the link above.

OmiseGO are now integrating a stable coin into their product. The coin they are using is Maker DAO. See these articles:

https://medium.com/makerdao/makerdao-and-omisego-announcing-dai-and-omg-collaborations-23600a080046

https://www.newsbtc.com/2018/04/11/...orating-for-a-decentralized-financial-future/

According to the marketwatch website: https://www.marketwatch.com/story/how-fast-is-your-dollar-deflating-2015-05-12 their calculations show how the dollar decreases in value in the following predictable way:

Inflation rate:
2 % inflation dollar is worth half its value in 36 years.
4 % inflation rate dollar is worth half its value in just 18 years
6 % inflation rate dollar is worth half its value in 12 years.

Stability is essential for commerce but in fact different types of stability are required depending on the types of localities that a merchant is doing business. A stable coin ideally would be able to cater for stability pegged to both USD and Euro but also long term savings which would be suitable for pensions because USD and Euro lose value over time due to inflation. However a coin pegged to the price of a basket of 80,000 goods would retain its value in 50 to 100 years or more.
The "purchasing power" of a currency is measured against a fixed basket of goods that are commonly used by people during normal cost of living conditions.
There are around 80,000 goods used in the cost of living calculation: https://www.thebalance.com/cost-of-living-define-calculate-compare-rank-3305737

Flexibility to the user in the type of stability they want would give DASH a significant advantage in the market over conventional fiat currency and could be the basis for merchants to see the value of DASH innovations and move over to using DASH as their preferred currency.
 

solarguy

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Mar 15, 2017
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Request for proposal in order to create a stable currency.

If you vote 'yes'; then, you request the core team to create a stable currency.
If you vote 'no'; then, you think it's not necessary.
If you vote 'abstain'; then, you don't know.

https://www.dropbox.com/s/7gy5at2kjytd044/The Dash Dollar.pdf?dl=0
That would be amazing, difficult, expensive and possibly impossible. There are presently three kinds of stable coins in the crypto ecosystem.

1. The crypto is backed by US dollars 1:1. Tether does this (in theory). So if we want to do it like Tether, we need to come up with 1.9 Billion dollars, and very likely a centralized entity that runs it, manages publicly available audits and so on. Where are we going to come up with a Billion or two dollars?

2. A stable crypto that is backed by another crypto or basket of cryptos. This gives up a substantial amount of value stability because the USD (sorry as it is) is pretty much the most stable thing out there. To compensate for that, the backing crypto is generally over collateralized. So, for example, if you wanted to issue 10 million Dash Bucks, we would have to purchase and sock away 20 million dollars worth of Ethereum. So that turns out to be even more expensive to set up, and the market can "break the peg" if it goes down by more than half. Has that ever happened? Yes, more than once, and very likely to happen again.

3. A stable crypto that is not backed by anything, except the expectation that it will work just like expanding and contracting the money supply of the US dollar to maintain stability. These typically use seigniorage accounts that use algorithms to make more Stable Bucks, or destroy Stable Bucks, depending on what the market is doing. If they convince enough people, then it will work. Ultimately, money is a social contract where we all agree that this unit (like a piece of paper with a green picture of Andrew Jackson on it) carries a certain amount of value/buying power. IF the social contract works, where enough people agree and believe, it is not really much worse or much better than how any given fiat currency holds its value.

It has the slight advantage that there can be open source controls that put meaningful restrictions on how much money can be printed. It has the huge "disadvantage" that the creators/developers can not force a big group of people to use it with violence/guns/threats. Adoption of social contracts for money tend to stick "better" if somebody will put you in a cage if you fail to use it. Even that has limits, as witnessed by Venezuela and a host of other countries who ruined their fiat money, even with the threat of violence to back it up.

Here is a very accessible article that describes stable coins and their strengths and weakness:
https://medium.com/@argongroup/stablecoins-explained-206466da5e61

There have been many many schemes over the years to peg currency A to currency B or some other stable thing. In the vast majority, the peg has been broken by the open market sooner or later. Even the mighty U.S. dollar has hit a number of rough patches in the last 100 years. It used to be partially backed by gold. Because you can't just print up a bunch more gold if you suddenly need more to expand your economy, or go fight a war that's how they maintained the buying power of the paper dollar. You could actually go to a bank and trade it in for a real chunk of gold.

The government found that constraint to be too restrictive, so they sort of went off the gold standard in 1933, and we totally abandoned the precious metals backing under Nixon in 1971. Note that the US dollar has lost 86% of it's purchasing power since 1971. And it's the best of a bad lot.

Whew, so here's the take home point. We don't have the money for methods 1 and 2. And for method 3 to work, a whole bunch of people in and out of the crypto space would have to hold hands with the Dash community and sing Kumbayah together every week. If we miss a week and the doubt and rumor mill decided they don't trust it, your stable coin goes the way of the Venezuelan Bolivar.

So, which method would you recommend that Core try?

I don't have an advance degree in crypto econ, or even Keynsian economics. But I have studied the mechanism of stable coins a fair amount recently. Making a stable coin in which the peg to a certain amount of buying power cannot be broken, is very nearly as hard as making a perpetual motion machine. But hey, I've been wrong before, and there are a lot of very smart people in the crypto space thinking about stable coins. I would be ecstatic to be proved wrong.

In the short and medium term, an easy decentralized on/off ramp to USD accomplishes many of the goals of a stable coin without all the expense and work, but then we're back to never being better than the USD in terms of purchasing power.
 
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solarguy

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Mar 15, 2017
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I'm not arguing for or against any of the methods. Merely pointing out that it's not as easy as it sounds.

And hey, if somebody gets it right, we can partner with them or improve the tech and make it our own.
 

Ricardo Temporal

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Nov 16, 2017
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The Question and Answers so far.

Question: "Treasury is largely already occupied with funding Dash Core Group and some other ongoing projects in the space". "i would rather to have Dash core team to focus on Dash Evolution"
Answer: Yes, the digital exchange would be developed only after the Dash Evolution because the features of the Dash Evolution are necessary to develop the digital exchange.

Question: "there are potentially tax implications depending on jurisdiction".
Answer: No, there aren't tax implications because the asset backing the stable coin is Dash, not the U.S. Dollar. We bypass any legislation or jurisdiction. We don't use bank accounts. The exchange is digital; the assets cannot be seized. The execution cannot be stopped.

Question: "Is the exchange a centralized point of failure?"
Answer: No, because the exchange would be a digital exchange developed on top of the Dash Evolution. It would run on the network of Masternodes.

Question: "... There are presently three kinds of stable coins in the crypto ecosystem. ... So, which method would you recommend that Core try?"
Answer: The method is described in the first post of this thread; follow the link to the PDF. It's not any of the three methods that you mentioned. It is the same method used for decades by hundreds of central banks around the world.

Question: "if you wanted to issue 10 million Dash Bucks, we would have to purchase and sock away 20 million dollars worth of Ethereum"
Answer: In my proposal, 10 million Dash dollars would be backed by 13 million dollars in Dash where 10 million dollars in Dash would be provided by the buyer of the Dash Dollar and another 3 million dollars would be provided by seller because the margin requirement is 30%.

Question: "...you can receive money (I suppose in a bank account): ... "DashUSD" is issued to a department of Dash that treasure them and start to market them in exchange for fiat"
Answer: There are no bank accounts! The asset backing the digital dollar is Dash, and it would be stored in a smart contract.
 
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Ricardo Temporal

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Nov 16, 2017
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I improved the explanation on how it works with new examples. Follow the same link to the new version of the PDF. Check the "Issuance of the Dash Treasury bonds".