I think this actually exposes the greater system risk of the US dollar and that is the debt backing cannot be stopped.
even if there was no aust mim could just literally offer leverage for deposits, mint their stable and do it, thats effectively what theyre doing. That’s effectively what the big banks are doing and central banks and government garbage honestly can all go suck it. But this is literally what they do, and it cant be stopped as long as you can mint your own stable and people are willing to believe it can trade at par for any other stable. This is what’s teather’s doing, USDC, USD, CAD, JPY, and they just loop it over millions of times so they can live free while the rest of us eat depreciating value. Only now when they are unable to sustain falling prices from technological innovation and leeching value off the working labor does it become a worldwide economic problem. Just a bunch of IOU slips we pretend is something else.
Another way of looking at that is think of Anchor like a king central bank, it sets the cap rate (20%) for the entire industry, other major banks overnight transact on it to maintain their own maximum capital efficiency, its just in this case anchor doesnt mint currency out of thin air it actually collects it from borrowers, well unless LFG decides to mint some out of Luna, which is not equivalent to minting out of thin air (there is a cost-opportunity arb mechanism built into the currencies). Now in our case these non-central banks are minting their own currency as a central bank would and using that to exchange for the non debt based stable to hold as collateral.
So the question is which bank defaults first, Anchor or the funny money banks? Well Anchor being the head of the ponzi is able to cut them whenever it feels like doing so, infact thats what we have been doing, enacting looser monetary policy through the governance with the rate reduction, improving capital control measures with the soon to be announced jump prop (that I don’t know anything about but am hoping they got something good), and expanding the real yield base with xanchor. The stables anchor interacts with (UST exclusively) are supported by a code-is-law algorithmic policy that includes 2 capital assets to control price (Luna and BTC). This factors out much of the pricing done by market participants as it’s rather cut and dry accounting. You could model this under all scenarios and figure out if / when it would collapse as there are set parameters and liquidity so you would just be modeling transactions. Now nobody seems to have done this, either because it doesnt support their viewpoint, it’s too cost intensive, or its unecessary. I fall into the believe that it’s uneccesary and the other two viewpoints and fight it out. I think while short term market fluctuations are inevitable code is law translates to price on the charts so UST would maintain it’s peg, Luna would be a price, anchor could be dead or alive in water, and terra ecosystem will continue chugging along since it’s a blockchain and the world doesnt run on price. What get’s interesting is the funny banks like mim and yeti.
So your minting this new non code-is-law stable that is basically backed by whatevers in the basket, you rely on free market to manage the price of the coin (after all if someone borrowed a dollar they would pay back a dollar), however, you’ve opened yourself up to money market risk, ontop of liquidity risk (you have to have pools of liquidity that are solvent enough to support this money market) more complexity risks, hacking risks, and risks introduced by the collateral itself. So your MIM or yeti stable has all of the UST risks compounded by those other risks. Meanwhile everything on the terra side is just the UST and smart contract risks. Ontop of that you have to pay out an extremely high yield just to continue to fuel growth, and as soon as you run out of growth on your debt stable it becomes a flywheel like the great depression, whereas Terra will grow organically with or without Anchor and the algorithmic stable design will maintain a sound dollar market around a basket of cryptos, which have honestly proven over their decade plus of existence (look at doge anyone) that free capital markets trumps goverened markets.
Maybe we should stop touching USD altogether apart from shorting it. the truth is the currency itself is unable to sustain 20% yield and depreciates 99.99999% of it’s value every 100 years. Thats where the problem is for depositors, your holding onto a trash currency (no offense to depositors but to the manufacturers of said dollar). M2 USD supply is still spilling over from 2008 forget about 2020 so your really holding onto the biggest of bombs. Bond market is saying exactly that and has been for decades.
With that being said UST adoption is going to continue to grow and so will Luna’s principal value by auxilary. Terra’s a great commercial blockchain and we’re just beggining to see it’s potential. Looks like most other blockchains are wanting to adopt a similar stable <-> chainToken pair strategy so it only speaks to its success. And Anchor’s got ve and x in the pipeline and already has easy ramp on and off solutions so buy it while it’s cheap. I couldnt tell you how many VC’s I know who are interested in developing tokens on Terra with real commercial business use just because of access to the genius invention that is UST and Dokwo.
is USD good for commerce? Yes, you can buy anything in the world with it. Is it good for holding for 20% APY? no.