https://youtu.be/5-Ozaf_aGNM
What is the problem that stablecoins are trying to solve?
What is a stablecoin?
- A stablecoin is a type of cryptocurrency whose price follows a target price.
- The theory goes that because the value is linked or pegged to something else, just like the dollar used to be pegged to real gold many years ago, its price is going to be much less volatile. Instead, it won't move or at least will fluctuate in a much narrower range.
- There are a few different approaches to stablecoins.
- Most commonly known approach is that a stablecoin is backed one to one by its Fiat counterpart.
- In the case of Tether USD, the biggest stablecoin currently in the space, the idea behind it is that one US dollar is kept in a bank for every one USDT coin. And because of this, the price can stay at a consistent value because anyone can trade it in at any time for the widely accepted US dollar. However, we don't know for certain that the company Tether actually has the money in those bank accounts that they claim. Tether is what's known as a centralised stablecoin. One entity controls the system. And because it's a private business, everything isn't fully transparent. It and other centralised stablecoins will never be as transparent as their decentralised counterparts. And so this introduces the idea of a decentralised algorithmic stablecoin.
1. Introduction
- Talks about history of stablecoins
2. Minimal Djed
- It's designed to be simple - the more you try and make a coin complex, the more errors that can occur.
- But even simpler, it's an automated mechanism that is buying assets through smart contracts.
- The smart contract is always willing to buy at 99 cents and always willing to sell at $1.01. And those fees could be higher or lower.
- So not only is Djed intentionally simple, it's also provably stable.
3. Stability Properties
- Unlike most stablecoins which don't go through formal verification processes, Djed has undergone this process and has provable theorems that have been mathematically tested.