Some thoughts - tokens & asset backed crypto

As much as I espouse crypto and the future that it holds, I love to read up counter theories on it. The purpose is to deepen understanding on how things work or could work, and the risks when things don't work out the way we thought they would. Not a bleeding heart here and also no interest in putting up sexy posts on how much money I have made in crypto, you can go to other blogs for that. Here are just some articles I have came across and points to highlight. 

Read also Making sense of DeFi

With digitalized token assets on the rise, we are seeing more and more platforms / institutions capitalizing on them (legit or not I don't know, DYODD). Yes there are tokens for all sorts of things from tweets, collectibles, gold, to even Astrea bonds! Mind you that tokens are not equal to cryptocurrencies although you can swap cryptocurrencies for tokens. 

Read about tokenization here. Tokens are units of value that blockchain-based organizations or projects develop on top of existing blockchain networks. While they often share deep compatibility with the cryptocurrencies of that network, they are a wholly different digital asset class and are NOT cryptocurrencies. [Reference: Cryptopedia] Eg. tokens built on the Ethereum platform are known as ERC-20 tokens.
Tokens are subjected to the governance of their respective project makers, such as their usage and supply.

There are no-doubt much benefits for use of tokens in terms of liquidity and accessibility, however, bear in mind the risks such as security and regulations and who holds accountable custody to those tokenized physical assets.

We also have the dollar-backed and gold-backed stablecoins. As the names suggest, stablecoins are supposed to have relatively stable pricing as their prices are pegged to the underlying asset. They reside on blockchain and can be used like fiat currencies on multiple crypto platforms. I think that with people around the world adopting the use of stablecoins, it will help to keep up the demand for USD. We need the fiat USD to buy stablecoins like USDC, USDT, USDG afterall. [Read also: Understanding counter-party risk]

By the way, digital yuan is coming. They can't let USD have all the limelights right? (With crypto vortex kept sucking in the currencies...)

Woke reads

(data is outdated, just read conceptually)

"To be clear, this is only an analysis of quantitative performance; to accurately judge the best stablecoin, there are many qualitative factors to evaluate as well. For fiat-backed coins you need to judge the counterparty/credit risk of the issuer and the credibility of their financial audits. It’s also worth nothing that the regulated stablecoins (PAX, USDC, TUSD and GUSD) all appear to have backdoors for law enforcement to access and freeze tokens, which were required by financial regulators and were fully disclosed by the project teams.

As far as crypto-collateralized coins, there is always some level of risk of smart contracts being hacked or code otherwise malfunctioning. There is also the possibility that if cryptoasset prices fall too much too fast, even an over-collateralized stablecoin could break its peg."

The multi-billion dollar question... will there be a crypto BIG SHORT some day?

"It’s hard for crypto exchanges to get banked, but Coinbase, Bitstamp, and several other high-quality exchanges manage it by maintaining strong know-your-customer (KYC) and anti-money-laundering (AML) controls internally."

"Bitcoin was clearly correlated with Tether; Tether was clearly being issued at a frantic rate; and that issuance had a high probability of being backed by nothing at all."

I think it's still in the midst of showing clarity to that. It has been a white elephant that almost every was adorning (look at its cap) and no one seemed cautious about its shit since 2017 till lately.

As for bitcoin, we now know that it is... well... not exactly correlated with Tether (given the difference in their market caps), but with so much more of others.

"Bob: You send your USD to Coinbase and buy Bitcoin with it. Then you move your Bitcoin onto Bybit and trade with it there.

Me: Hang on. If that’s the case, then why would anybody ever use an unbanked offshore exchange that trades purely in crypto? What does Bybit offer you that Coinbase doesn’t?

Bob: Leverage. I personally only use 2–3X leverage, but they let you leverage your positions up to 100X if you want. You can’t do that on Coinbase."


Anyone with thoughts on the above please feel free to leave your comments below.

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