In this case it seems to have been much more complex than that. There was UST, which was supposed to be stable, and a linked coin Luna which was a form of balancing token, with smart contracts allowing conversion between the two, with the Luna exchange rate supplied by an oracle.

If UST starts to lose value, buy pressure is created because someone could buy 100 of them at (say) $39 and immediately convert to $100 of Luna. If it starts to rise, say to $1.10, you use Luna to convert to UST at a discount and then sell it to turn a profit. There were multiple other mechanisms to this, including one that involved staking your UST for interest and getting Anchor tokens, so that others could take loans. Anchor would give a 20% interest rate(!) and then there was something about loan defaults and buying collateral at a discount and ...

Massively complex, and one of those things that works fine, until one day it doesn't.

You say complex, I say contrived. They managed to maintain the appearance of stability for a while but it sounds like that was built on a Lovecraftian nightmare of convoluted interconnected systems that only ever seemed trustworthy thanks to the power of buzzwords.

> You say complex, I say contrived

And I don't believe you would be wrong! It looks almost purposely designed to blind the casual investigator with complexity and buzzwords, while luring them in with the promise of m4d g41nz.

Stable coins don't have to be backed by dollars, e.g. Dai and MIM are over-collaterized with cryptos. Dai survived the fall from ~$2k Ether to ~$50 Ether, and never lost its peg.

If you are collateralized to survive a 97.5% loss in collateral value, it means there has to be a severe limit on the amount of USD circulated by the stablecoin. It cannot scale.

Except if most of your collateral is USDC and USDT which are allegedly backed by real dollars

That would be fractional reserve cubed … or something!

That's not what happened.

Can you elaborate?

HN is not the place to discuss innovations in crypto space.

And why would you think that? HN has been around since before the BTC whitepaper, and there has been healthy discussion of the space over the years. Not sure what you think the right venue is, honestly, but I'd love to find out.

Somewhere that has easier marks. HN crowd tends to not be easily duped by Get-Rich™

Unless it is VC fuelled start-up lottery...

The right venue is someplace that is unlikely to have an audience familiar with monetary history, databases, decentralized networks and payment processing and settlement systems.

I disagree there has been healthy discussion when mostly is anti-crypto, there has been more neutral venues on subreddits.

What do you mean? HN can have pretty meaningful discussions around this topic. It's rather bizarre that you'd need a safer space than Hacker News to discuss these innovations, there is no punishment (except losing some internet points if downvoted), the worst thing that happens around here for the crypto community is getting sceptics asking some deeper and/or harder questions.

What's the issue with scrutinisation?

Well, instead of shouting you down, I'll just say this is contested, both by myself and many others.

The community at large has awful factions, but a portion of this tech will be normalized sooner than we hope.

I mean if you want a stable coin... just use dollars? I get that you want to make use of some of the benefits of crypto, but the downside is that there's scams and instability everywhere, and "stable" coin is just a sales pitch, not a guarantee.

I mean the USD is not stable either by definition, but there's more checks and balances there and your $1000 won't halve in value overnight except in extreme situations like the world shutting you off of the international financial system for invading a neighbouring country.

That is basically how every fractional reserve banking system ends.

.. which is why in the real world central banks are there to act as lenders of last resort. If there's a bank run, print money and lend it to the banks until the run stops.

This is separate from the issues facing stablecoins. I'm reminded of the British government's failed attempt to maintain a "stablepound" against the "stablemark", in the proto-stablecoin mechanism known as the ERM. https://en.wikipedia.org/wiki/Black_Wednesday

Many of the same features are there. Spend the reserves! Increase the interest rates! Ultimately they had to de-peg.

The person on the other side of that trade? George Soros. Yes, really.

An unregulated fractional reserve banking system with no minimum reserve requirements, and with no lender of last resort.