I think this is the only way a "stablecoin" can function as designed... but it is not possible to construct an entity that has any scalable incentive to provide the backing that would create such a coin. For that entity, it is nothing but downside.

Therefore, stable coins are a fiction on par with perpetual motion machines. In the short term there's all sorts of perpetual motion and over unity machines... in the long term, not so much.

Backing a currency isn't about taking deposits from people. You can't back with deposits because your liabilities = assets then. You have to put your own stuff up, but then all you are doing is running the risk that people will redeem it away from you. Backing a currency is basically just giving your stuff away with extra steps.

And if people redeem from you, just add a clause where if the liquidity pool is gone you have to wait X days before getting it redeemed.

It’s like panicking because you’re because your bank only has $30k cash onsite, or your money market fund is only 3% cash.

Disclaimer: I’m still slightly short Tether, just think this a bad reason to be. Search my history for the details.