My thinking on stablecoins has evolved greatly since I started writing about them four years ago. There are things I’ve gotten right (their emergence as a killer app for blockchain), things I’ve gotten wrong (the viability of Dai), things I was early on (adoption for vanilla payments) and things I remain conflicted on, like the viability of the undercollateralized AKA algorithmic variety.
Algorithmic stablecoins have always seemed like a fantasy to me, a design pushed by techies who don’t understand value. My conservatism was supported by events like the failure of Basis to launch (despite a massive ICO) and the collapse of similar projects that did launch.
My skepticism starts with their reliance on circular logic alone. Every currency requires a certain amount of faith to succeed, but few are born of faith alone. To escape the gravitational pull of oblivion, new types of money usually anchor themselves to an independent source of value at the outset. Th...