All in crypto? Are stable tokens secure enough for our life savings?
What it means to be all in crypto
To be all in crypto is to earn crypto, to have your life savings in crypto, to eventually spend crypto. To be all in crypto is to ditch the traditional fiat banking system as much as is reasonable. Why do I post so much about stable tokens? Because stable tokens finally close the loop allowing those who are determined to stay in crypto to do so.
Some reasons to leave the crypto economy include tax requirements, to pay for living expenses, to diversify the portfolio.
Traditionally speaking being all in crypto also meant dealing with the crypto winter, the bear markets which could last for years, the volatility. Stable tokens and security tokens are game changers because they make it possible for a person to fully and completely embrace the crypto lifestyle.
Completely embracing could mean living as a digital nomad, earning crypto, keeping as much out of traditional banking as possible, and being as tax efficient as possible.
Are stable tokens secure enough for our life savings?
Assuming you are choosing to go all in crypto the next question would be how secure are stable tokens really? Some stable tokens have different risks than others. I mentioned previously that multi collateral Dai is set to launch and I personally am considering putting my Steem earnings into it. There is also Tether, Coinbase USD, and potentially many others. The Australian government is involved now with a gold backed token at least according to this [article](https://www.afr.com/chanticleer/perth-mint-goes-crypto-20191010-p52zjg)
In my opinion the security of the stable token will depend on technical, legal, political and cultural factors. From a legal point of view as long as crypto is not banned in the particular country then stable tokens are legally favorable. From a regulatory risk point of view it appears holding a stable token is the least risky because in some cases it clearly is a security. For spending, if you are all in on crypto, stable tokens allow you to actually avoid confusing capital gains taxes so that you actually can buy your cup of coffee or go see a movie using your crypto (tax efficiency is a good thing)
Stable tokens could mean never having to go back to fiat and never having to cash out. I don't see a bigger win for crypto than this for those who are truly all in and who are living the crypto lifestyle.
If you want to learn more about the stable tokens being discussed a list of links are below. I cannot give you any investment advice and the amount of risk you decide to take on is up to you.
https://www.coinbase.com/price/usdc
Regards esteemed friend @dana-edwards.
Stable refers to a value that remains constant or unchanged. Then c When we talk about stablecoins we must identify what is the form of support or reference taken to consider that stability.
Namely we can find three modalities:
Backed by Fiat.
If we pretend to be "all in crypto" this type of backup would seem a contradictory option.
Backed by commodities or raw material.
When we talk about Gold support, for example, this would be a sensible option. Especially when the companies that issue their tokens allow periodic audits to certify their reservations. In Colombia there is a startup with a stable token backed by "Emeralds".
Backed by Cryptoactives.
Stabilization scheme widely used but based on a very complex economic system. However, this system has the vision of detaching itself from the centralism of supporting stablecoin using fiat currency.
Definitely, Stablecoins are a sensible alternative when it comes to safeguarding our assets and keeping us "all in crypto."
Thanks for sharing.
Your friend, Juan
I pretty much agree. Backed by fiat when fiat itself isn't stable is not ideal and which fiat would you even choose because they all suffer from inflation. Backed by gold could be interesting but I think in the end it has to be backed by an array of different stable assets. It can include precious metals, it can include fiat, it can include crypto derivatives, but it's not likely to be just one stable asset to rule them all because nothing is truly stable as anything has the risk of crashing.
Thanks for your kind reply.
Oh, this sounds like something apocalyptic!
So what would be a sensible option?
Dai has remained stable (1: 1 with usd) since its launch.
Tether does not present this same case, although it is currently stable.
Personally I would choose some stablecoin backed by gold.
Which one did you choose?
No problem.
Portfolio theory shows me that to preserve wealth is mainly about managing risk. In coming up with a stable token I would suggest that the collateral or backing be diversified in such a way to spread the risks. So to put it all into one fiat is to back it in a political way and politics can change, fail, or anything could happen, so I would not think that is a good idea.
I think Dai actually has a good approach to it. They are going multi collateral which spreads the risk. I would go a similar route if it were my decision. As for what assets should make that collateral up I would say these should be swapped in and out according to calculations of risk.
Suppose we go with my real estate example? Real estate can charge rent. Rent can produce the equivalent of a dividend or interest. So this explains to you how a stablecoin can pay interest from the collateral.
I totally agree, the key is diversification.
And like everything in finance; it's about taking risks (in a good sense of expression).
Your real estate example reminded me that I recently read an article of my great friend @shortsegments, where he raised the theory of "debt good".
It is really possible to diversify to distribute the risk and at the same time increase the profit margins and the chances of success.
Thank you for your attentive reply dear @dana-edwards, you´re so kind.
Would you mind if I share with you some details about our nonprofit initiative based on STEEM Blockchain: "Project Hope" (@project.hope)?
Together with @crypto.piotr I've been working on it for few months already and recently we've launched our website. It's still kind of a "construction zone" :)
If you think so, could check it out: https://www.projecthope.pl/
You may find section "passive income" particularly interesting. Please, check it out and let me know what do you think. Your opinion would be a gold mine for me.
Your friend, Juan
It is already possible. For example, investing $200K stable coin (e.g. USDC or, DAI) for 3 month fixed deposit in Crypto.com can earn 12% in Stable which is paid weekly. Once the $2000 per month profit is deposited to Debit Card account. With that VISA debit card anything can be purchased from the anywhere in the world.
https://steemit.com/steemleo/@dtrade/my-expectation-from-blockchain-and-how-they-come-to-realization-not-financially