Basis, the upcoming stablecoin ICO backed by the who's who of Venture Capital - I am confused!
Just saw this article on coindesk -
https://www.coindesk.com/bain-lightspeed-back-first-ico-133-million-basis-funding/
First some key parts of the article below -
Announced Wednesday, Basis (formerly known as Basecoin) has raised $133 million (most of which was reported last week in an SEC filing) in an initial coin offering (ICO), a round that featured an all-star cast of investors -
Andreessen Horowitz,
Bain Capital,
Lightspeed Ventures,
Google Ventures and
Bain Capital Ventures
Basis is seeking to offer a so-called "stablecoin," or cryptocurrency that would maintain a stable price in what has proven to be one of the world's most volatile markets.
Many other cryptocurrencies assure stability by backing their tokens with actual fiat currency, but this requires users to trust the entities that manage those currencies. Trusting someone else is risk, and crypto promises to create trustless payment systems where that risk isn't inherent.
Basis uses simple supply and demand to manage the price of its currency. When too many people want basis, the protocol increases the supply of the currency. It does the opposite when demand is weak.
All of this is managed by software, not people -- who might have ulterior motives or simply bad judgement.
Now, I am amazed to the read the investors named in the articles. Individual backers also includes Stanley Druckenmiller. Stanlet Druckenmiller is one of most well known names in the Hedge Fund Industry worldwide. And those venture capital firms are no joke. But all this makes me really confused and may be you all can help me understand this.
Basis, as mentioned, is trying to create a stable coin based on what central banks do - only one aspect though - control the supply of currency in circulation, and thus balance demand/supply and with that its price.
A central bank's aim is the following - maximizing employment, controlling inflation and longer term interest rates. Every action of printing money is directly as a result of restoring the economy after a recession and control inflation (2% inflation target in the case of US). The central bank will also control the supply of currency in the system through issuance of debt and by asking banks to maintain reserves with it. So I don't think Basis is trying to remotely emulate how an economy functions, but then what is it trying to do?
Stability, true but I wonder why do we need a stable coin?
- If the price will remain stable, why will people invest in it.
- If the price is fixed to US Dollars, then why do people need Basis? Poeple can just hold US Dollars.
- If Basis is trying to achieve a way to store US dollars, in a digital way, and remove counterparty risk, then moving counterparty risk from a regulated entity - a bank - to an unregulated entity - Coinbase or whichever entity owns Basis - also makes no sense either.
- How does Basis manage supply demand when people start shorting it, or buying it in a frenzy, when the algo can't catch up? Also what purpose does it have besides stability?
- What are the legal ramifications of creating such a coin? We haven't resolved the USDT controversy yet.
I just don't get this coin. But I really wonder if I am that stupid because the best of the best are backing this. Guy's what do you think? Does a stable coin matter to you? Let me know in the comments section below.