Doesn’t this depend on having price feeds for the various ERC20s so that you know when to trigger liquidation calls for CDPs? My scheme does not depend at all on price feeds; it instead gets the same effect through incentivized preference revelation (ie. people participate in the “implied price feed” by choosing which asset they withdraw).
Great point, the feeds can be manipulated, and will be a target for hackers as the makerdao/DAI system grows in the crypto space.
Your suggestion around tranches makes sense, as the data provided is from an alternative “data source” that cannot be easily hacked as it is people or algorithms making decisions with their own internal data as a starting point, effectively distributing the attack surface.
I am more of a proponent of seignorage shares: https://github.com/rmsams/stablecoins
I am familiar with basecoin and looked into seignorage shares, and those models to approach stablecoins are interesting, but I have a hard time thinking they would be successful in the long-term unless backed by real-world assets (collateral).
If I take a few steps back, the value of money is connected to multiple attributes (not exhaustive): fungability, stability, availability, portability, acceptability, etc. In the perspective of monetary policy, the money supply is adjusted to influence interest rates, ie: the cost of money. Basecoin and seignorage shares from what I understand provide a similar function to a central bank in the adjusting of the money supply.
An additional attribute is faith in the currency, ie resilience to withstand economic contractions and provide a stable value. During the 2007 financial meltdown, only a few assets provided positive returns (not exhaustive): USD, US Bonds, Gold, and Japanese assets (Yen, bonds, etc.). The reason why those assets had positive returns is because they are viewed as assets that hold value and can withstand economic contractions.
The faith element does not exist from what I can see in the crypto world, the faith that the system can re-stabilize itself without pouring additional capital from outside resources into it. The faith attribute may occur in time, but people will need to build faith in the system that when there are economic contractions, the stable coin can hold its value. This idea has not been tested, as there has been a good degree of economic growth since 2009, with the community not really knowing how crypto assets will perform during large economic contractions.
I believe the faith aspect is needed for the long-term success of a crypto stablecoin, and a reason why I question basecoin and seignorage shares long-term sustainability. A bridge to effectively create a synthetic “faith” would be to leverage collateral, not just crypto collateral (ETH, BTC, LTC), but crypto collateral that is connected to real-world assets, such as a government currency (USD/Euro/Yen), physical assets such as Gold and Silver, or even securitized assets such as mortgage backed securities wrapped in a crypto shell.
An additional thought I had is there could be a mechanism that incentivizes lower correlated assets to be included as collateral backing the stablecoin through reducing interest rate costs to withdraw the stablecoin from the collateral. For example, if it would cost 0.5% to withdraw makerdao DAI using ETH from a CDP, vs. .4% using TrueUSD.
Curious as to your thoughts.