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Fractionalreserve

Market Makers get vilified. Why not own one?Dear friends, let me introduce to you my favorite crypto project of all. This automated market maker initiative is literally making the world a better place. My all time favorite crypto project happens to be an Ethereum token (compatible with Ethereum wallets) that is a governance token of the Maker System. The Maker system behaves as a market maker and generates a stable coin that is pegged 1:1 to the USD and is called Dai. Through this brief conversation we are going to discuss some stats, quotes right off a paper on the Fed's website and see if there is helpful data to unpack here. Stats: Market Cap $2.6B Circulating Supply 995,700 Tokens Protocol that Generates Dai Stable Coins First things first, what is MakerDao? Decentralized Organization that offers two tokens Dai & MKR The Protocol enables users to supply collateral which they can then use to borrow funds. Being that it runs via smart contracts, this negates counterparty risk all together. Imagine in essence you are the vendor with goods within a vending machine, and the user wants to purchase something from the vending machine - the autonomous vending machine administers the transaction securely where both parties can remain anonymous and have total trust in each other, and not need to run credit checks, nor balk at payment terms etc. I do not know if this is a helpful example for understanding Smart Contracts, but it is the best I can think of. Just imagine now that the vending machine runs on an immutable blockchain that is practically impenetrable. Technically a quantum computer could penetrate it, but then again a quantum computer could penetrate all of legacy financial institutions - as Russia proved - even super computers can. MKR is one of the largest players on the Eth Blockchain, and is currently the 14th most popular crypto project on Coinbase. Through collateral MKR generates Dai, which is a stable coin that targets parity 1:1 with the USD. We will reference the Federal Reserves source to learn more about Dai in a few moments. So briefly let me explain legacy financial institutions: First off we are dealing with Fractional Reserve Banking Banks need to be stress tested as they only have a fraction of bank deposits of actual cash on hand and readily available for withdrawal. The Federal Funds rate acts as a lever or a tool controlling reserves, and if they were to force legacy institutions to increase their reserves it would reduce the loans that could be administered which could then cripple businesses, and prevent new home purchases - etc. Hence higher interest rates would strengthen the dollar, and integrity of financial institutions but the consequence would be hampering the money supply and risk deflation. People would purchase less homes, vehicles, not be able to start new businesses - etc. Dai is different Dai does not rely on fractional reserves in an account, similar to what Tether is accused of doing now (although Tether has far higher reserves then legacy financial institutions using fractional reserve banking) Dai is generated when users use a smart contract on the ETH network and deposit assets as collateral that has been audited and is publicly viewable for all to see at any time. There are a SURPLUS of assets that generate Dai, so in essence the Dai has actual reserves backing it with real collateral rather then legacy financial institutions "fractional reserves" MKR is a token that maintains Dai is pegged to the actual value of the USD The fact Dai is decentralized, unbiased, collateral-backed makes it a wonderful tool for countries experiencing inflation concerns. And the surplus collateral make it actually safer then financial institutions fractional reserves. Ever hear of a "run on the banks" - this would not be a problem if you are banking using Dai - as every dollar has collateral backing it. What is nice is rather than waiting for stress test on legacy financial institutions and trusting them, just like we did into 2008's housing fiasco, Maker provides total visibility, current stats: Total Dai - $2,324,560,767 Dai Dai Debt Ceiling - $3,039,965,535 Dai Surplus Dollars - $8,431,217 Dai Visibility is continually available and updated dynamically here: daistats.com Dai is not mined or minted, but rather only generated when collateral is deposited by borrowers. The stability fee is a variable rate that reflects the cost paid by borrowers who deposit collateral to generate Dai. Instead of a centralized Federal Reserve, the community of MKR token holders gets to vote on the stability rate. Each MKR token provides the owner one vote per proposal. An alternative proposal would be voting on what assets constitute collateral willing to be accepted as deposits. The stability fee enables the Dai to be pegged to the USD. Let me explain. If Dai's market price falls below one dollar, the community could vote to increase the stability fee. This would then decrease the amount of Dai in circulation which will raise the price of Dai. If Dai's market price rises above on dollar, the community could vote to decrease the stability fee. This would then increase the amount of Dai in circulation which would lower the price of Dai back to $1 parity. Quick chart of Dai vs its top reputable competitor which is USDC: Now here is the great part of Dai! The thing that makes this a true Gem! If the MKR community make good decisions and the system performs well, the excess surplus if it exceeds a certain point will auction off Dai, and use the proceeds to purchase more MKR tokens which are then permanently removed from circulation - which raises the value of all of our MKR tokens. If the inverse were to occur, and if MakerDao becomes under collateralized, and there is more Dai then collateral the system will initiate an auction with new MKR being minted and sold for DAI, with that Dai then being burnt. This automated process will enable this to always maintain 1:1 parity with the USD. Again, much more sophisticated, and much safer then "fractional reserve banking" - shudder. This project is a beautiful one, and I truly believe that if you can fix the money, you can fix the world. If someone is in a country suffering from inflation, they can open an ETH account and purchase Dai, and in essence maintain their buying power much better than the Turkish Lira for example. I believe everyone has the capacity for production, creativity, and industriousness all over the planet and this is a project that is providing infrastructure for people to access banking all through an application on their phone. So let's talk Technical Analysis: Currently ranging and finally broken above the EMA ribbon after consolidation following the big breakout from the ascending Triangle Pattern leading up to this: I would advise that just as we beta-weight everything in the S&P500 one could in essence beta-weight this fairly well against Ethereum itself. I would project that they balance each other out well. Our next breakout point after ranging will be the $2,800 ceiling, where following that it will then move parabolic till we uncover our new range: Now an excerpt as promised from the Federal Reserve: Some DeFi applications allow users to create collateralized debt positions and thereby issue new tokens that are backed by the collateral. To be able to create these tokens, the person must lock cryptoassets in a smart contract. The number of tokens that can be created depends on the target price of the tokens generated, the value of the cryptoassets that are being used as collateral, and the target collateralization ratio. The newly created tokens are essentially fully collateralized loans that do not require a counterparty and allow the user to get a liquid asset while maintaining market exposure through the collateral. The loan can be used for consumption, allowing the person to overcome a temporary liquidity squeeze or to acquire additional cryptoassets for leveraged exposure. To illustrate the concept, let us use the example of MakerDAO, a decentralized protocol that is used to issue the USD-pegged Dai stablecoin. First, the user deposits ETH in a smart contract classified as a collateralized debt position (CDP) (or vault). Subsequently, they call a contract function to create and withdraw a certain number of Dai and thereby lock the collateral. This process currently requires a minimum collateralization ratio of 150 percent, meaning that for any 100 USD of ETH locked up in the contract, the user can create at most 66.66 Dai.6 Any outstanding Dai is subject to a stability fee, which in theory should correspond to the Dai debt market's maximum interest rate. This rate is set by the community, namely the MKR token holders. MKR is the governance token for the MakerDAO project. As shown in Figure 3, the stability fee has been fluctuating wildly between 0 and 20 percent. To close a CDP, the owner must send the outstanding Dai plus the accumulated interest to the contract. The smart contract will allow the owner to withdraw their collateral once the debt is repaid. If the borrower fails to repay the debt, or if the collateral's value falls below the 150 percent threshold, where the full collateralization of the loan is at risk, the smart contract will start to liquidate the collateral at a potentially discounted rate. Interest payments and liquidation fees are partially used to "burn" MKR, thereby decreasing the total MKR supply. In exchange, MKR holders assume the residual risk of extreme negative ETH price shocks, which may lead to a situation in which the collateral is insufficient to maintain the USD peg. In this case, new MKR will be created and sold at a discounted rate. As such, MKR holders have skin in the game, and it should be in their best interest to maintain a healthy system. It is important to mention that the MakerDAO system is much more complicated than what is described here. Although the system is mostly decentralized, it is reliant on price oracles, which introduce some dependencies. Final comment guys, the best oracle is LINK, which I am also bullish on & will touch on in a future date. Additional Citations: -Federal Reserve Bank of St. Louis: research.stlouisfed.org -Whitepaper makerdao.com -Similar to how as shareholders we can vote with our underlying equity. MKR holders can go onto the Maker Governance Dashboard and vote on proposals and decisions and in a decentralized manner make decisions that will benefit the stability of MakerDao. -Maker Governance Dashboard: vote.makerdao.com -How to vote: We can likewise see the mean (red line has caught up to price and is strongly pointing up). The mean reverting to price, or mean reversion indicates to me that we may tag it and then continue higher on our trend as the mean continues higher. A great way to spot the trend is just to see what direction it is pointing.
COINBASE:MKRUSDLong
by ZenMode
6
Happy anniversary Bitcoin.From a 1989 article in the The Wall Street Journal, by Victor Niederhoffer, speculator: Speculators don't only create bubbles (not sure short term speculators make bubbles happen, they might actually smooth them). The Federal Reserve was created by a US president to separate the money supply from the government. But they ended up being control freaks very destructive. I'll make another idea more detailed on that, in particular on the Bretton Woods system. Satoshi in his white paper, published 11 years ago, said: And 6 months later he said: "The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust." I do not know a single Fiat currency outside of the British Pound that stood the test of time. And just 4 months after this, Bernanke told US politicians "The Federal Reserve will not monetize the debt". Because it was temporary apparently. Today the FED has pumped the stock market to a point where the rich are so rich and the poor so poor than 1/3 of US citizen get in debt just to eat (corporate buybacks did not help). Europe is not better. Some countries even have negative interest rates and they are looking into "deep negative" rates, like -10% a year. The IMF has a guide on Enabling Deep Negative Rates to Fight Recessions www.imf.org The central banks are debasing currencies. And it's actually hurting the 90%. They keep pushing this pyramid scheme up. The problem is, a peer to peer system can't even fight those low IQ central authorities, because they are just going to ban it. They're going to have to end up in jail. The UK drifted to the right, the US drifted right, but also left, actually very far left it's scary. Those central morons that think they are helping (are they really that stupid? It has to be intentional) won't stop, and won't let people save cash, buy gold. So maybe citizen voting far left or right is necessary. But do those politicians understand they have to get rid of the central banks (or reduce their powers)? All I hear is "white man bad, rich people evil, let's stop progress" it's like none of them has a clue what the real issues are. Bitcoin reached a point where it went into a mania attracting alot of gullible unskilled speculators excited by stories of "Bitcoin millionaires". The tech reached its saturation point, it can't scale further, and there is very low interest in using it as a viable currency. I hope it will remain in history as a great prototype and not just a speculative bubble that cause "innocent people" to lose their shirts. Bitcoin ended up being a ponzi/pyramid scheme, with early adopters making a huge amount of money on the back of late adopters. But anyway, it possibly opened the way. Central banks have done so much harm. Over and over. Just like governments trying to prevent traders from trading or forcing prices. Take the example of oil demand being high on the east coast because it's terribly cold, and demand is very low on the west coast. When the government forces a price, traders have no incentive to buy cheap on the west and sell high on the east (as price is not moving even with supply and demand varying). And so on the west coast they warm their swimming pools they don't use, while on the east there is not enough Oil for everyone and people are cold. I could list so many examples. Over and over same story. Perhaps we could evolve into having currencies that are not completely controlled by some central authority. The gullible victims that are dreaming of lambos would really love to see their favorite ponzi scheme be bought by everyone (greater fools). But I have a better solution: The free market. Let's let currencies not be controlled in such a way, or very minimally, let's let the stock market not be controlled, and let them fluctuate naturally as they should. Ultimately it does not even matter what currency we use, it's just a number to help make things convenient, to help with trade. As long as it has the basic qualities it's all good. Central institutions hear about Bitcoin and immediately they want to control it... Risible... Crypto gambling moonboys don't care of course, but using a crypto will serve no purpose if it is fully controlled by a central bank. What we really need is to get rid of ultra controlling and manipulative central authorities. Central banks power must be reduced. Governments too. Their role should be of regulation, administration, resolving conflicts, governing the military (with limitations)... Not manipulating and spending like degens. Look around, there are great examples of centralized systems, decentralized ones, and mixed. But I think the best ones are a fusion of both. Just some examples off the top of my head... Central powers have to stop sticking their filthy paws everywhere, preventing innovation and causing poverty and generally pain & destruction. Let people with a financial incentive to do good, participate freely in the economy. There is no simple workaround. We have to get rid of all controlling central authorities. No alternative. Just like Ron Swanson said. Satoshi was right. We need to get rid of central institutions.
BITSTAMP:BTCUSDEducation
by MrRenev
36
Rejoice , cautiously.What a great day. Today shows more than ever that the crypto media has been manipulative and has made predictions based upon nothing. When the market is up , they tear it down; conversely when it is down , they encourage people to buy based upon arbitrary speculation. Just days ago the words "death Spiral" were being used. While I do not know why , aside from negative divergence in things like the Klinger oscillator , the market is doing so well on a monday of all days , I rejoice in the feeling that the feelings of doom and gloom are , for today at least , greatly diminished. I am no financial advisor , but I do encourage believers to do their part. Don't short sell. I short sold 2 lite-coin this a.m. at 28.30 u.s.d. and look where it is now. It's reasonable to be cautious , prudent even , but I encourage those who believe to use stop orders rather than short. I wish I had with the litecoin, but I will simply buy it again , in greater quantity. Even BCH is climbing the charts. With Banks still adhering to the fractional reserve speaking of the need for centralized digital currency - the stuff of fraud , and currency that doesn't even need to be printed in excess - simply typed in excess, it is time for the crypto community to show them that we will not adopt that sort of currency. It is YOUR money , MY money , and I can't speak for you , but I don't want their b.s. interest rates paid to me while they lend MY money to others at a high interest rate. That is what the mafia is for. Every effort is being made to scare you. Be strong. The government is for it's people , by it's people. It was once and will once again. This has been one day , but a week long lookback at litecoin will show that a correction was coming , and that the most money (at the time) was to be made 1 dollar at a time with large quantities of the currency , and in days past was the only major coin in the green. Don't let the government scare you. Don't let vague tax guidelines scare you - you can only be expected to do your best provided with the vague information given. There are sites out there that make reporting easy. Let's keep this going. Fortis fortuna adiuvat. Caveat Emptor.
BITSTAMP:XRPUSD
by Cryptocautious
1