Experts from BitMEX Research analyzed two popular stablon — BitUSD, BitShares is based on, and DAI, based on MakerDAO to study the mechanisms of preserving the value of these two cryptocurrencies, reports The Next Web.
The study showed that the main reason for their stability — a kind of market logic that says: “why they should trade at a different price?” Most investors sell a specific asset at a certain price just because they take this price as actual.
These coins differ from tablconv, pegged to the dollar: Tether (USDT) and TrueUSD (TUSD). The Tether relies on the support of a financial asset company, which makes it centralized and influenced by regulators. Described in the study tablconv another, more decentralized model of providing value.
BitUSD was the first stable digital currency. It is released in 2014, on the platform, BitShares, which was founded by Dan Larimer (founder of EOS). This coin is trading at the price of the dollar (1:1), but, unlike the Tether, tied to the cryptocurrency BitShares (BTS), not the Fiat.
BitUSD is opposed to the price fluctuations of BTS, to ensure the stability if the price of BitUSD by itself does not change relative to the dollar. But BitMEX notes that, if the price of BitShares has been volatile, not BitUSD would be valued at $1 in the market. Research suggests that, even if the price of BitUSD is kept at $1, this binding would come out of of control, if the price of BTS has dropped by half or even lower.
CoinMarketCap data show that the price of BitUSD mostly fluctuated around $1. The cryptocurrency has experienced a large (for stablon) the race course. In January 2016, it has risen to $1.6, and in December 2015 was reduced to $0,75.
The study indicates the absence of a special mechanism from BitUSD to ensure stability of the coin. Investors just think “Why don’t I exchange it for $1?” It maintains stability. Cryptocurrency is also susceptible to market manipulation by producers blocks in the blockchain of BitShares (the equivalent of a miner in the algorithm of consensus Delegated Proof-of-Stake). Manufacturers of blocks can use low volumes of trading BitUSD vs Bitshares, causing a decrease in the value of BitUSD and BTS receiving a “discount”.
The experts also studied the working on the Ethereum stablon Dai (DAI). They found that, unlike BitUSD, Dai implemented several mechanisms to ensure the stability of coins. Dai is a token ERC20 supported by collateral in the ether (ETH). Owners of secured items (CDP) generate DAI, putting the equivalent of the ETH in the smart contract. Then DAI tokens can be sold or used in the ecosystem.
The study shows that the main mechanism of stability of DAI is the ability of the owners of CDP to buy DAI against the ETH with a profit. If DAI price goes up, the owners of CDP can create a new DAI against ETH and make a profit, but if it falls too low, they can just buy DAI at ETH (the risk in this case is just too low cost ETH).
CoinMarketCap charts DAI show that this cryptocurrency does not have such fluctuations as BitUSD. It reached a peak price of $1.06 and in March of this year and fell to a low of $0.88 / l in February.
The authors come to the conclusion that, although DAI is more efficient mechanisms than BitUSD, the price of this stabilini governed primarily by psychology of investors who want to trade at that price.
Due to regulatory barriers, not all exchange traded cryptocurrency in pairs with traditional money, which is relatively less volatile. This plays into the hands stabilium, as often traders need to “go to Fiat” in periods of extreme volatility in the market.
Tether, the most popular stablein, recently caused a lot of criticism about its security dollar, and in connection with the alleged inflating of prices of bitcoin in the past year.
The company Circle, supported by the Bank Goldman Sachs, also plans to launch a cryptocurrency pegged to the US dollar. Circle claims that her stablein will meet all regulatory requirements, however, remains to be seen whether the company can deliver on its promises.
See also:
Stabilini in detail: Basic circuits and principles of action and perspectives
Stabilini on the rise: What are the stable cryptocurrencies and why they are needed
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