…quantify. While the volatility-coin introduces conceptual challenges around valuation and adoption, it also serves a distinct purpose missing from the fiat-backed model: incentive alignment among stakeholders. Crypto-backed stablecoin systems borrow from Bitcoin the idea that a community can be incentivized …
Honestly your article didn’t convince me that incentives are aligned in the volatility-coin model. It still doesn’t seem like adequate incentives exist to lock up ETH in a CDP to issue DAI which outweigh the downside risk of volatility which could result in margin calls which liquidate the collateral.
Give me some real life stories in the wake of the crashing price of ETH where DAI issuers have felt that their participation was “aligned” with DAI holders and they were adequately “incentivized” to stake their ETH.
Likely the vast majority will admit that they made a terrible financial mistake in participating and are now worse off for it.