BC BITCOIN
Saved by @ThomassRichards

Another #FreeLoveFriday. So far, I’ve covered Bitcoin, Mastercoin/Omni, and last week ChainLink and the importance of decentralized oracles. Today, let’s talk about one of the most fascinating projects in crypto - @MakerDAO

 In my thread about Mastercoin, I briefly touched on the vital role fiat-backed stablecoins play in crypto markets, but there’s a catch with them:

The counterparty risk of a third-party holding fiat in reserves.
Enter MakerDAO, which set out to create a decentralized, collateral-backed cryptocurrency, DAI, that would be “soft-pegged” to the U.S. Dollar using the power of algorithms. In crypto tradition, its supporters said trust game theory, not operators.
In 2017, MakerDAO published a whitepaper describing a system where anyone could create DAI by leveraging ETH as collateral to create Collateralized Debt Positions. Essentially, you take out a digital USD loan against your crypto.
The game theory of the system is structured such that DAI issuance is controlled to keep the price pegged to $1.00. In essence, it buffers the fluctuations of the underlying collateral to create a synthetic dollar bill.
This obviates the need for a backing bank, or fiat in reserve, or any kind of dependence on fiat, save as a unit of account.
In 2019, the project innovated further to accept forms of collateral beyond just ETH. Now, there’s a whole ecosystem built on MakerDAO’s governance, including the DAI stablecoin, collateral vaults, and oracles.
While DAI seems to be similar to USD, it offers advantages that fiat cannot match. Namely, it is trivial to send even large quantities. No need for costly and slow bank transfers. So that’s why the price for DAI sometimes even exceeds its peg of $1.00.
Admittedly, it took me a while to understand exactly how Maker works -- our paper on the taxonomy of stablecoins sheds some light on its internals. It’s always amazed me how stable DAI has stayed over the years.
https://t.co/Pz3BkJLUM7
My greatest worry about algorithmic stablecoins like DAI had been the game theory. They work well as long as demand has them operating at or above $1.00, but the dynamics of when they fail are not well understood.
But last March, we saw that the biggest threat to the stable value of DAI isn’t governance, but the constraints of its underlying network.
As the Covid-19 pandemic triggered a meltdown of the traditional financial markets, a liquidity shock rang throughout the crypto markets. Ethereum network fees were outrageously high, and that’s if you could get a transaction confirmed.
You’ll recall, DAI is a collateralized product. If you can’t sufficiently re-capitalize your position as the price of your collateral plummets, the Maker contract follows its rules and liquidates your position.
It was sad to see people losing their money & being turned away from crypto. It was also disappointing to see an innovative project take a reputational hit for circumstances that were out of their immediate control.
I’m certain that the MakerDAO ecosystem will continue to innovate and seemingly make magic happen with math. I’m also curious to hear what you all and @RuneKek want to see built around MakerDAO next.

More from Bitcoin

Yan Pritzker \U0001f9a2
Yan Pritzker 🦢...
@skwp
1/THREAD: WHEN WAS IT CLEAR?

Oct. 8, 2020: The purpose of this thread is to document and timestamp when it first became clear that #Bitcoin was likely to become a major reserve asset for public corporations, and eventually states, with Square's purchase of $50M in BTC.

The purpose is to give something to cite when ppl later claim "But there was NO WAY OF KNOWING..."

h/t @ErikSTownsend who used the same format to call out the impact of Covid on Feb 8 and made me personally aware of the looming shutdown of the country https://t.co/opuiNgSeqC !


Bitcoiners smarter than me have been predicting the takeover of the dollar by Bitcoin for many years.

In 2014 with Bitcoin barely at $1B, @pierre_rochard wrote https://t.co/EGHa58KqHq, covering all the incorrect narratives of Bitcoin and stating it will overtake the dollar.

"[skeptics] misunderstand how strong currencies like bitcoin overtake weak currencies like the dollar: it is through speculative attacks and currency crises caused by investors, not through the careful evaluation of tech journalists and 'mainstream consumers'" - @pierre_rochard

I first became bullish on Bitcoin in the summer of 2016, around a $3B market cap, but it was still a toy project at that time in the eyes of most in the financial world, while many technologists thought of it as a v1 technology to be improved on.
BITCOIN
Pete Rizzo
Pete Rizzo
@pete_rizzo_
✨ Today, I started my ８ＴＨ ＹＥＡＲ working full-time in #Bitcoin.

I've been a journalist, I've worked at a global exchange and I've spent thousands of hours down the rabbit hole.

If you're just starting out, here are the lessons I'd pass along 🧵
BITCOIN
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Dan Held
Dan Held
@danheld
1/ Don’t Fear Tether

Whenever Bitcoin has a bull run, naysayers try to cope with missing the boat by rationalizing why it will fail through FUD. Most of these are completely unsubstantiated, but annoyingly persist as negative narratives Bitcoin must fight against.
BITCOIN
Meltem Demirors
Meltem Demirors
@Melt_Dem
1/ #Bitcoin FUD-busting time!

claim: bitcoin ownership is heavily concentrated.

@business published an article claiming "2% of accounts control 95% of all Bitcoin" 🤣

truth: the facts, my friends, simple don't line up. let's dive in!

2/ interrogating on-chain addresses is tricky.

address =/ account.

one person can control multiple addresses.

one address can hold bitcoin belonging to multiple ppl.

exchanges and trading firms will have addresses with large balances that represent client funds.

3/ the fine folks @glassnode published an excellent analysis of on-chain address balances in January

the ownership distribution of bitcoin among wallets is actually much more diverse than one might expect.

full piece here:
https://t.co/n5IdIQdNoA


4/ 31% of BTC is held in addresses not identified as exchange wallets.

these are likely institutions, funds, custodians, and OTC desks.

our analysis at @CoinSharesCo indicates >15% of all bitcoin is held in third party custody, including @coinbase and our own @KomainuCustody

5/ in fact, between asset managers @Grayscale ($36B in BTC) and our @xbtprovider ($4B in BTC), 4% of bitcoin is locked up by fund providers and asset managers!

our @CoinSharesCo research team publishes an EXCELLENT weekly report on fund flows and AUMs -
BITCOIN
RealRLD
RealRLD
@rld_real_CPR
https://t.co/kWHHSWdlw2 #GoldStandard #Bitcoin #BTC
#Covidstroika
BITCOIN

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