Explaining crypto in dialogues EP 13
Stablecoins: why $1 stays $1, isn’t it a crypto token?
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Telcier: why is a stablecoin always worth $1? isn’t it a crypto coin?
Taiyo: because it's backed by real money. For every token issued, the company is supposed to hold about $1 in reserves, mostly cash and short-term US Treasuries
Telcier: so it's just a digital dollar?
Taiyo: think of it as a receipt for a dollar. The token is the receipt, and the reserves are the dollar it points to.
Telcier: but what stops the price from drifting to $0.98?
Taiyo: traders… if it drops to $0.98, someone buys it and redeems it with the issuer for $1. That's a 2 cent profit per token.. all that buying pushes the price back up
Telcier: so the peg holds itself?
Taiyo: as long as people trust two things: the reserves are real, and you can actually redeem
Telcier: what if they stop trusting?
Taiyo: then everyone runs for the exit at once, the price falls below $1, and it only recovers if the reserves are proven to be there.
Telcier: are all stablecoins built the same?
Taiyo: no, and this is where people get burned.
- Cash-backed: reserves in dollars and Treasuries, the simplest kind.
- Crypto-backed: backed by other crypto, locked up in excess to absorb price swings.
- Algorithmic: no real reserves, just code and incentives trying to hold the peg. These are the riskiest.
Telcier: so how do I know which one I'm holding?
Taiyo: you ask three questions, what's backing it? Who holds the backing? Can anyone verify it?
Telcier: and if i can't get a clear answer?
Taiyo: then you don't hold a dollar. You hold a promise.
Telcier: so a stablecoin is only as stable as the thing behind it.
Taiyo: yes… exactly., the price tells you what the market believes and the reserves tell you whether it's true.
Explaining crypto in dialogues EP12 (understanding PaperTrade)
how they work, how loosing make you earn, and what happened on the day they launched! (Long Read)
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Big Oma: what is Papertrade?
TEAONA: a trading app where you bet on Bitcoin or Ethereum going up or down, using borrowed power called leverage. It goes up to 1000x.
Big Oma: what’s leverage?
TEAONA: it makes your bet bigger than your money… put in $100 and trade as if you had $100,000. a tiny move in your favor wins big. a tiny move against you, about 0.05%, wipes you out.
Big Oma: so who takes the other side of my bet?
TEAONA: the app itself, like a casino. If you win, you get your original money back right away. your profit joins a waiting list and gets paid as other people lose.
Big Oma: and what do the losers get?
TEAONA: a token called PAPER. if you lose $100 and you get 10,000 PAPER. stakers are meant to share the app's earnings.
Big Oma: i heard they launched on the 10th of october, how did the launch go?
TEAONA: the team says it was huge. they claim it passed the stock market's volume in the first 6 hours, has $5M in the pool, and has paid $25M to stakers.
Big Oma: any problems?
TEAONA: there are two actually, First, people complained about the waiting line at launch. The team says they couldn't let small trades jump ahead of big ones, because it would let spam clog the site, which they say would've been worse.
Big Oma: and the second?
TEAONA: overnight, some people tried to manipulate the price on Hyperliquid, where Papertrade copies its prices from. apparently, if you can push that price, you can trick Papertrade into paying you.
Big Oma: ah 😹 did it work?
TEAONA: the team admits it was possible, because limits on position sizes were loose to handle launch demand. they say they're tightening those limits now.
Big Oma: what happened to the people who did it?
TEAONA: somebody won overnight, kept trying, and ended up giving almost all the profit back to the house through new accounts… the team also says some users chose to undo their manipulated trades in exchange for their PAPER.
Big Oma: damnn… so how about now, is it safe now?
TEAONA: the team says attacks like this can never be fully ruled out and goal is to make them rarely worth trying
Big Oma: should I try it?
TEAONA: only with money you can afford to lose completely. Treat it as an experiment, not an investment. NFA DYOR etc etc