What happens if a stable coin fails. - page 2.

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Quote from: pedro161977 on March 04, 2021, 12:00:38 PM

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?

Most of here will definitely says yes because thats a possibility. Those centralized platform have the option to use it but they are out of decision whether that particular fiat coin has been under an extreme problem( rug or became scam) cause it is likely should be blame on that stablecoin company that you bought. There are cases that some asset got freeze so centralized crypto are always at risk.

tranthidung

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Quote from: pedro161977 on March 04, 2021, 12:00:38 PM

what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc)

Stable coins are

Altcoins
Mostly centralized and have risks of shutdown by companies or by governments. Or PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets
Their inflation schedules are as similar as fiat. They are minted from the air

Quote

and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?

It depends. As consequences from their inflation schedules, their values can fall to lower than $1 for 1 stablecoin (1 USDT, ie.) or to zero.

Initial stable coin can be swapped to another stable coin or another token, if the company want and still be enable to do so (without lawsuit or prison charge from governments).

Whatever the scenario is, any of which will be terrible.

Darker45

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Generally, yes, you will lose it all. And once it happens, no other token or fiat will save your ass. However, it depends on what happened and other factors. For example, if there's a swap or a change of token, then the old stable coin will lose its value and you will be given a new one with the same value. Or if your funds are stored somewhere where they are insured, then you will probably be refunded with it if ever a hack or any untoward incident happened.

But take note that there are a number of risks associated with a stable coin. First, it is under the control of an entity. Meaning to say, you do not really own it. Second, since its value is pegged on fiat, it is therefore going down. The value of fiat is depreciating by design. There is no point holding it. Third, since there's not much you can do with it and you decided to invest it on lending platforms, for example, you are adding another layer of risk. If that platform fails, it will certainly affect your funds.

btcxz

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Quote from: NeuroticFish on March 04, 2021, 12:19:43 PM

Quote from: pedro161977 on March 04, 2021, 12:00:38 PM

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?

If I understood the question right then:
1. If the value of the stablecoin will drop to 0, you will end up with the same number of coins, just now they will worth 0.
2. If the coin underlying architecture (blockchain) fails then you (and everybody else) will be unable to withdraw (and also most probably the value will drop).

I am not familiar with those platforms, but why would they exchange the worthless coins into something valuable (hence lose money) because you made a bad investment?

You lose it all. Simple. Stablecoins suck, they are decentralized as Fiat.

Bitcoin_Arena

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Yep if the coin fails or exit scams, you also lose everything;

1. All the stable coins you see are not like Bitcoin, they are high centralized and very prone to security attacks and Government seizures.
2. Defi platforms are high centralized and also prone to hacks

Basically, you are going to double the risk of losing your money by using a stablecoin then a Defi platform to keep your stablecoin for just less than 10% APY

Solution:
Just buy Bitcoin and HODL. You get way too many gains than those risky defi platforms

TryNinja

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Like it was said above, you will most likely just have a ton of tokens worth nothing. But it also depends on what the platform does with your deposits. I know some of them probably do DeFi, so there is a risk the protocol derivates the stablecoin price from other sources and liquidates the coins if their price gets dumped on the market; result: you lose your tokens (they would be worthless anyways).

In both ends, you end up with nothing unless the company has any kind of insurance that deals with this kind of risk or if someone else (gov?) bails you out (unlikely, IMO).

NeuroticFish

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Quote from: pedro161977 on March 04, 2021, 12:00:38 PM

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?

If I understood the question right then:
1. If the value of the stablecoin will drop to 0, you will end up with the same number of coins, just now they will worth 0.
2. If the coin underlying architecture (blockchain) fails then you (and everybody else) will be unable to withdraw (and also most probably the value will drop).

I am not familiar with those platforms, but why would they exchange the worthless coins into something valuable (hence lose money) because you made a bad investment?

pedro161977

newbie

Activity: 3

Merit: 1

Hi,

Just a novice question here: what happens if you hold x amount of a stable coin in one of the many lending crypto platforms available (crypto.com, youhodler, nexo, etc) and that coin fails and goes Kaput? Do you loose it all? or are your assets moved to another token or FIAT?

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