Reply to post: Re: Backing

America says banks can now transact using so-called stable crypto-coins. What does that actually mean?

doublelayer Silver badge

Re: Backing

The person you are replying to is expressing skepticism, not that it's possible, but that it would be done. Whatever resource is used, how do you know the backing organization has the resource in the necessary quantity? Even if you can prove that they had it at one point, how can you prove that they still have it? If a backing organization had a bunch of cash in an account to back their coins, how would you detect it if someone decided to take a bit out to spend on something else on the theory that not enough people will use the backing that they'll need it all? Or used it as a resource for something else putting the coin investors lower in the debt cycle should the backing organization go bankrupt?

Essentially, the question is why should a backing system be trusted, because otherwise it's similar to any unstable investment which has the possibility to crash without warning with little recompense. The usual argument is that these coins will replace cash, but even under hyperinflation, cash can't become worthless in five minutes.

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