They described what they are doing in their documentation, but the core ethical problem here is that the only users that would use their service are those incapable of understanding how UST/Terra worked, because anyone capable of understanding would just deposit funds directly and get higher APR for the same risk! Extremely predatory.
UST fooled many ...not very bright people who genuinely didn't realize it's a ponzi scheme - but obviously smart and technically proficient founders of Stablegains' have no such excuse. Zero room for doubt - they fully knew it's certain to collapse eventually, banking on their legal terms to protect them from liability while privately profiting as long as it works.
Founders of Stablegains belong in prison and everything they own should be confiscated and divided among victims. Sadly they are probably safe - as knowing the inevitability of collapse they must have felt their legalese to be ironclad.
Stablecoins are literally modernised promissory notes and the people hawking them are unregulated banks. It's incredible the people selling these stablecoins are not being regulated as if they are banks.
Just because something didn’t explode previously, doesn’t mean it was safe until now.
Of course they are not, but UST is. Stablecoins are different from each other. USDT, USDC and DAI are all collateralized (at least partially). UST is minted out of void by burning LUNA, creating demand for LUNA so creators get a profit and turn away, slashing all UST investors. It is an outright ponzi scheme hidden behind layers of DeFi jargons and borrowing trust from true stablecoins like USDC while being fundamentally different from any other responsible stablecoin.
Ironically, this is partially what made UST so big - because to many people it looked like this:
(1) months of three digit APR - 'obviously unsafe' ('common sense' - high yield is sus, smells like ponzi)
(2) it wasn't a ponzi. Nothing bad happens. Many people make bank. Some have no idea what's safe and were just gambling, some make informed decisions
(3) eventually, the person in question feels stupid for missing free money and decides to put money in with no deep understanding
(4) safe yields crater from a combination of people like that + slow moving, but smart, funds that started to deposit hundreds of millions
(5) person in question deposits into the UST ponzi scheme by extrapolating safety record of non-ponzi farms that are now gone, due to a category error - 'it's defi and it was safe for so long, therefore UST is safe'
(6) not realizing it's a ponzi scheme they don't even try to exit when the gig is up. Massive loss.
Ironically I now see many examples of the same category error but applied in reverse - many people that lost on Luna think its collapse proved that defi is, in fact, fundamentally unsafe, when the reason they lost is because they put their money into a ponzi scheme that leveraged defi brand for marketing.
I'm not saying these aren't some other kind of scam but lots of people use "Ponzi" as if it meant any kind of scam... And generally speaking "how many thingy-coins do I own" is the one thing cryptocurrencies focus on making very difficult.
TLDR: Everybody overuses "Ponzi" and it annoys me.
If you're driving 200kph and crash, you weren't safe before the crash and unsafe afterwards.
What happens when some old depositor wants to cash out? Money comes out of new money that's coming in. As long as there's enough new money it works (the fundamental ponzi property). The system also utilizes some liquidity buffers (liquidity pools with other stablecoins) that can absorb temporary volatility in a redemption demand - which works as long as money flow is positive. When that stops being true, and liquidity buffers run out - both UST and Luna started collapsing, with 100% of inflows redirected to UST sellers.
Viewed as a system - all difference to a traditional, straightforward ponzi disappears. Empirically, this obfuscation is so successful from the marketing perspective algostables with meaningless changes (or even not) will continue to proliferate, although it may take years for any to get as big as UST.
Lying about source of potential gains concerns marketing of it - which is something external and done by humans, and not part of the internal distribution of money flows. How can an algorithm itself commit fraud? It can't.
You also can't really add "almost always" to "completely safe". It's either "completely safe", or it's not. This statement is just "it works 100% of the time 65% of the time", but with words rather than numbers.
"It's 'completely safe', until it's not" which is exactly the point that I and others in this thread started with.
Due to their actual stability (relative to other stablecoins), they're more likely to trade at a premium than at a discount.
About a year ago I traded 10,000 USDC for 12,100 USDT during a run on a certain DeFi bridge, only to trade it back to 12,080 USDC a couple hours later.
No, that assumption (emphasis added) is popular but utterly false.
In a Ponzi scheme, cash from new buy-ins gets FRADULENTLY reported to existing participants as dividends from the underlying business or investment.
That fraudulent reporting of fake-dividends is essential to the scheme, because it's how the scammer lures in successive waves of investors to keep it perpetuated.
Unsustainable optimistic speculation != Ponzi Scheme
It was often in usd.
>"It's 'completely safe', until it's not" which is exactly the point that I and others in this thread started with.
The meaning was: almost all smart contracts were safe, meaning you had to at least check the code before depositing.
It was conflated in the past because without smart contracts ponzi schemes were necessarily executed by people.
>Unsustainable optimistic speculation != Ponzi Scheme
Speculation on a token that doesn't generate any income and isn't backed by anything is one version of a ponzi scheme, yes.