The Case For DAI: All Fiat-Backed Stablecoins Can Be Frozen

Why Fiat-Backed Stablecoins Should Be Used Sparingly
Nearly all fiat-backed stablecoins are issued by companies who have shown they will freeze assets when ordered by governmental entities, or even at their own discretion. Earlier this year, in the Polygon bridge hack, the hacker in question returned all the assets they stole, except for the USDT, because Tether chose to freeze the tokens in the wallet. Circle (the maker of USDC) has also said they will freeze tokens when ordered by the US government.

While it is good that this provides possible recourse against criminal action, it is not good for central entities like these stablecoin companies to have the power to freeze assets, especially if they later choose to do it for personal reasons such as stopping a competitor (which SDAO one day may be). For our own good, we need to use a decentralized stablecoin, such as crypto-backed DAI.

Why DAI?
There are other crypto-backed stablecoins on Ethereum that SDAO could use, such as UST, or algorithmic stablecoins such as AMPL. However, there is not a great deal of liquidity for either on Ethereum. UST is a wrapped asset on Ethereum, being native of the Terra blockchain where it is backed by Luna. AMPL has been criticized for not holding its value very well and is not as popular.

DAI is backed on Ethereum by a smart contract, cannot be frozen by centralized entities, and has a great deal of liquidity. It is for these reasons that I propose DAI be used as the primary stablecoin by SDAO for its liquidity pools and prioritized by dynasets on Ethereum whenever possible.

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Great point! In the end i believe it draws back to the question of wether SDAO will be compliant to governments or will we be able to rise above jurisdictions once the project is further decentralized. From an individuals standpoint it is easy for me to be non compliant with government action since they cannot access my data/crypto, but what about institutional clients that may not be allowed to hold decentralized stable coins in the future? Taxes due to be paid in stablecoins may require to only use US gov. approved only.

In the end im confident stable coins are gonna be like holding a burning bread in your hands, the less it stays the better, probably most of those people will be looking to put their profits into safer, by then also far more mature, assets such as Bitcoin where the dynBTC will excel and certainly retain the most value in the long-term.

To conlcude, in the short term i believe we should prioritize profits in the most liquid assets and if that means using heavily centralized stablecoins i guess its alright. In the mid to long term a mixture between decentralized and centralized depending on compliance.