Trading Dollars for Dollars without a Centralized Exchange

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Convert Dollars for Dollars without a Centralized Exchange (CEx)

dollars and coins

I like what CExes do for me, but I shouldn't trust them. You get Goxxed, and you should learn. It was Binance that Goxxed me by not refunding my HBD. If you use a C.Ex.,, you're trusting a third party not to steal your funds, malfunction, or hold your funds for randsom after you have deposited them for something. It was the Steem cofounder Dan Larimer who tried to solve this problem with a precursor to Ethereum called Bitshares. It was the first blockchain to have more than two asset types on the chain, and exchanges were and can be done on-chain person to person without either trusting the other. In a sense it does solve the problem, except only for assets on that chain. Ethereum is even more flexible in what it can do but it is mostly used as a cheap currency creator.

Both of these multi-coin blockchains have decentralized exchanges. Now sometimes you need a dollar from Binance and have dollars from Ethereum. What do you do if you don't trust CExes?

There are many dollars.

Dollar NameBlockchain
bitUSDBitshares
USDT (Tether)Ethereum, Omni, Tron
USDCEthereum
USTEthereum (lost peg)
TUSDEthereum
DAIEthereum
USDDBinance
HBDHive
pHBDPolygon
BUSDBinance
NBITSNusharse (lost peg)

Stable coin trade chart

Thorchain: BUSD, USDC, USDT, DAI
BeeSwap: BUSD, USDT, HBD
Uniswap, : BUSD, USDT, DAI, USDC but no HBD.
Shapeshift: over three dozen different stablecoins including BUSD, USDT, DAI, and USDC, but no HBD.

Some front end can connect your browser wallet with the DEX to allow you to trade on Ethereum. Some combine BSC and Ethereum assets.

Bee Swap

Thanks to @ecoinstant and his proposal, you can get HBD or cash out of HBD via Beeswap. Take the case for converting HBD to some other dollar asset, you first have to go through Beeswap. There is a 0.25% fee for converting HBD to SWAP.HBD, and the cost to trade is about 1% for 100 HBD or less. For 100 HBD you would get 98.8 BUSD. For 10 HBD you'd get $9.94 BUSD but for 1000 HBD you'd only get 925.80. That's a 7% cost. Ouch. For that amount, it is actually more efficient to destroy HBD dollars for HIVE using the blockchain based "convert" operation and then trading HIVE for BUSD. This still costs you 5% which is a lot to pay for just trading. The "convert" operation isn't a trade. For the other direction, 1000 BUSD, would buy you 1774 HIVE, and then you could trade it on the Hive DEx for Dollars. Leaving you with $967 HBD. That's about a 3% loss.. The same interface says I can convert 100,000,000 at the same price, so we should take it with a pound of salt.

I have yet to read the beeswap whitepaper but I guess there are incentive mechanisms, to make this 'decentralized.' So I am not confident enough to say it isn't really decentralized or that it is. I've been told it is 'decentralized'.

Thorchain

Thorchain, runs on a multisignature scheme for many chains and the key holders put up Rune as collaterial, so that they lose much more if they steal the funds. A malicious filthy rich bad actor could do some real damage to the reputation should this user manage to get enough of the multisignature keys. By estimates on the Asgard wallet, 1000 USDC buys you 992 DAI. You need to trade USDC to Rune and then trade Rune to DAI, but this is 0.8%. The same trade on Uniswap estimates $999.88. Insanely good, but the Ethereum gas prices impose $3 fee on the trades according to Uniswap.

You end up getting a cost just with transaction fees that exceed 3% on trades with amounts running at 100 USD or less in a trade involving the Ethereum blockchain.

Trade?

I think with large liquidity, we could see a lower cost to trade dollars for dollars. Indeed with lower volatility, we should expect a lower cost to trade kinds of currencies. The trades like these can only reasonably be expected to be done for utility rather than speculation. You might want to convert HBD into DAI in order to pay for a plane ticket that accepts the later but not the former. You could be someone sitting on a lot USDT and would like to move it to a kind of dollar with less systemic risk and a 20% interest rate, and trade it for HBD for savings.

I no longer trade money for money because I can buy things I'll need in the future in order to fight inflation. I trade work for money. I trade money for goods and services.



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