So how about we contemplate the doomsday scenario for stablecoin:

• stablecoin starts out wildly successful, miners get rich, everybody is happy
• Stablecoin 2.0 comes out, and nobody wants the original stablecoins anymore
• Everyone tries to sell their stablecoins all at once, price drops 99%
• All confidence in the protocol is lost except a couple hardcore believers holding out hope that the protocol will somehow correct itself

What should the protocol do to transfer fees in this case? Is there a 90% transfer fee? 50%? 10%? If the transfer fee is too high, who is going to want to buy stablecoins? Transfer fees penalize buyers as well as sellers. If nobody wants to buy OR sell, there is no incentive for prices to go up. Stablecoin simply dies.

It would seem that the transfer fee needs to be pretty small even when the price diverges by a large amount from the underlying asset, otherwise the new currency is completely ruined. On the other hand, if the coins cease to track the underlying asset, nobody wants to hold the coins anymore, and the currency is completely ruined.

Morpheus - have you considered how to handle a doomsday scenario like this?