Why can't a stablecoin have unlimited supply ?

There has always been a big discussion about Tether and their reserves, or lack of. This week, it all started again. Same thing.

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I agree with the fact that they should be honest and let a 3rd party do a proper audit. If they promised that 1 USDT would backed by 1 USD then they have to be able to prove they have those USDs in their bank account. It should be clear. Period.

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Now let's forget about Tether and let's focus on why do stable coins exist. What is the point of having a stable coin? The whole point is so that you can trade your crypto for it if you fear the market would crash. You can keep it in a stable coin without having to put it in your bank account.

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What I care as a crypto trader is that the stable coin actually delivers on the promise of keeping it's value constant. That's all I care as a crypto trader. That the value stays the same. 1 stable coin equals 1 USD today, tomorrow and the day after tomorrow.

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The problem with Tether is that they laid about their promise of keeping a 1 on 1 reserve.

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But what if they wouldn't have had this 1 on 1 pegged promise.

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What if they would have said instead, from the bigining: we have created a stable coin, it's pegged 1 to 1 with the US dollar. We don't keep reserves of USD. Why? Because we don't need to. Our promise to you is that 1 USDT will always equal 1 USD. We achieve that by using an oracle that always matches the price of USDT to the price of USD. That's it.

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We will also have an uncapped supply. Does that impact you as a holder of USDT? No, it doesn't. Remember that the price will always be 1 USDT = 1 USD

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Would that work in practice?

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I would love to hear your opinion on this.

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Please comment below saying why is my analysis wrong or why it is correct.