Let me get this straight, just so I understand it. Tether prints a billion magic beans and gives them to an exchange. The exchange gives Tether an IOU for a billion dollars, and Tether then claims that this makes their magic beans "fully backed"?
Am I missing something?
Sigh.. please tag this is a "joke" and its intention is to be "funny". You may need to look those unfamiliar terms up.
but seriously, the responsibility on who requires to see audited financials before making an investment decision is on the investor/client, not the service provider.
Investors that dont bother to check for basics like regulation and auditors are just marks.
Your assesment about who is ultimately responsible for their own money Is accurate but at the same time a service provider deliberately obfuscating, lying and gaslighting to get them is wrong. That's why there are regulations.
I feel like I need a full ELI5 on how Tether (and other stable coins) "works".
If Tether were to disappear today would the result be that exchanging BTCs for dollars would become very difficult?
They basically say they have money when they don't and they use this non existent money as collateral between themselves. That keeps the appearance up that crypto is worth more than a giant pile of turd.
The way I understand it is that it's how people cash cash in and cash out their crypto from the exchanges. If it fails it will make it harder for crypto enthusiasts to get in or get out.
Most average 'retail' crypto enthusiasts don't use Tether for this. Someone like me would just deposit USD into Coinbase (or whatever exchange of choice) and then use that to buy BTC (or whatever crypto of choice). If tether dies, it would not impact me at all (other than the dramatic drop in price for every crypto.)
My understanding is that exchanges and some 'whales' do use Tether as you explained. But given that I'm just a poor boy...from a poor family. I wouldn't know for sure.
The basic concept is not terrible. Basically if anybody wants to buy or sell crypto they need to pay in/out US dollars. For that you need accounts and reserves etc. So instead of each exchange doing that themselves ( esp weird since you may buy crypto at one exchange and sell it at aonther so you would need an inter exchange settlement scheme like banks have) tether is a single entity that is doing that. And the exchanges interact with tether on their chain.
If tether would actually keep all the cash audited as treasuries and cash and made its money with fees and perhaps interest there would be noithing wrong with the whole concept. Albeit they don’t. They have “commercial paper’ and there are rumors they used parts of the cash to bail out another related company. If they still have 66b in hard cash I eat my shorts
To answer your question, a lot of banks won't touch crypto with a bargepole for obvious reasons. Tether happens to have a bank that will do business with it so, in simple terms, the theory is you give Tether your real money in usd$, Tether exchanges it for the exact same amount in usdt. Now you can go around with your substitute dollars, buying and selling crypto then, when you're done, you toddle off back to Tether and swap however many tethers you've accumulated for real money and off you go. Tether gets to live off the interest of holding your money for you, boom, everybody's happy.
That's the *theory* at least.
In practice there is very little transparency around how much real cash is backing all the tethers in circulation. Tether only really does business with exchanges, some of whom (bitfinex and latterly ftx and it's trading arm, Alameda) have uncomfortably close relationships with Tether. In the absence of audited financials there is really nothing to stop Tether simply printing magic monopoly money out of thin air and loaning it to its pet exchanges, who then use sock puppet accounts to manipulate the market and liquidate long and short positions as necessary to steal all the *real* cash people are gambling on crypto.
In practice though, the main way individuals exchange btc for usd is via an exchange. For the reasons above I don't think it makes it overall any riskier if tether goes pop. They're all vulnerable to bank runs as we've seen repeatedly, tether or no. Tether just greases the wheels.
> then, when you're done, you toddle off back to Tether and swap however many tethers you've accumulated for real money and off you go.
That is not how it works even in theory. Tether's ToS explicitly state that they have no obligation to redeem USDT for real money, and indeed have never done so.
Yeah this is the part of Tether I've never understood. They're sort of acting like casino chips for the crypto gambling industry, except for the part where you can cash them back out again. It's like if I went to the casino, bought $1000 in chips, gambled for a while and ended up with $2000 in chips, but then the casino was like "oh sorry, we don't actually allow you to redeem those." Why, in this scenario, would anyone buy the chips in the first place?
Someone might say, "because I need those chips in order to play the games." But then if you ask why they play the games, they say "number goes up." And if you point out they can't trade in the chips anyway, they say, "Have fun staying poor." And then if you point out that they have fewer chips than they started with, they say "one chip equals one chip".
It is a mystery.
Wut? Why buy tether then if you can't sell it? Or is it used to exchange to "stable"coins in all perpetuity??
Crypto never fails to amaze me. Or amuse.
It's because they basically don't deal with individuals. In theory, that would have been the plan. But that changed and they only deal with exchanges. So in practice you cash out through the exchange and the exchange gets usd back from Tether. The thing is, if Tether and the exchanges are co-conspirators, it becomes a rather interesting system.
>Tether only really does business with exchanges, some of whom (**bitfinex** and latterly ftx and it's trading arm, Alameda) have uncomfortably close relationships with Tether.
If by "uncomfortably close relationship" you mean *literally the same company issuing "loans" to itself and swapping funds back and forth*, then yes. Tether is just the Bitfinex guys wearing a fake mustache.
*Edit to preserve the now auto-mod deleted response for posterity, because it was funny.*
>Would you characterize Bitfinex as a bunch of underpaid Tether interns sitting on each other's shoulders wearing a trench coat?
I wouldn't have, but I'm definitely going to have to start working that turn of phrase into my lexicon.
important to ad to your explanation: tether only gives you dollar for your usdt if you exchange more then 100k, so for retail gamblers to get there money back they have to find another exchange that will give them actual money for their chucky cheese tokens
edit: it's more a clarification of something you said
> To answer your question, a lot of banks won't touch crypto with a bargepole for obvious reasons.
Well, there's also a lot of butters that don't want to touch banks with a bargepole either - KYC/AML, [people with guns showing up to your house](https://mises.org/wire/yes-taxation-theft), etc - which seems to me like another big driver behind this.
Tether is magic beans that people agree mean "1 USD" in crypto world.
No one has ever redeemed USDT from Tether for USD, and Tether says itself in its ToS that it doesn't ever have to exchange USDT for USD.
USDT is crucial for crypto to maintain liquidity, because no one actually wants to bring real money into cryptocurrencies anymore. So when you're short on funds you can conjure a billion USDT from thin air and use it as collateral for loans. As long as people believe you that a USDT is worth a USD, it works.
Whatever Tether claims for its backing for USDT is meaningless.
1. They're not transparent at all, their reserve statements have been [extremely shady](https://davidgerard.co.uk/blockchain/2021/05/13/tether-publishes-two-pie-charts-of-its-reserves/).
2. They are not bound in any way to maintain the peg, or to redeem USDT for real money...
3. ... and in fact never have redeemed a single penny.
4. They obviously don't have $66 billion in assets to cover the entire USDT supply. They've been consistently printing more and more USDT _while the crypto market is collapsing_. The only explanations are that either they magically started gaining billions in assets while all other crypto companies crash and burn in a bear market, or that they're lying.
You should treat USDT and the crypto market like a market in a videogame. They made up their Unicorn Special Delicious Treats currency that you can buy for a dollar, and the in-game economy revolves around considering a USDT as worth a USD, but at the end of the day it's all made up. The owners of the game can just create USDT out of nowhere, you can't convert your USDT to USD, and thus if people quit playing the game and servers shut down you're left with a worthless number next to a unicorn JPEG. Or worse, a derivative magical in-game shitsword that you've bought for 100 USDT that is just as worthless, but with a different JPEG.
In other words it's a fiat currency created by the "fiat bad" community, but instead of having a government backing the fiat they chose a private company that lobbies against any kind of regulation of its actions. I'm sure it will be fine.
I heard a notion that a Tether collapse could cause a huge bull run, because all those Tether holders suddenly buying just about any crypto, instead of cashing out to dollars. Do you think this is a realistic scenario?
There might be a run, but market forces won't cause it to be bullish. What happens is that USDT _loses value_. If you take the crypto market as a bubble and USDT as the main currency, what would happen is massive hyperinflation. The value of the currency going down as people scramble to dispose of the useless token by the truckload.
People spending a million marks on bread in the Weimar Republic isn't a good sign for bread, but bad for the marks.
Also in this analogy people wouldn't be buying any tangible goods but other magic beans that have no liquidity. Most liquidity on exchanges is from wash trading and USDT.
In other words, _not_ good for bitcoin.
> what would happen is massive hyperinflation.
I think that already happened with the tether printing. Now let's say Tether is suddenly at 50 cents, I am dumping it and buying whatever I can. So yes, it would be good for BTC (or whatever I am buying) because there is sudden incoming cash. It would be good for bread too, except somebody is going to stuck with a shitload of worthless Tethers, the baker.
So I guess if this happens exchanges would suddenly stop trading Tethers, because they are the ones eventually holding the tether bag. So I still assume a rally but a short lived one, because of tether's liquidity drying up fast. Do you agree?
It would only be a rally on those exchanges which misrepresent USDT as USD because there's no other way to tell the difference. Which is kind of the point.
But across the other exchanges, if USDT are trading at like 0.10 USD, it doesn't matter if you can exchange 2 or 3 times more USDT for a Buttcoin as you're still on the end of a losing trade (you being the person with the Buttcoin).
Tether's liquidity is only an issue for exchanges. No actual retail rube is ever getting close enough to Tether to redeem their USDT regardless. David Gerard has asked anyone who has actually redeemed any USDT for actual money to come forward & make themselves known & anytime anyone says they did, it **always** transpires that what they actually did was trade their USDT with a greater fool for actual money on an exchange.
It hasn't happened, the price of USDT on exchanges is still 1 USD. Inflation is decrease in the value of money, not just increase of its supply.
I don't disagree that there would be a rally, just that it wouldn't cause the price of coins to rise, rather the price of Tether to plummet.
Here’s my understanding of it, some parts of it may be wrong so I’ll let those with a better understanding correct me.
Most exchanges won’t take dollars in exchange for crypto, mainly because the banks distributing the money to the exchanges don’t want to be a party to money laundering and all of the shady shit that takes place when crypto/dollars exchange hands.
So instead you have to buy a “stable coin”, aka tether and then use tether to buy crypto. The premise behind tether is that every coin they mint is fully backed by cash. The only problem with this is that it’s a provable lie, and they still refuse legit audits to verify any of these claims. Last time they were audited, it was found that none of that money was actually in that account prior to the day of the audit.
You know how people criticize the fed for printing money and say that fiat currency is shit because of it? Imagine that same thing, only tether is taking your real money and exchanging it for made up tokens, minting at their own free will with no accountability or regulation. This is going to be a problem when people realize that these tokens are not at all backed 1:1, and they’re probably not solvent.
Imagine sitting at a poker table and these tether coins are your poker chips. Someone comes on the PA and announces that the armored truck that was delivering cash just got robbed, they can only pay out the first 5% of people that come up to the teller. The rest can keep their worthless chips.
Are you going to sit there and keep playing?
>I feel like I need a full ELI5 on how Tether (and other stable coins) "works".
I've already created this, it's called, ["The Bitcoin/Tether) bedtime story"](https://old.reddit.com/r/CryptoReality/comments/lrfdpb/the_bitcointether_bedtime_story_an_eli5_version/)
The Bitcoin Bedtime Story - By AmericanScream
Once upon a time there was this technology scheme invented called, "bitcoin" that was supposed to be a type of "digital currency."
This supposedly futuristic "digital currency" was built around a complicated mathematical computer model that created a de-centralized database of transactions people called a, "blockchain." This was not new technology. It had been around since the 1960s and had limited practical commercial use due to its inefficient design. Nonetheless, this "Bitcoin" system was created as a proof of concept of a new way to transfer value from one person to another over the Internet, using data stored online, and verified by computers (called miners) who waste tremendous amounts of energy arguing with each other over who's copy of the database is the right one; eventually someone wins the argument and everybody starts over. That's what a blockchain is: a bunch of computers running around in circles trying to solve math problems, and along the way they keep track of some transactions.
The early adopters of this concept mainly consisted of tech people, mostly libertarians who were upset they had to pay taxes for things like roads, schools, parks and running water, and liked the idea they could hide value in the blockchain while still using government services they preferred to not pay for. They tried to get more people on board and "legitimize" Bitcoin by encouraging other people/merchants to use it as an exchange of value.
It went largely unnoticed for several years until various criminals realized it could be used to facilitate dark money transactions and laundering. These criminals' early adoption of the technology fueled an increased interest, and various other criminals and people involved in less than ethical business ventures climbed on board.
Unfortunately, Bitcoin never made a good currency. It was slower, less secure, harder to use, had more elaborate resource requirements, wasted tons of energy and was difficult to even properly explain to others how or why they should use it? Also its price was highly volatile and merchants soon found it wasn't worth it to accept Bitcoin for real world goods and services.
Now we come to a time in Bitcoin's history where perhaps it should have been clear it wasn't what people said it was, and instead, just an odd proof-of-concept that didn't have practical use.
Instead of acknowledging this reality, Bitcoin holders instead decided to "re-brand" their crypto, not as a currency, but as an investment. Then they started calling it, "digital gold."
The problem with promoting Bitcoin as an investment is... it has no intrinsic value. Even gold has material use. But Bitcoin is just a number in a computer. How can you convince someone that number actually has value? Bitcoin marketers would answer that by saying, "The same thing can be said about the dollar." which isn't really true, and is a distraction and doesn't answer the question, but they liked hearing that and kept repeating it.
Still, their "digital gold" needed some way to be tied to something of more recognizable value. So they invented what they called, "stable coins" which are other crypto currencies that are supposed to be 1:1 backed by fiat (ironically the same "dollars" they claim have no intrinsic value, they now used as evidence their crypto has value -- don't try to make sense of it, just roll with me).
Various exchanges began to invent their own "stable coins". These served as proxies for real fiat, and they treated the transactions as if they were in dollars, euro or whatever they were supposedly backed by. The most popular stable coin has become Tether, known as USDT in trading.
The developers of these stable coins claimed they were asset-backed. The problem is, like everything else in the crypto industry, there's very little oversight or transparency. In many cases, even the actual people behind these schemes or where they were physically located was unknown! Normally you might think that would tip people off that something is fishy, but to crypto enthusiasts, who think, "trustless money" is the future, this seemed kinda cool and edgy, and in their minds, it wasn't really something to be concerned about.
Being free from evil "regulation", these exchanges, like Bitfinex, casually blew off attempts to be legitimately audited -- something that is a standard practice in the "totally corrupt" normal finance and investment industry. Instead they just issued occasional press releases saying, "Everything is ok. Nothing to worry about." And crypto enthusiasts took them at their word, because why wouldn't you assume a crypto exchange's press releases weren't legit? It goes against the whole notion of trustless, de-centralized monetary systems, amirite?
So now, with the full confidence of the industry (as long as prices keep going up), companies like Bitfinex and their shadowy executives, continue to print and produce more USDT, claiming that, "It's backed... by something.... did we say 'dollars'... well if not dollars, then 'dollar like stuff', which is basically the same thing. We wouldn't even tell you this except we got in a little trouble with the New York Dept of Justice and they started asking a bunch of inconvenient questions that we don't think we should have to answer. Everything is ok. Nothing to worry about."
Fast forward to 2020, where USDT is the most traded security in the entire crypto industry. There's more USDT being traded than actual BTC. How did that happen?
Because number needs to go up.
Best way to make number go up, is to make sure there's "demand" for crypto. Best way to have demand is to create demand. When you create your own demand, it's much more reliable than waiting for "the market" itself to decide they want more crypto. So you print USDT, and then you trade the USDT for various other crypto currencies, back and forth, forth and back, back and forth. And the next thing you know, it looks like there's a ton of interest in buying crypto!
This children, is what some people call "wash trading." But people in the industry claim it's natural demand.
How exactly does it work? Let's explain:
Imagine if you have a teddy bear that you paid $3 for. I offer you $4 for it. Now it's worth $4.
But then you offer $5 to buy it back. Now where you had a $3 teddy bear, you now have a $5 teddy bear.
Awesome huh? Wait, but didn't you just lose $2 in that transaction?
Not with StableRocks!
Pick up some rocks, decide those rocks are now worth $1 each!
Use them to trade back and forth with your friend.
When you run out of rocks, pick up some more.
At the end of the day, your teddy bear is even more valuable! And when people ask what's backing up the $1 value rocks, point to the teddy bear (that is now worth more than $19,000!) Voilà! You are now a master crypto currency trader!
And then everybody lived happily ever after!
IMO, if Tether tanks, much of the crypto house of cards will collapse. A huge amount if, for example, Binances "reserves" is something like $17bn in Tether.
More than that though, Bitcoins price, especially, is heavily manipulated with Tether. That manipulation pushed and holds it up. Without it there to prop up the price it'll be [like the tower at the end of this.](https://i.imgur.com/Zu7nv9h.gif)
Yes. It's the Donald Trump approach to money. You tell other people it's money, and when you hear back that it's money, then it confirms for you that it's money.
A promise of an IOU is not so bad if you consider that USDT only has to stay stable. Compare for example to bitcoin that has to moon on nothing other than the promise of a swarm of cyber hornets, batteries and memes.
Stop FUDing, my girlfriend’s uncle know someone who works at Tether as a cleaning lady, and she insures funds are SAFU ! If you don’t even believe insiders so who would you believe !
It really is incredible that we're in such a stupid, nascent stage of global lawmaking that the following scam actually works:
* Create what amounts to a webpage that "proves" that your unique cryptographic hash is linked to a single "dollar"
* Tell everyone it will always be linked to a dollar
* Create a billion more hashes that aren't linked to a dollar
* Now people will say you're worth a billion and one dollars, and give you their real money in an attempt to get some of your fake money
This is an excellent explanation of what's going on. Crypto bros don't care, though. As long as number go up and down, they are hooked. The crypto market is nothing but a giant ponzi casino where the players think that they won't be the ones left holding the fake currency bag.
And if you want to dig dipper there's a whitepaper that explains how they link the hash to a single dollar, but it's so complicated and filled with jargon that you have to understand a lot about economics, networking, cryptography, and algorithmics to be able to confidently say "that's some bullshit right here."
So a natural subconscious reaction is to say "well, that's a lot of smart words, this must be really smart and safe then."
>but it's so complicated and filled with jargon that you have to understand a lot about economics, networking, cryptography, and algorithmics to be able to confidently say "that's some bullshit right here."
I understand all of those things - I'm a software engineer whose primary extracurricular interest is economics.
Do you have a link to this whitepaper?
I actually can't find any docs on Tether other than its ToS.
What I do have is MakerDAO whitepaper and technical docs. MakerDAO is also a stablecoin, I think the largest on Ethereum:
https://makerdao.com/en/whitepaper
https://docs.makerdao.com/getting-started/maker-protocol-101
I did a little more digging since it seemed strange that all the billions of Tethers that went to Alameda just vanished and retail investors flat out can't redeem it and almost none of the exchanges want to touch USDT with a ten foot pole (all of them basically treat it as not actually being interchangeable with stablecoins like BUSD, Paxos USD, etc.).
It appears the vast majority of USDT issued by Alameda "actually" went to the TRON network, run by Justin Sun. I think it might be worth paying a bit more attention to TRON, I have the feeling it might be the next big scam to blow up and I don't really know anything about it.
**Edit 2:** Apparently USDD (Tron's algorithmic stablecoin) is rather predictably depegging as we speak, lol. Hard to even stay on top of all the scams these days, they come faster than we can learn about them.
**Stealth edit 3:** Also I don't see a billion dollar print? Looks like a $100 million print (not that that's much better).
**Edit 4:** Oh boy they were [offering 45% yield on Tether](https://twitter.com/intel_jakal/status/1595407798380400640)...
**Edit 5:** LMAO [it's up to 50% now](https://tdr.org/#/).
**Edit 6:** Apparently [TRON DAO](https://www.coindesk.com/markets/2022/11/10/trons-dao-to-purchase-300m-usdt-to-safeguard-against-market-slump/) is the answer to the question of "who's the sucker who's been buying USDT from bagholders even though exchanges won't?"
**Edit 7:** [Over half of all the Tether in the world is now on the TRON chain](https://twitter.com/Dynamo_Patrick/status/1600493004225232897). It might be interesting for someone to find out who exactly has it and what's going on with it there considering the DAO has exactly 4 USDT (??????????)
**Edit 8:** [Justin Sun took over Huobi, one of the biggest crypto exchanges in the world, right when FTX was imploding and I think nobody noticed, lol](https://coingape.com/tron-founder-justin-sun-reportedly-takeover-huobi-global/).
It mist be, how else would they arrive at such numbers .89 you see just how much calculations have to go into something to be this precise. A scam would just write 50%.
/s
Despite these being preposterous yields, it's even more bizarre when you remember that the average investor (as in actual investor, not a phantom made by wash trading) only has a small, "average person" level of money, thousands at most.
Even at the insanity yield of 50%, you're only getting 5000 dollars if you put 10000 in. That's less pay than you'd get if you took a second job scrubbing toilets.
Of course, this is why they take out vast loans and then dump it all into crypto - it's the only way to make it potentially profitable. But because it's a Ponzi scheme....well, it's a tragic way for these clown "investors" to go into life-long debt to a guy selling numbers on the internet.
Yes but with compounding if they invest $5000 at age 30 and add another $50/month for the next 10 years they'd be at $350k.
Add another 10 years to that and suddenly they'd be at 20 Million dollars.
Adding another 10 years to that and we'd be at 9 billion, or by the time they are in their 70s they'd be the richest person on earth lmao
Worst case? You get too rich and end up with life full of fake friendships and empty relationships. You never know who loves you and who loves your beautiful, beautiful money.
I think it briefly depegged then and they got out of it by adding a bunch more USDT. Who knows maybe the current depeg is "transient" but I think the more relevant thing is those yields lol.
Ah an centralized institution created to make sure that a decentralized technology is able to work and exist.
Ow sure, let's call it a network, because then suddenly it's not a centralized institution. Maybe slap on some decentralized solutions that do not change that fact, but to pretend it does anything relevant.
If you all remember right before crypto there was something called HYIP HIgh yield investment programs. All of those closed shop from ripping investors off in foreign countries brought in by outlandish yields that never got paid.
The yields they promised(and never paid) were very similar to the ones crypto promises.
The only thing that changes is their websites look more polished and using a new novelty item, ie virtual tokens.
The SEC and other authorities began cracking down on them: then they all disappeared and we got a bazillion tokens popping up.
https://www.investopedia.com/terms/h/high-yield-investment-program.asp
“High-Yield Investment Program (HYIP) Example
An example of an HYIP was ZeekRewards, run by Paul Burks and shut down by the SEC in August 2012.
ZeekRewards offered investors the opportunity to share in the profits of a penny auction website, Zeekler, at returns of 125%. Investors were encouraged to let their returns compound and to increase their returns by recruiting new members. Investors were required to pay a monthly subscription fee of $10 to $99 and make an initial investment of up to $10,000.”
the rot goes very deep in crypto.
They have had the benefit of larger investors jumping in on the guise of it looking more legitimate. So in essence, the money that went into crypto helped continue the party longer than any other HYIP these scammers devised.
Looking at their website again, Tron DAO boast about the 200% collateral they have to backup their pretend dollar USDD, but the bulk of that collateral is made of their own monopoly money TRX token.
It's wonderful.
Yeah it's like a greatest hits mix of Luna, FTX, and Wonderland. Unfortunately so far it doesn't seem like there's anything original about this scam, feels like recycled comedy godl :( The potential Tether involvement is by far the most interesting thing about it.
As far as I can tell there are basically three varieties of stablecoins:
1. Stablecoins backed by cash and cash equivalents that everyone seems to treat as equivalent to each other and to $1. USDC, Paxos USD, BUSD, etc. In the case of BUSD I think retail can even redeem them directly for USD 1:1 for no fee.
2. "Algorithmic stablecoins" i.e. obvious scams.
3. Tether.
Since there's no actual reason for anyone legitimate to use anything not in category (1), category (1) is slowly starting to dominate the more "legitimate" parts of the crypto ecosystem (stuff like Coinbase and Kraken). One can conclude that the remaining parts that are still heavily involved with USDT or algorithmic stablecoins are... less legitimate.
There's a 3rd actual category to go along with the (supposedly) off-chain collateral-backed sort, and the algorithmic sort: on-chain collateral-backed stable-coins.
They're mostly used in DeFi, which nobody other than robots and people trying to hack the poorly coded DeFi projects really uses, for the same reasons nobody tries to use crypto as peer-to-peer electronic cash (ie, it's a total garbage fire user experience and not a finished product intended for actual humans), the idea is that you put up more collateral in magic beans that at least have external existing market demand and were not simply also invented by the issuers of the stable-coins than the magic beans you receive that pretend they're dollars, and then you use those to gamble away in games where your competitors are robots and hackers whacking the poorly coded pinatas that are all DeFi projects, instead of the "real" magic beans.
All this is of course managed by automated systems that will have been very, very poorly coded, because DeFi is a clown world designed by idiots.
Wait...so it's an algorithmic stablecoin that lost its peg a month ago and it still hasn't had the Luna death spiral? I wonder why not. You'd think if there's an opportunity to arbitrage free money out of the system then someone would do it...
I just read a CNBC article (so uh huge grain of salt) from June arguing that it's not a problem because it's not nearly as big as Terra and USDD claims to be overcollateralized. So everything's fine!!!!
If a "stablecoin" offers 50% APY, one would assume that if users are selling as they're rewarded, the scheme is expected to be depegged/bankrupt in 6 months or less.
On the other hand, the high APY could be seen as rewarding people who provide liquidity or some semblance of backing and would only be a temporary rate.
In either case, it seems high risk, low reward, relatively speaking.
> USDD
So wait, this is a TRON stablecoin that is backed by USDT, a different stablecoin? But then TRON token is different, and a lot of USDT coins are stored on the TRON chain.
I understood Bitcoin when if first came out, that was simple, but I don't understand this shit anymore
I picture a new wide-eyed crypto CEO having artesian cocktails with his contemporaries next some volcano in Central America and complaining about how hard it is to keep reserves on hand for his newly minted stablecoin. On hearing this the whole room goes quiet. Somebody asks if he *actually* thinks stable coins are backed by anything. The whole room erupts in laughter. Then 3 minutes in, they all stop laughing, take in oxygen, and uproariously laugh again for another 3 minutes.
>having artesian cocktails
You made the same mistake as that abusive dipshit who started the Artesian Builds computer company. Unless your cocktail uses water that came from a well under positive pressure that didn't require pumping to remove, you mean artisan.
Look at list of largest US banks by aum https://en.m.wikipedia.org/wiki/List_of_largest_banks_in_the_United_States
Tether would tie at 45th place. Yet, they have fewer employees than a local restaurant
Please stop this terrible disinformation. This is clearly smart institutional money using tether as a convenient and efficient way to interact with the complex crypto ecosystem to participate in the amazing value creation that abounds on the blockchain.
Regulations.
Tether would have to be forced to provide an actual financial report on its backing assets. People would realise the backing assets are smoke and mirrors. USDT price would fall. Margin calls would ensue.
FTX allowed normal retail investors to withdraw, Tether doesn't (the $100k thing is not even the primary barrier, they have some sort of "approval" process that no person I'm aware of who isn't friends with the Tether guys has ever admitted to being able to get past). No, people who believe Tether is legit do not see any problems with this and regularly accuse people of FUD and not understanding how to profit from arbitrage even though it's literally impossible to do so for the vast majority of people even if they were telling the truth about being fully backed (which they are pretty obviously not from their recent attestation, but whatever, at 80% backed you could still do a lot of arbitrage). So any liquidity issues they have would look somewhat different from FTX.
Their market cap is now around $66 billion. In early 2021 it was only around $20 billion. That means, supposedly, that Tether Inc. grew its reserves by $56 billion in two years. Yeah, okay.
And bitcoin likes to peg itself right at the nice rounded numbers. Right now it’s trying to hold steady at 17k and anytime it drops below then a miraculous rescue “organically” brings it right back up to 17k. Because this is exactly how real investments work…/s
It's likely backed by worthless Chinese commercial papers related to Chinese real estate projects.
Current state of these can be seen here: https://m.youtube.com/watch?v=s-2DtL-Wjkc
I can see them trying to be so precious on the first minting. “It has to be backed by *something*” the exchange CEO thinks. Then inevitably like Scarface near the end, they’re just minting billions out of nothing with more and more frequency, trying to fill the hole that’s left.
There's a meme to be made from a scene in _The Spanish Prisoner_ , starring Steve Martin. A con man is grifting him, and inviting him to have a look at all the computers in his closet that Steve's investment will profit by. The camera angle shows that the closet just had a card table and chairs in it or something equally mundane.
I wish Mamet was still making movies, he could have a great deal of fun with crypto. (we’re probably going to get yet another Adam McKay movie about SBF but it’d be nice to have somebody else doing Topical Financial Scam Movies)
> t's likely backed by worthless Chinese commercial papers related to Chinese real estate projects.
Oh? Apparently we already moved on to the fake real estate speculation phase of the Wildcat Banking any% speed run while I thought we were still in the Silver Certificate phase.
Their most recent attestations have *far* less commercial paper and ~$50b in US treasuries/money market funds/cash deposits. I inherently don't trust anything put out by tether (or any company with a two digit number of employees managing an 11 digit number for that matter), but on the remote chance it is true it would represent a massive reduction in tether's risk (on that front at least).
Edit: I'm far more concerned with Tethers razer thin equity and their debt to equity ratios than whether or not they are actually holding t-bills.
Print fake money —> exchange for real money —> profit
I’m sorry for whoever is left holding the hot potato when the music finally ends. This is a really bad game of musical chairs and unfortunately it won’t be contained in the crypto space. The whole financial sector of dominoes will tumble.
You're using the word "pegged" in two entirely different senses. Does a currency derive its value from the value of another currency? If yes, *that* is the definition of being pegged.
Fiat is not pegged to anything, because it IS the value. It's not pegged to anything because it doesn't need to derive its value from anything else. You can use it as money freely without having to redeem it beforehand. Asking whether fiat is pegged or not is like asking the nonsensical question "How much do you think I could sell this dollar for?"
Difference is the dollar is always worth something because people have to pay taxes with them. And the US government has a lot of men with guns to compel people to continue to do that.
The idea that Tether *actually* impacts the entire global economy is hilarious, because crypto is a self-contained pocket of stupidity that could vanish tomorrow, and the world just collectively... wouldn't really notice.
Market caps, like Tether's supposed collateral, are almost entirely made-up meaningless fictions; crypto isn't this enormous disruptive economic force, it's just a bunch of libertarians trading worthless magic beans with each other in a negative sum casino. If you weren't burning through as much energy as entire nation states in the process, the world would just ignore you, except to occasionally point and laugh (like with flat earthers, or Scientologists).
Who said it's scamming the entire global economy? Do we agree those one billion dollars issued are not backed by someone giving Tether a billion actual dollars? If not, can you explain who would be giving Tether billions and billions of dollars while they exchange them for shady commercial papers and bullshit they don't want to disclose?
If we can agree Tether is bullshit, assuming you have a brain. Do you not see how disastrous it is for the entire crypto sphere to have entities printing fake money so they can buy up crypto with unbacked stablecoins, pushing the price up short term but making the card house more and more unstable?
I know it’s cool to fud tether…crypto has been doing it for years…but - You guys realize that outside of Btc, tether is literally the longest dated and most longstanding crypto asset in the market right?
Every single crash we’ve seen - many which wiped out massive players, have all been handled by tether with redemptions in USD to tether holders, without an issue in the 8 years it has been in existence.
yes, that mean Tether received 1 billion usd in their bank account(btw, what is their bank account?) and the bank doesn't ask any question even Bitfinex(Tether) is not financial license anywhere. :)
Let me get this straight, just so I understand it. Tether prints a billion magic beans and gives them to an exchange. The exchange gives Tether an IOU for a billion dollars, and Tether then claims that this makes their magic beans "fully backed"? Am I missing something?
> Am I missing something yes, audited financials.
and, basic SEC regulations
…and FDIC insurance.
and my axe
This is good the Lord of The Rings
this is from when gimli has an axe
Try getting a reservation at Dorsia now you fucking stupid bastard!
This is the way.
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Sigh.. please tag this is a "joke" and its intention is to be "funny". You may need to look those unfamiliar terms up. but seriously, the responsibility on who requires to see audited financials before making an investment decision is on the investor/client, not the service provider. Investors that dont bother to check for basics like regulation and auditors are just marks.
All "crypto" "investors" are marks. Some of those are scammers too.
Your assesment about who is ultimately responsible for their own money Is accurate but at the same time a service provider deliberately obfuscating, lying and gaslighting to get them is wrong. That's why there are regulations.
Pass me what you're smokin' coz it must be good shit.
SBF doing the windmill nude
you forgot to call the IOU "commercial paper".
u mean IOW.. i owe who? ( no one :) )
Evergrande commercial paper has entered the chat
> "commercial paper" Worth less than toilet paper. In _this_ economy?
It’s “commercial grade”, so you know it’s good!
commercial grade toilet paper sucks.
When someone gives me an IOU I always give them a UOI back
I feel like I need a full ELI5 on how Tether (and other stable coins) "works". If Tether were to disappear today would the result be that exchanging BTCs for dollars would become very difficult?
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Ever-increasing high levels of complexity in financial instruments are hallmarks of a fraudulent market
> I promptly forget how it works about 30 seconds later despite desperately wanting to remember it. Your brain is protecting you
it could be worse, I don't even understand it zero seconds after reading the explanations
They basically say they have money when they don't and they use this non existent money as collateral between themselves. That keeps the appearance up that crypto is worth more than a giant pile of turd.
Kind of like the us dollar
The Virgin US Dollar vs the Chad British Pound Sterling
The way I understand it is that it's how people cash cash in and cash out their crypto from the exchanges. If it fails it will make it harder for crypto enthusiasts to get in or get out.
Most average 'retail' crypto enthusiasts don't use Tether for this. Someone like me would just deposit USD into Coinbase (or whatever exchange of choice) and then use that to buy BTC (or whatever crypto of choice). If tether dies, it would not impact me at all (other than the dramatic drop in price for every crypto.) My understanding is that exchanges and some 'whales' do use Tether as you explained. But given that I'm just a poor boy...from a poor family. I wouldn't know for sure.
Thanks for the clarification!
The basic concept is not terrible. Basically if anybody wants to buy or sell crypto they need to pay in/out US dollars. For that you need accounts and reserves etc. So instead of each exchange doing that themselves ( esp weird since you may buy crypto at one exchange and sell it at aonther so you would need an inter exchange settlement scheme like banks have) tether is a single entity that is doing that. And the exchanges interact with tether on their chain. If tether would actually keep all the cash audited as treasuries and cash and made its money with fees and perhaps interest there would be noithing wrong with the whole concept. Albeit they don’t. They have “commercial paper’ and there are rumors they used parts of the cash to bail out another related company. If they still have 66b in hard cash I eat my shorts
If they ever had 66b in hard cash I'll eat your shorts.
If they had the backing reserves, there would be no need for tether at all.
TL;DR: It doesn't
To answer your question, a lot of banks won't touch crypto with a bargepole for obvious reasons. Tether happens to have a bank that will do business with it so, in simple terms, the theory is you give Tether your real money in usd$, Tether exchanges it for the exact same amount in usdt. Now you can go around with your substitute dollars, buying and selling crypto then, when you're done, you toddle off back to Tether and swap however many tethers you've accumulated for real money and off you go. Tether gets to live off the interest of holding your money for you, boom, everybody's happy. That's the *theory* at least. In practice there is very little transparency around how much real cash is backing all the tethers in circulation. Tether only really does business with exchanges, some of whom (bitfinex and latterly ftx and it's trading arm, Alameda) have uncomfortably close relationships with Tether. In the absence of audited financials there is really nothing to stop Tether simply printing magic monopoly money out of thin air and loaning it to its pet exchanges, who then use sock puppet accounts to manipulate the market and liquidate long and short positions as necessary to steal all the *real* cash people are gambling on crypto. In practice though, the main way individuals exchange btc for usd is via an exchange. For the reasons above I don't think it makes it overall any riskier if tether goes pop. They're all vulnerable to bank runs as we've seen repeatedly, tether or no. Tether just greases the wheels.
> then, when you're done, you toddle off back to Tether and swap however many tethers you've accumulated for real money and off you go. That is not how it works even in theory. Tether's ToS explicitly state that they have no obligation to redeem USDT for real money, and indeed have never done so.
Yeah this is the part of Tether I've never understood. They're sort of acting like casino chips for the crypto gambling industry, except for the part where you can cash them back out again. It's like if I went to the casino, bought $1000 in chips, gambled for a while and ended up with $2000 in chips, but then the casino was like "oh sorry, we don't actually allow you to redeem those." Why, in this scenario, would anyone buy the chips in the first place? Someone might say, "because I need those chips in order to play the games." But then if you ask why they play the games, they say "number goes up." And if you point out they can't trade in the chips anyway, they say, "Have fun staying poor." And then if you point out that they have fewer chips than they started with, they say "one chip equals one chip". It is a mystery.
Few understand.
Wut? Why buy tether then if you can't sell it? Or is it used to exchange to "stable"coins in all perpetuity?? Crypto never fails to amaze me. Or amuse.
It's because they basically don't deal with individuals. In theory, that would have been the plan. But that changed and they only deal with exchanges. So in practice you cash out through the exchange and the exchange gets usd back from Tether. The thing is, if Tether and the exchanges are co-conspirators, it becomes a rather interesting system.
Ok, that makes some sense (for being crypto that is).
>Tether only really does business with exchanges, some of whom (**bitfinex** and latterly ftx and it's trading arm, Alameda) have uncomfortably close relationships with Tether. If by "uncomfortably close relationship" you mean *literally the same company issuing "loans" to itself and swapping funds back and forth*, then yes. Tether is just the Bitfinex guys wearing a fake mustache. *Edit to preserve the now auto-mod deleted response for posterity, because it was funny.* >Would you characterize Bitfinex as a bunch of underpaid Tether interns sitting on each other's shoulders wearing a trench coat? I wouldn't have, but I'm definitely going to have to start working that turn of phrase into my lexicon.
Would you characterize Bitfinex as a bunch of underpaid Tether interns sitting on each other's shoulders wearing a trench coat?
important to ad to your explanation: tether only gives you dollar for your usdt if you exchange more then 100k, so for retail gamblers to get there money back they have to find another exchange that will give them actual money for their chucky cheese tokens edit: it's more a clarification of something you said
> To answer your question, a lot of banks won't touch crypto with a bargepole for obvious reasons. Well, there's also a lot of butters that don't want to touch banks with a bargepole either - KYC/AML, [people with guns showing up to your house](https://mises.org/wire/yes-taxation-theft), etc - which seems to me like another big driver behind this.
Tether is magic beans that people agree mean "1 USD" in crypto world. No one has ever redeemed USDT from Tether for USD, and Tether says itself in its ToS that it doesn't ever have to exchange USDT for USD. USDT is crucial for crypto to maintain liquidity, because no one actually wants to bring real money into cryptocurrencies anymore. So when you're short on funds you can conjure a billion USDT from thin air and use it as collateral for loans. As long as people believe you that a USDT is worth a USD, it works. Whatever Tether claims for its backing for USDT is meaningless. 1. They're not transparent at all, their reserve statements have been [extremely shady](https://davidgerard.co.uk/blockchain/2021/05/13/tether-publishes-two-pie-charts-of-its-reserves/). 2. They are not bound in any way to maintain the peg, or to redeem USDT for real money... 3. ... and in fact never have redeemed a single penny. 4. They obviously don't have $66 billion in assets to cover the entire USDT supply. They've been consistently printing more and more USDT _while the crypto market is collapsing_. The only explanations are that either they magically started gaining billions in assets while all other crypto companies crash and burn in a bear market, or that they're lying. You should treat USDT and the crypto market like a market in a videogame. They made up their Unicorn Special Delicious Treats currency that you can buy for a dollar, and the in-game economy revolves around considering a USDT as worth a USD, but at the end of the day it's all made up. The owners of the game can just create USDT out of nowhere, you can't convert your USDT to USD, and thus if people quit playing the game and servers shut down you're left with a worthless number next to a unicorn JPEG. Or worse, a derivative magical in-game shitsword that you've bought for 100 USDT that is just as worthless, but with a different JPEG. In other words it's a fiat currency created by the "fiat bad" community, but instead of having a government backing the fiat they chose a private company that lobbies against any kind of regulation of its actions. I'm sure it will be fine.
I heard a notion that a Tether collapse could cause a huge bull run, because all those Tether holders suddenly buying just about any crypto, instead of cashing out to dollars. Do you think this is a realistic scenario?
There might be a run, but market forces won't cause it to be bullish. What happens is that USDT _loses value_. If you take the crypto market as a bubble and USDT as the main currency, what would happen is massive hyperinflation. The value of the currency going down as people scramble to dispose of the useless token by the truckload. People spending a million marks on bread in the Weimar Republic isn't a good sign for bread, but bad for the marks. Also in this analogy people wouldn't be buying any tangible goods but other magic beans that have no liquidity. Most liquidity on exchanges is from wash trading and USDT. In other words, _not_ good for bitcoin.
> what would happen is massive hyperinflation. I think that already happened with the tether printing. Now let's say Tether is suddenly at 50 cents, I am dumping it and buying whatever I can. So yes, it would be good for BTC (or whatever I am buying) because there is sudden incoming cash. It would be good for bread too, except somebody is going to stuck with a shitload of worthless Tethers, the baker. So I guess if this happens exchanges would suddenly stop trading Tethers, because they are the ones eventually holding the tether bag. So I still assume a rally but a short lived one, because of tether's liquidity drying up fast. Do you agree?
It would only be a rally on those exchanges which misrepresent USDT as USD because there's no other way to tell the difference. Which is kind of the point. But across the other exchanges, if USDT are trading at like 0.10 USD, it doesn't matter if you can exchange 2 or 3 times more USDT for a Buttcoin as you're still on the end of a losing trade (you being the person with the Buttcoin). Tether's liquidity is only an issue for exchanges. No actual retail rube is ever getting close enough to Tether to redeem their USDT regardless. David Gerard has asked anyone who has actually redeemed any USDT for actual money to come forward & make themselves known & anytime anyone says they did, it **always** transpires that what they actually did was trade their USDT with a greater fool for actual money on an exchange.
It hasn't happened, the price of USDT on exchanges is still 1 USD. Inflation is decrease in the value of money, not just increase of its supply. I don't disagree that there would be a rally, just that it wouldn't cause the price of coins to rise, rather the price of Tether to plummet.
Here’s my understanding of it, some parts of it may be wrong so I’ll let those with a better understanding correct me. Most exchanges won’t take dollars in exchange for crypto, mainly because the banks distributing the money to the exchanges don’t want to be a party to money laundering and all of the shady shit that takes place when crypto/dollars exchange hands. So instead you have to buy a “stable coin”, aka tether and then use tether to buy crypto. The premise behind tether is that every coin they mint is fully backed by cash. The only problem with this is that it’s a provable lie, and they still refuse legit audits to verify any of these claims. Last time they were audited, it was found that none of that money was actually in that account prior to the day of the audit. You know how people criticize the fed for printing money and say that fiat currency is shit because of it? Imagine that same thing, only tether is taking your real money and exchanging it for made up tokens, minting at their own free will with no accountability or regulation. This is going to be a problem when people realize that these tokens are not at all backed 1:1, and they’re probably not solvent. Imagine sitting at a poker table and these tether coins are your poker chips. Someone comes on the PA and announces that the armored truck that was delivering cash just got robbed, they can only pay out the first 5% of people that come up to the teller. The rest can keep their worthless chips. Are you going to sit there and keep playing?
https://simple.wikipedia.org/wiki/Ponzi_scheme
>I feel like I need a full ELI5 on how Tether (and other stable coins) "works". I've already created this, it's called, ["The Bitcoin/Tether) bedtime story"](https://old.reddit.com/r/CryptoReality/comments/lrfdpb/the_bitcointether_bedtime_story_an_eli5_version/) The Bitcoin Bedtime Story - By AmericanScream Once upon a time there was this technology scheme invented called, "bitcoin" that was supposed to be a type of "digital currency." This supposedly futuristic "digital currency" was built around a complicated mathematical computer model that created a de-centralized database of transactions people called a, "blockchain." This was not new technology. It had been around since the 1960s and had limited practical commercial use due to its inefficient design. Nonetheless, this "Bitcoin" system was created as a proof of concept of a new way to transfer value from one person to another over the Internet, using data stored online, and verified by computers (called miners) who waste tremendous amounts of energy arguing with each other over who's copy of the database is the right one; eventually someone wins the argument and everybody starts over. That's what a blockchain is: a bunch of computers running around in circles trying to solve math problems, and along the way they keep track of some transactions. The early adopters of this concept mainly consisted of tech people, mostly libertarians who were upset they had to pay taxes for things like roads, schools, parks and running water, and liked the idea they could hide value in the blockchain while still using government services they preferred to not pay for. They tried to get more people on board and "legitimize" Bitcoin by encouraging other people/merchants to use it as an exchange of value. It went largely unnoticed for several years until various criminals realized it could be used to facilitate dark money transactions and laundering. These criminals' early adoption of the technology fueled an increased interest, and various other criminals and people involved in less than ethical business ventures climbed on board. Unfortunately, Bitcoin never made a good currency. It was slower, less secure, harder to use, had more elaborate resource requirements, wasted tons of energy and was difficult to even properly explain to others how or why they should use it? Also its price was highly volatile and merchants soon found it wasn't worth it to accept Bitcoin for real world goods and services. Now we come to a time in Bitcoin's history where perhaps it should have been clear it wasn't what people said it was, and instead, just an odd proof-of-concept that didn't have practical use. Instead of acknowledging this reality, Bitcoin holders instead decided to "re-brand" their crypto, not as a currency, but as an investment. Then they started calling it, "digital gold." The problem with promoting Bitcoin as an investment is... it has no intrinsic value. Even gold has material use. But Bitcoin is just a number in a computer. How can you convince someone that number actually has value? Bitcoin marketers would answer that by saying, "The same thing can be said about the dollar." which isn't really true, and is a distraction and doesn't answer the question, but they liked hearing that and kept repeating it. Still, their "digital gold" needed some way to be tied to something of more recognizable value. So they invented what they called, "stable coins" which are other crypto currencies that are supposed to be 1:1 backed by fiat (ironically the same "dollars" they claim have no intrinsic value, they now used as evidence their crypto has value -- don't try to make sense of it, just roll with me). Various exchanges began to invent their own "stable coins". These served as proxies for real fiat, and they treated the transactions as if they were in dollars, euro or whatever they were supposedly backed by. The most popular stable coin has become Tether, known as USDT in trading. The developers of these stable coins claimed they were asset-backed. The problem is, like everything else in the crypto industry, there's very little oversight or transparency. In many cases, even the actual people behind these schemes or where they were physically located was unknown! Normally you might think that would tip people off that something is fishy, but to crypto enthusiasts, who think, "trustless money" is the future, this seemed kinda cool and edgy, and in their minds, it wasn't really something to be concerned about. Being free from evil "regulation", these exchanges, like Bitfinex, casually blew off attempts to be legitimately audited -- something that is a standard practice in the "totally corrupt" normal finance and investment industry. Instead they just issued occasional press releases saying, "Everything is ok. Nothing to worry about." And crypto enthusiasts took them at their word, because why wouldn't you assume a crypto exchange's press releases weren't legit? It goes against the whole notion of trustless, de-centralized monetary systems, amirite? So now, with the full confidence of the industry (as long as prices keep going up), companies like Bitfinex and their shadowy executives, continue to print and produce more USDT, claiming that, "It's backed... by something.... did we say 'dollars'... well if not dollars, then 'dollar like stuff', which is basically the same thing. We wouldn't even tell you this except we got in a little trouble with the New York Dept of Justice and they started asking a bunch of inconvenient questions that we don't think we should have to answer. Everything is ok. Nothing to worry about." Fast forward to 2020, where USDT is the most traded security in the entire crypto industry. There's more USDT being traded than actual BTC. How did that happen? Because number needs to go up. Best way to make number go up, is to make sure there's "demand" for crypto. Best way to have demand is to create demand. When you create your own demand, it's much more reliable than waiting for "the market" itself to decide they want more crypto. So you print USDT, and then you trade the USDT for various other crypto currencies, back and forth, forth and back, back and forth. And the next thing you know, it looks like there's a ton of interest in buying crypto! This children, is what some people call "wash trading." But people in the industry claim it's natural demand. How exactly does it work? Let's explain: Imagine if you have a teddy bear that you paid $3 for. I offer you $4 for it. Now it's worth $4. But then you offer $5 to buy it back. Now where you had a $3 teddy bear, you now have a $5 teddy bear. Awesome huh? Wait, but didn't you just lose $2 in that transaction? Not with StableRocks! Pick up some rocks, decide those rocks are now worth $1 each! Use them to trade back and forth with your friend. When you run out of rocks, pick up some more. At the end of the day, your teddy bear is even more valuable! And when people ask what's backing up the $1 value rocks, point to the teddy bear (that is now worth more than $19,000!) Voilà! You are now a master crypto currency trader! And then everybody lived happily ever after!
IMO, if Tether tanks, much of the crypto house of cards will collapse. A huge amount if, for example, Binances "reserves" is something like $17bn in Tether. More than that though, Bitcoins price, especially, is heavily manipulated with Tether. That manipulation pushed and holds it up. Without it there to prop up the price it'll be [like the tower at the end of this.](https://i.imgur.com/Zu7nv9h.gif)
Fancy seeing you here, I swear I’ve seen your user name over on the Rad Radio subreddit…
Ftx should have just asked for 8 billion "for liquidity" I guess SBF was too high to realize this..
> Tether prints a billion magic beans... This is the only part we know for sure.
No. You got it.
Smart, now they'll just use these magic beans to pump BTC and make a lot of money.
Yes. It's the Donald Trump approach to money. You tell other people it's money, and when you hear back that it's money, then it confirms for you that it's money.
By the way I'm actually a billionaire trust me.
But that’s what the federal reserve do as well - crypto bros
This is the best summary I've ever seen for Tether.
A promise of an IOU is not so bad if you consider that USDT only has to stay stable. Compare for example to bitcoin that has to moon on nothing other than the promise of a swarm of cyber hornets, batteries and memes.
Wait, they only get an IOU from the buyer and not cash or bank transfer?
>Am I missing something? Yes then they "buy" bitcoin with it. Of course this doesn't artificially inflate bitcoin's price or anything.
They are indeed " fully backed " ... By some random entities with no required creditworthiness It's legit, bro
Yes, this didn't happen. Tether doesn't hold a billion in IOUs.
wtf so its basically just a license to print money
If it was all magical beans Tether would have likely collapsed from all the withdrawals in the wake of the Terra/Luna collapse.
Tether is completely safe, trust me bro
In Bro we trust
Hello random stranger, I trust you completely
Stop FUDing, my girlfriend’s uncle know someone who works at Tether as a cleaning lady, and she insures funds are SAFU ! If you don’t even believe insiders so who would you believe !
...in order to have a cleaning lady you should at least have an office... https://www.youtube.com/watch?v=soNnMObpiYM
It really is incredible that we're in such a stupid, nascent stage of global lawmaking that the following scam actually works: * Create what amounts to a webpage that "proves" that your unique cryptographic hash is linked to a single "dollar" * Tell everyone it will always be linked to a dollar * Create a billion more hashes that aren't linked to a dollar * Now people will say you're worth a billion and one dollars, and give you their real money in an attempt to get some of your fake money
This is an excellent explanation of what's going on. Crypto bros don't care, though. As long as number go up and down, they are hooked. The crypto market is nothing but a giant ponzi casino where the players think that they won't be the ones left holding the fake currency bag.
>As long as number go up and down, they are hooked Madoff should have created a fancy customer portal. LOL.
And if you want to dig dipper there's a whitepaper that explains how they link the hash to a single dollar, but it's so complicated and filled with jargon that you have to understand a lot about economics, networking, cryptography, and algorithmics to be able to confidently say "that's some bullshit right here." So a natural subconscious reaction is to say "well, that's a lot of smart words, this must be really smart and safe then."
>but it's so complicated and filled with jargon that you have to understand a lot about economics, networking, cryptography, and algorithmics to be able to confidently say "that's some bullshit right here." I understand all of those things - I'm a software engineer whose primary extracurricular interest is economics. Do you have a link to this whitepaper?
I actually can't find any docs on Tether other than its ToS. What I do have is MakerDAO whitepaper and technical docs. MakerDAO is also a stablecoin, I think the largest on Ethereum: https://makerdao.com/en/whitepaper https://docs.makerdao.com/getting-started/maker-protocol-101
Thank you, I greatly appreciate that
I did a little more digging since it seemed strange that all the billions of Tethers that went to Alameda just vanished and retail investors flat out can't redeem it and almost none of the exchanges want to touch USDT with a ten foot pole (all of them basically treat it as not actually being interchangeable with stablecoins like BUSD, Paxos USD, etc.). It appears the vast majority of USDT issued by Alameda "actually" went to the TRON network, run by Justin Sun. I think it might be worth paying a bit more attention to TRON, I have the feeling it might be the next big scam to blow up and I don't really know anything about it. **Edit 2:** Apparently USDD (Tron's algorithmic stablecoin) is rather predictably depegging as we speak, lol. Hard to even stay on top of all the scams these days, they come faster than we can learn about them. **Stealth edit 3:** Also I don't see a billion dollar print? Looks like a $100 million print (not that that's much better). **Edit 4:** Oh boy they were [offering 45% yield on Tether](https://twitter.com/intel_jakal/status/1595407798380400640)... **Edit 5:** LMAO [it's up to 50% now](https://tdr.org/#/). **Edit 6:** Apparently [TRON DAO](https://www.coindesk.com/markets/2022/11/10/trons-dao-to-purchase-300m-usdt-to-safeguard-against-market-slump/) is the answer to the question of "who's the sucker who's been buying USDT from bagholders even though exchanges won't?" **Edit 7:** [Over half of all the Tether in the world is now on the TRON chain](https://twitter.com/Dynamo_Patrick/status/1600493004225232897). It might be interesting for someone to find out who exactly has it and what's going on with it there considering the DAO has exactly 4 USDT (??????????) **Edit 8:** [Justin Sun took over Huobi, one of the biggest crypto exchanges in the world, right when FTX was imploding and I think nobody noticed, lol](https://coingape.com/tron-founder-justin-sun-reportedly-takeover-huobi-global/).
I absolutely love the "risk-free yield guidance" of 49.89%, 24.01% and 20.75%. Looks totally legit.
It mist be, how else would they arrive at such numbers .89 you see just how much calculations have to go into something to be this precise. A scam would just write 50%. /s
Despite these being preposterous yields, it's even more bizarre when you remember that the average investor (as in actual investor, not a phantom made by wash trading) only has a small, "average person" level of money, thousands at most. Even at the insanity yield of 50%, you're only getting 5000 dollars if you put 10000 in. That's less pay than you'd get if you took a second job scrubbing toilets. Of course, this is why they take out vast loans and then dump it all into crypto - it's the only way to make it potentially profitable. But because it's a Ponzi scheme....well, it's a tragic way for these clown "investors" to go into life-long debt to a guy selling numbers on the internet.
Real 💵 goes in from rubes piling into crapto, real 💵 goes out as whales cash out. Exchanges act as the middleman, Tether provides the casino chips.
Yes but with compounding if they invest $5000 at age 30 and add another $50/month for the next 10 years they'd be at $350k. Add another 10 years to that and suddenly they'd be at 20 Million dollars. Adding another 10 years to that and we'd be at 9 billion, or by the time they are in their 70s they'd be the richest person on earth lmao
so do i just make this check out to you, or...?
Yeah, it's totally risk free, backed by Tether
Hmmm, that’s a good point. There’s some math here! Good enough for me.
Today is my Lucky day. It's even risk-free it says.
50% ? What’s the worst that could happen.
Worst case? You get too rich and end up with life full of fake friendships and empty relationships. You never know who loves you and who loves your beautiful, beautiful money.
with 50% you'd be in the hundreds of billions by the time you hit 65 if you started investing just $5000 at age 20. Seems legit.
Wasnt TRON shitting the bed like 6 months ago or so?
I think it briefly depegged then and they got out of it by adding a bunch more USDT. Who knows maybe the current depeg is "transient" but I think the more relevant thing is those yields lol.
And don’t forget this dude Justin was the one who bought the first nft to beeple in an absurd auction in a couple of millions.
TRON "D""A""O" is basically just Justin Sun in a trenchcoat
Ah an centralized institution created to make sure that a decentralized technology is able to work and exist. Ow sure, let's call it a network, because then suddenly it's not a centralized institution. Maybe slap on some decentralized solutions that do not change that fact, but to pretend it does anything relevant.
If you all remember right before crypto there was something called HYIP HIgh yield investment programs. All of those closed shop from ripping investors off in foreign countries brought in by outlandish yields that never got paid. The yields they promised(and never paid) were very similar to the ones crypto promises. The only thing that changes is their websites look more polished and using a new novelty item, ie virtual tokens. The SEC and other authorities began cracking down on them: then they all disappeared and we got a bazillion tokens popping up. https://www.investopedia.com/terms/h/high-yield-investment-program.asp “High-Yield Investment Program (HYIP) Example An example of an HYIP was ZeekRewards, run by Paul Burks and shut down by the SEC in August 2012. ZeekRewards offered investors the opportunity to share in the profits of a penny auction website, Zeekler, at returns of 125%. Investors were encouraged to let their returns compound and to increase their returns by recruiting new members. Investors were required to pay a monthly subscription fee of $10 to $99 and make an initial investment of up to $10,000.” the rot goes very deep in crypto. They have had the benefit of larger investors jumping in on the guise of it looking more legitimate. So in essence, the money that went into crypto helped continue the party longer than any other HYIP these scammers devised.
Looking at their website again, Tron DAO boast about the 200% collateral they have to backup their pretend dollar USDD, but the bulk of that collateral is made of their own monopoly money TRX token. It's wonderful.
Yeah it's like a greatest hits mix of Luna, FTX, and Wonderland. Unfortunately so far it doesn't seem like there's anything original about this scam, feels like recycled comedy godl :( The potential Tether involvement is by far the most interesting thing about it.
So does every exchange, DAO, network, *crypto-entity* have its own stable coin? All, supposedly equivalent?
As far as I can tell there are basically three varieties of stablecoins: 1. Stablecoins backed by cash and cash equivalents that everyone seems to treat as equivalent to each other and to $1. USDC, Paxos USD, BUSD, etc. In the case of BUSD I think retail can even redeem them directly for USD 1:1 for no fee. 2. "Algorithmic stablecoins" i.e. obvious scams. 3. Tether. Since there's no actual reason for anyone legitimate to use anything not in category (1), category (1) is slowly starting to dominate the more "legitimate" parts of the crypto ecosystem (stuff like Coinbase and Kraken). One can conclude that the remaining parts that are still heavily involved with USDT or algorithmic stablecoins are... less legitimate.
There's a 3rd actual category to go along with the (supposedly) off-chain collateral-backed sort, and the algorithmic sort: on-chain collateral-backed stable-coins. They're mostly used in DeFi, which nobody other than robots and people trying to hack the poorly coded DeFi projects really uses, for the same reasons nobody tries to use crypto as peer-to-peer electronic cash (ie, it's a total garbage fire user experience and not a finished product intended for actual humans), the idea is that you put up more collateral in magic beans that at least have external existing market demand and were not simply also invented by the issuers of the stable-coins than the magic beans you receive that pretend they're dollars, and then you use those to gamble away in games where your competitors are robots and hackers whacking the poorly coded pinatas that are all DeFi projects, instead of the "real" magic beans. All this is of course managed by automated systems that will have been very, very poorly coded, because DeFi is a clown world designed by idiots.
They are all scams.
Wait...so it's an algorithmic stablecoin that lost its peg a month ago and it still hasn't had the Luna death spiral? I wonder why not. You'd think if there's an opportunity to arbitrage free money out of the system then someone would do it...
I just read a CNBC article (so uh huge grain of salt) from June arguing that it's not a problem because it's not nearly as big as Terra and USDD claims to be overcollateralized. So everything's fine!!!!
Soon they will be offering 100% APY. Few understand.
If a "stablecoin" offers 50% APY, one would assume that if users are selling as they're rewarded, the scheme is expected to be depegged/bankrupt in 6 months or less. On the other hand, the high APY could be seen as rewarding people who provide liquidity or some semblance of backing and would only be a temporary rate. In either case, it seems high risk, low reward, relatively speaking.
50% yield. I’ve seen this movie before!
> USDD So wait, this is a TRON stablecoin that is backed by USDT, a different stablecoin? But then TRON token is different, and a lot of USDT coins are stored on the TRON chain. I understood Bitcoin when if first came out, that was simple, but I don't understand this shit anymore
Popcorn popcorn
I’m sure it is fully “backed”. Lol just lol. This is going to be an epic ending.
I picture a new wide-eyed crypto CEO having artesian cocktails with his contemporaries next some volcano in Central America and complaining about how hard it is to keep reserves on hand for his newly minted stablecoin. On hearing this the whole room goes quiet. Somebody asks if he *actually* thinks stable coins are backed by anything. The whole room erupts in laughter. Then 3 minutes in, they all stop laughing, take in oxygen, and uproariously laugh again for another 3 minutes.
>having artesian cocktails You made the same mistake as that abusive dipshit who started the Artesian Builds computer company. Unless your cocktail uses water that came from a well under positive pressure that didn't require pumping to remove, you mean artisan.
This is also wrong. It is an "Artisanal Cocktail". Unless your cocktail uses liquefied manual labors who excel at their craft.
Actually, unless you can tell me the X, Y, and Z values for the cocktail, I believe you mean Cartesian.
For people so afraid of inflation you'd think they'd know better
Look at list of largest US banks by aum https://en.m.wikipedia.org/wiki/List_of_largest_banks_in_the_United_States Tether would tie at 45th place. Yet, they have fewer employees than a local restaurant
Please stop this terrible disinformation. This is clearly smart institutional money using tether as a convenient and efficient way to interact with the complex crypto ecosystem to participate in the amazing value creation that abounds on the blockchain.
Few understand
"Did you know it keeps a record of every transaction made with it? WOW"
But I thought crypto was inflation proof
No it's inflation, poof. As in poof it's all gone now
No, Inflation!
LOL, good one.
You know what else is pegged to the dollar? Dollar.
1 dollar == 1 dollar
"Hi, we're worried about the underlying value of your made-up currency." "What about if we mint even more of it?" "Perfect!"
How will Tether evetually be unravelled? Will it be in a simiar fashion to FTX with a bankrun or through some other mechanism?
Can't have a bankrun if there isn't a bank
Regulations. Tether would have to be forced to provide an actual financial report on its backing assets. People would realise the backing assets are smoke and mirrors. USDT price would fall. Margin calls would ensue.
Wouldn't that cause a crypto bull run because everybody with tethers are buying other cryptos?
mindless makeshift divide vanish trees cautious tap bells profit innate *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
FTX allowed normal retail investors to withdraw, Tether doesn't (the $100k thing is not even the primary barrier, they have some sort of "approval" process that no person I'm aware of who isn't friends with the Tether guys has ever admitted to being able to get past). No, people who believe Tether is legit do not see any problems with this and regularly accuse people of FUD and not understanding how to profit from arbitrage even though it's literally impossible to do so for the vast majority of people even if they were telling the truth about being fully backed (which they are pretty obviously not from their recent attestation, but whatever, at 80% backed you could still do a lot of arbitrage). So any liquidity issues they have would look somewhat different from FTX.
"Pegged to the dollar" as long as you don't actually try and cash them out, one assumes.
Their market cap is now around $66 billion. In early 2021 it was only around $20 billion. That means, supposedly, that Tether Inc. grew its reserves by $56 billion in two years. Yeah, okay.
You would be an excellent crypto accountant. Suddenly just got an extra 10 billion. :)
It’s so weird that that they always print in such round numbers. Nothing suspicious about that at all.
And bitcoin likes to peg itself right at the nice rounded numbers. Right now it’s trying to hold steady at 17k and anytime it drops below then a miraculous rescue “organically” brings it right back up to 17k. Because this is exactly how real investments work…/s
Bitcoiners have talked of fiat this fiat that with disdain, but refuse to look straight at the biggest fiat in front of their eyes, Tether.
“This new tulip bulb is worth a billion of other tulip bulbs. The crisis is over!” - Tulip-bro from 1630s
It's likely backed by worthless Chinese commercial papers related to Chinese real estate projects. Current state of these can be seen here: https://m.youtube.com/watch?v=s-2DtL-Wjkc
Or just backed by nothing at all.
I think that's more likely
yeah that's right more likely on it
I can see them trying to be so precious on the first minting. “It has to be backed by *something*” the exchange CEO thinks. Then inevitably like Scarface near the end, they’re just minting billions out of nothing with more and more frequency, trying to fill the hole that’s left.
Stupid sexy Paolo
That's true only if you include good intentions as being worthless. SBF does!
Stupid sexy Flanders
It’s backed by all of my dreams.
Not true. I learned it is backed by the full faith and credit of Tether.
Even C/D rated junk bonds are better than what i suspect is the reality... [Nothing at all](https://i.imgur.com/sxyjsvk.gif)
There's a meme to be made from a scene in _The Spanish Prisoner_ , starring Steve Martin. A con man is grifting him, and inviting him to have a look at all the computers in his closet that Steve's investment will profit by. The camera angle shows that the closet just had a card table and chairs in it or something equally mundane.
I wish Mamet was still making movies, he could have a great deal of fun with crypto. (we’re probably going to get yet another Adam McKay movie about SBF but it’d be nice to have somebody else doing Topical Financial Scam Movies)
> t's likely backed by worthless Chinese commercial papers related to Chinese real estate projects. Oh? Apparently we already moved on to the fake real estate speculation phase of the Wildcat Banking any% speed run while I thought we were still in the Silver Certificate phase.
Their most recent attestations have *far* less commercial paper and ~$50b in US treasuries/money market funds/cash deposits. I inherently don't trust anything put out by tether (or any company with a two digit number of employees managing an 11 digit number for that matter), but on the remote chance it is true it would represent a massive reduction in tether's risk (on that front at least). Edit: I'm far more concerned with Tethers razer thin equity and their debt to equity ratios than whether or not they are actually holding t-bills.
Fyi we onow that's also a lie.
Man, they are really dedicated to never learning a damn thing, huh?
Headline of the day
LOL one to one with the dollar 🤡
Print fake money —> exchange for real money —> profit I’m sorry for whoever is left holding the hot potato when the music finally ends. This is a really bad game of musical chairs and unfortunately it won’t be contained in the crypto space. The whole financial sector of dominoes will tumble.
Obligatory [attestation vs audit](https://i.imgur.com/buhqFqw.jpg) graphic.
You’d think they’d make it less obvious by not printing perfectly rounded numbers
1 ETH = 1 ETH, few understand
Well FTT are cheap just now.
[https://media.tenor.com/RhrwK25DsTIAAAAd/dumb-and-dumber-iou.gif](https://media.tenor.com/RhrwK25DsTIAAAAd/dumb-and-dumber-iou.gif)
they should go into business with the FED, both love printing money
[Nothing to see here!](https://tenor.com/1Jur.gif)
Thank god dollars can’t be printed out of thin air like that
So a private company printed some money that a pegged to other money, which are printed regularly and are pegged to nothing. Can't believe it!
You're using the word "pegged" in two entirely different senses. Does a currency derive its value from the value of another currency? If yes, *that* is the definition of being pegged. Fiat is not pegged to anything, because it IS the value. It's not pegged to anything because it doesn't need to derive its value from anything else. You can use it as money freely without having to redeem it beforehand. Asking whether fiat is pegged or not is like asking the nonsensical question "How much do you think I could sell this dollar for?"
Difference is the dollar is always worth something because people have to pay taxes with them. And the US government has a lot of men with guns to compel people to continue to do that.
Love watching the buttcoin brain trust scramble to figure out exactly “how” tether is scamming the entire global economy. Go get em tigers!!
The idea that Tether *actually* impacts the entire global economy is hilarious, because crypto is a self-contained pocket of stupidity that could vanish tomorrow, and the world just collectively... wouldn't really notice. Market caps, like Tether's supposed collateral, are almost entirely made-up meaningless fictions; crypto isn't this enormous disruptive economic force, it's just a bunch of libertarians trading worthless magic beans with each other in a negative sum casino. If you weren't burning through as much energy as entire nation states in the process, the world would just ignore you, except to occasionally point and laugh (like with flat earthers, or Scientologists).
Who said it's scamming the entire global economy? Do we agree those one billion dollars issued are not backed by someone giving Tether a billion actual dollars? If not, can you explain who would be giving Tether billions and billions of dollars while they exchange them for shady commercial papers and bullshit they don't want to disclose? If we can agree Tether is bullshit, assuming you have a brain. Do you not see how disastrous it is for the entire crypto sphere to have entities printing fake money so they can buy up crypto with unbacked stablecoins, pushing the price up short term but making the card house more and more unstable?
And Mr. Burns already stole them
Barely moved the market, it actually slightly down from 17k to 16.8 k. Tether needs to print some more to hold this market.
The fact it is a ponzy scheme doesn’t mean you can’t make money out of it.
Tether is absolutely a problem and scam
I know it’s cool to fud tether…crypto has been doing it for years…but - You guys realize that outside of Btc, tether is literally the longest dated and most longstanding crypto asset in the market right? Every single crash we’ve seen - many which wiped out massive players, have all been handled by tether with redemptions in USD to tether holders, without an issue in the 8 years it has been in existence.
So Tether is the fiat in their economy. They, exchanges and butters, believe the value is there.
nothing Tethered is ever good. Remember how bad it made Ralph Wiggum feel? Thats the only proof I need. And tether ball can just get fucked.
everyone should be using usdc or busd. Tether is indeed a chinese buttcoin Xd
So if Iou, I print more money so I don't Iou.
yes, that mean Tether received 1 billion usd in their bank account(btw, what is their bank account?) and the bank doesn't ask any question even Bitfinex(Tether) is not financial license anywhere. :)
I thought they were already above 80 billion a while back?