6 ms·

I'm out of the loop. What's the deal with tether?

by robbyt 9y ago

eximius 9y ago
Issue Tether (it is issued, not mined), trade Tether for Bitcoin, BTC price in Tethers increases, due to stated and believed peg of Tether to USD, BTC raises in USD price due to arbitrage executioners. More details: https://seekingalpha.com/article/4129543-bitcoin-one-way-go-true#/comment-76992585 https://seekingalpha.com/article/4129543-bitcoin-one-way-go-...
- runeks 9y ago
  Which BTC/tether market(s) is this happening on? I know plenty of BTC/USD markets, but I’m not familiar with which BTC/tether markets exist.
  - eximius 9y ago
    Bitfinex which is cooincidentally owned by the same people as Tether.
- samsonradu 9y ago
  Failing to understand how you could peg Tether to the USD and have people believe you. I was under the impression that pegging to a currency is something only a very big player, with close to unlimited resources can achieve, see People's Bank of China, Swiss Bank etc. Among others, you have to defend the currency against speculators and that requires a lot of capital. Even the Bank of England failed to maintain the peg to the German Deutschmark some years ago. Can someone with more knowledge in the FX market area explain this better?
  - StavrosK 9y ago
    You can peg tether to the usd simply by offering to always exchange one tether for one usd and vice versa, no?
    - tehlike 9y ago
      The problem is, sonfar they issued north of 800m with no proof of reserves, and no professional audit to support their claims.
      - samsonradu 9y ago
        That s the thing I don’t get, how do they “issue” tether? Because if one says they peg it to the dollar then it must follow the dollar’s inflation. Otherwise somebody is at a loss because there s more tether value than usd or viceversa, even if they were fully transparent and fair. Edit Unless of course tether is not a store of value in any way and just a fancy name for a dollar.
        tehlike 9y ago
        The way it works is, i go to exchange a, and tell them hey i have this cryptocurrency and i have enough cash to back it up. People can withdraw money from me using these. If you do not verify my claims, you think this is a great idea, because now you can transact with usd(t). Formally these exchanges only used cross-coin exchanges. Now this is not a problem as long as you have _enough_ money to support withdrawals on an ongoing basis. Nobody knows you dont have enough cash to support all issued tokens, because seemingly, everything works nicely. With the recent hype, money keeps flowing. Until a mass withdrawal happens.
        samsonradu 9y ago
        But why do I want tether in the first place? Why bother switching back and forth at all? I don’t see why would I want to hold tether. Can I buy a can of coke with it directly? What if the coke seller is a bit skeptical of tether and asks for 1.2 tether instead of one usd, just to play safe. Isn t this pressure applied to the exchange rate?
        tehlike 9y ago
        You mean, instead of USD? Because most exchanges cannot and does not support withdrawals - they are virtual.
  - tedunangst 9y ago
    The claim is that they are in fact holding an equivalent amount of USD for all Tether. It's an IOU. (No comment on whether this is true.) Bank of England couldn't maintain the peg because they weren't holding DM for literally all pounds in existence.
  - antonvs 9y ago
    > Failing to understand how you could peg Tether to the USD and have people believe you. In principle, it's simple: people pay you USD for Tether, you charge them a small percentage fee, put the remaining USD in a reserve account, and issue the buyer a corresponding amount of Tether. You do the reverse to buy Tether back from people. For the trust issue, you get a reputable company to audit your reserves and Tether/USD transactions. If you do this, no defense of anything is needed - if someone wants to sell Tether, they can always come back to the company that issues it and exchange their Tether for some of the dollars in the reserve account at an exchange rate of 1:1 minus fees. In practice however, the auditing and transparency for Tether is not sufficient to be sure that this is what's actually happening. So the "having people believe you" part is definitely an issue right now. > Even the Bank of England failed to maintain the peg to the German Deutschmark some years ago. That's not the same kind of peg, at all. A Tether is just supposed to be a proxy for a USD. The pound and Deutschmark were two otherwise completely independent currencies, so the idea of pegging one to the other was dubious to start with. Here's a brief article which covers some of the issues with that peg: https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp https://www.investopedia.com/ask/answers/08/george-soros-ban...
    - samsonradu 9y ago
      > Tether is just supposed to be a proxy for USD. That would make sense indeed, so for every tether coin issued they’d normally have to pull a dollar out of circulation. Otherwise they re printing money isn’t it? Even if true, saying that they back it up is not enough.
      - samsonradu 9y ago
        Too late to edit. Now that I think of it this would make sense for the FED to actually use the blockchain tech to manage its currency supply. Instead of the printing press they issue cryptodollars which supposedly are better than paper because they can be easily and fastly moved around or whatever. But not for a 3rd party to just say: This is a dollar, but called differently, trust us, we issued it.
- Kiro 9y ago
  How is it issued exactly? Practically and technically speaking. What is the process?
  - eximius 9y ago
    I haven't read the whitepaper. But Ripple and Dash are similarly centralized I believe.
econner 9y ago
Tether is supposed to be backed 1:1 by US dollars and function as a non-volatile way to move money across exchanges. It's market cap is ~$815M. Lots of people believe that Bitfinex, the creator of Tether, is not actually holding $815M to back it. Instead they believe Bitfinex is creating Tether out of thin air and could be using it to inflate the price of Bitcoin.
- simooooo 9y ago
  How would them issuing tether out of thin air inflate the price of bitcoin?
  - fmela 9y ago
    By trading tether issued out of thin air for BTC.
    - deleted 9y ago
      [deleted]
    - RexetBlell 9y ago
      Why would anyone want to exchange their Bitcoins that are worth over $10,000 each on Coinbase (and can be converted to real dollars) for some tokens that are backed by nothing?
      - cantrip 9y ago
        Tether are, ostensibly, backed by $1 in a bank somewhere. Having a dollar token is very useful, since you can move in and out of crypto trading positions into a stable store of value, good old USD. Converting to real money takes a long time so you can't react to the market, and is also taxable and often has other fees on top.
        michaelchisari 9y ago
        > backed by $1 in a bank somewhere. Are we sure about this?

I'm out of the loop. What's the deal with tether?

by robbyt 9y ago

I'm out of the loop. What's the deal with tether?

Issue Tether (it is issued, not mined), trade Tether for Bitcoin, BTC price in Tethers increases, due to stated and believed peg of Tether to USD, BTC raises in USD price due to arbitrage executioners. More details: https://seekingalpha.com/article/4129543-bitcoin-one-way-go-true#/comment-76992585 https://seekingalpha.com/article/4129543-bitcoin-one-way-go-...

runeks 9y ago
Which BTC/tether market(s) is this happening on? I know plenty of BTC/USD markets, but I’m not familiar with which BTC/tether markets exist.
- eximius 9y ago
  Bitfinex which is cooincidentally owned by the same people as Tether.
samsonradu 9y ago
Failing to understand how you could peg Tether to the USD and have people believe you. I was under the impression that pegging to a currency is something only a very big player, with close to unlimited resources can achieve, see People's Bank of China, Swiss Bank etc. Among others, you have to defend the currency against speculators and that requires a lot of capital. Even the Bank of England failed to maintain the peg to the German Deutschmark some years ago. Can someone with more knowledge in the FX market area explain this better?
- StavrosK 9y ago
  You can peg tether to the usd simply by offering to always exchange one tether for one usd and vice versa, no?
  - tehlike 9y ago
    The problem is, sonfar they issued north of 800m with no proof of reserves, and no professional audit to support their claims.
    - samsonradu 9y ago
      That s the thing I don’t get, how do they “issue” tether? Because if one says they peg it to the dollar then it must follow the dollar’s inflation. Otherwise somebody is at a loss because there s more tether value than usd or viceversa, even if they were fully transparent and fair. Edit Unless of course tether is not a store of value in any way and just a fancy name for a dollar.
      - tehlike 9y ago
        The way it works is, i go to exchange a, and tell them hey i have this cryptocurrency and i have enough cash to back it up. People can withdraw money from me using these. If you do not verify my claims, you think this is a great idea, because now you can transact with usd(t). Formally these exchanges only used cross-coin exchanges. Now this is not a problem as long as you have _enough_ money to support withdrawals on an ongoing basis. Nobody knows you dont have enough cash to support all issued tokens, because seemingly, everything works nicely. With the recent hype, money keeps flowing. Until a mass withdrawal happens.
        samsonradu 9y ago
        But why do I want tether in the first place? Why bother switching back and forth at all? I don’t see why would I want to hold tether. Can I buy a can of coke with it directly? What if the coke seller is a bit skeptical of tether and asks for 1.2 tether instead of one usd, just to play safe. Isn t this pressure applied to the exchange rate?
        tehlike 9y ago
        You mean, instead of USD? Because most exchanges cannot and does not support withdrawals - they are virtual.
- tedunangst 9y ago
  The claim is that they are in fact holding an equivalent amount of USD for all Tether. It's an IOU. (No comment on whether this is true.) Bank of England couldn't maintain the peg because they weren't holding DM for literally all pounds in existence.
- antonvs 9y ago
  > Failing to understand how you could peg Tether to the USD and have people believe you. In principle, it's simple: people pay you USD for Tether, you charge them a small percentage fee, put the remaining USD in a reserve account, and issue the buyer a corresponding amount of Tether. You do the reverse to buy Tether back from people. For the trust issue, you get a reputable company to audit your reserves and Tether/USD transactions. If you do this, no defense of anything is needed - if someone wants to sell Tether, they can always come back to the company that issues it and exchange their Tether for some of the dollars in the reserve account at an exchange rate of 1:1 minus fees. In practice however, the auditing and transparency for Tether is not sufficient to be sure that this is what's actually happening. So the "having people believe you" part is definitely an issue right now. > Even the Bank of England failed to maintain the peg to the German Deutschmark some years ago. That's not the same kind of peg, at all. A Tether is just supposed to be a proxy for a USD. The pound and Deutschmark were two otherwise completely independent currencies, so the idea of pegging one to the other was dubious to start with. Here's a brief article which covers some of the issues with that peg: https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp https://www.investopedia.com/ask/answers/08/george-soros-ban...
  - samsonradu 9y ago
    > Tether is just supposed to be a proxy for USD. That would make sense indeed, so for every tether coin issued they’d normally have to pull a dollar out of circulation. Otherwise they re printing money isn’t it? Even if true, saying that they back it up is not enough.
    - samsonradu 9y ago
      Too late to edit. Now that I think of it this would make sense for the FED to actually use the blockchain tech to manage its currency supply. Instead of the printing press they issue cryptodollars which supposedly are better than paper because they can be easily and fastly moved around or whatever. But not for a 3rd party to just say: This is a dollar, but called differently, trust us, we issued it.
Kiro 9y ago
How is it issued exactly? Practically and technically speaking. What is the process?
- eximius 9y ago
  I haven't read the whitepaper. But Ripple and Dash are similarly centralized I believe.

econner 9y ago

Tether is supposed to be backed 1:1 by US dollars and function as a non-volatile way to move money across exchanges. It's market cap is ~$815M. Lots of people believe that Bitfinex, the creator of Tether, is not actually holding $815M to back it. Instead they believe Bitfinex is creating Tether out of thin air and could be using it to inflate the price of Bitcoin.

simooooo 9y ago
How would them issuing tether out of thin air inflate the price of bitcoin?
- fmela 9y ago
  By trading tether issued out of thin air for BTC.
  - deleted 9y ago
    [deleted]
  - RexetBlell 9y ago
    Why would anyone want to exchange their Bitcoins that are worth over $10,000 each on Coinbase (and can be converted to real dollars) for some tokens that are backed by nothing?
    - cantrip 9y ago
      Tether are, ostensibly, backed by $1 in a bank somewhere. Having a dollar token is very useful, since you can move in and out of crypto trading positions into a stable store of value, good old USD. Converting to real money takes a long time so you can't react to the market, and is also taxable and often has other fees on top.
      - michaelchisari 9y ago
        > backed by $1 in a bank somewhere. Are we sure about this?