5 ms·

Can somebody explain, in detail, the conspiracy theory here? Preferably in a way that doesn't emotionally assume some nefarious action? $450M is a lot of mone

by blhack 9y ago

Can somebody explain, in detail, the conspiracy theory here? Preferably in a way that doesn't emotionally assume some nefarious action? $450M is a lot of money. Why do you assume that tether is lying about this? If tether aren't actually backed by anything, isn't that just about the worst ponzi scheme imaginable? Like some sort of reverse ponzi scheme, actually? They give you "fake" tethers, and you get to buy "real" bitcoins with them.

Shank 9y ago
> Can somebody explain, in detail, the conspiracy theory here? For tether to maintain a 1:1 ratio of 1 USDT to 1 USD, they have to have a backing of $450M from some company or bank that has USD to give them. As of now, they have no US based banks even doing transfers with them, let alone working with them on being solvent. Tether promised to be open to auditing, and none of the latest issuings have been audited as having actual backing currency.
- StavrosK 9y ago
  I'm far from knowledgeable on this, but, as I understand it, for tether to maintain that ratio, the issuer of tether must both be willing to buy and sell one tether for one dollar, to and from anyone, at any time. The moment that stops, you're operating on faith, and you're no longer pegged to anything.
  - FireBeyond 9y ago
    Well, it's a good thing they don't have anything like this in their Terms: > "There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers." Oh, wait, that's exactly what is in their Terms...
- mrb 9y ago
  Tether the company (Tether Limited) claims that non-US exchanges buy tethers directly from them. At least it seems plausible.
  - Shank 9y ago
    I don't think anything says that it isn't plausible. The issue is that $450M appearing with no third party audit in a relatively short time period with no fanfare (e.g., Tether: "We just secured a new deal with a bank and have issued more tethers as a result!") is a bit odd to look at from a normal perspective. If Tether were 10 years old and had established chains of successful audits, this would be less of a big deal (but still a deal).
- FireBeyond 9y ago
  Let's not forget that they explicitly disclaim that they have any obligation or responsibility to turn the Tethers (that you can't buy, unless of course you're one of the institutional investors supposedly giving them $100MM/day) back into USD at any point in the future.
jameskilton 9y ago
But no-one can actually buy tethers, it's disabled and no-one will say why. This is Bitfinex itself printing and using Tethers to buy BTC. I've been following https://twitter.com/bitfinexed https://twitter.com/bitfinexed
- deleted 9y ago
  [deleted]
- jpmattia 9y ago
  > This is Bitfinex itself printing and using Tethers to buy BTC. Who is on the other side of that transaction? ie, who is accepting $450M in tether for their BTC?
  - lingben 9y ago
    exchanges clients on exchanges sell BTC and buy USDT thinking they are buying USD not realizing they are buying tethers think of it this way, you can easily put money into the system but you can't get it out, instead you get funny money don't believe me? find me one person who has sold tether and has documentation to prove it when money comes in but can't leave... there's a name for that...
    - jpmattia 9y ago
      > and buy USDT thinking they are buying USD not realizing they are buying tethers There are people buying $450M of USDT thinking that it's actually dollars? And just in the last round? Let's think about how many people, and what average transaction $$: 1M people @ $450 100K people @ $4500 10K people @ $450K Which of those is most plausible? That's a lot of suckers, no matter which choice. And remember that's just the last round, there's nx$1B out there already. It sounds implausible really.
FireBeyond 9y ago
The only "proof" they have is an "audit" that is explicitly disclaimed as "not an audit" by the very party they asked to do it in their summary letter. They've been booted from Wells Fargo, and other banks have refused to do business with them. They say they have a new bank, but refuse to name it. When a reporter asked, they said they'd require an NDA to even name where they are storing their funds. Sounds like an organization that isn't exactly trying to build trust.
- mercer 9y ago
  On top of that they explicitly lied about the connection between Bitfinex and Tether. I'd say that's a huge red flag.
withdavidli 9y ago
It works based on it being redeemable for USD. It says it has frequent audits, but only recent one made public was not considered an audit by their own words. US residents on their legal page and updates is stated to not be legal customers of USDT. Answered this in another thread that includes citation from their own site: https://news.ycombinator.com/item?id=16141938 https://news.ycombinator.com/item?id=16141938
gnarcoregrizz 9y ago
The theory is that Bitfinex creates these out of thin air and buys other cryptos with them, thus raising the prices across the board (the prices quickly bleeds into all the other exchanges because arb). Crypto holders buy tethers when they want to short crypto against "USD" since tethers are supposedly equal to usd. Often times the entire market swings at once and lots of it dumps into usdt during downturns ("tether up!"), and back again into crypto on an upswing. Anyway, if you look at Bitfinex, you'll notice they have pairs like BTC/USD... except that USD is really USDT. It's basically counterfeit usd and it seems like all exchanges that can't trade actual usd use it Right now its almost like tether is like the central bank of crypto, constantly bailing out the market during downturns and pumping the price up. They've really upped their printing the past few days due to the massive downturn.
- ghthor 9y ago
  Alternatively, You could make the argument that what Bitfinex has done here is really smart. It's really expensive, engineering & risk wise, to setup payout links at consumer scale. There really is no difference between me holding Tether's and holding a USD balance on Coinbase. But in actuality Coinbase is in more danger here than Bitfinex. If all the Coinbase users cashed out, they'd be unable to payout, but Bitfinex is secure from this. This is the pattern we will see moving forward. Robot Cache is adopting it, and we'll see more. It'll be easy to put money into crypto, move crypto around and trade crypto. But to get money back out as real physical money will always be a hard problem, and I predict it will come down to a distributed effort by the banks. I'll walk into my branch and they'll transfer X USDT to they're account from mine and hand me physical dollars.
  - banderman 9y ago
    Those are extremely bold assertions with no evidence provided to back them up. How is Bitfinex secured from an inability to pay out? To my knowledge, they have never published an independent 3rd party audit showing that they actually have the reserves that would be required.
deleted 9y ago
[deleted]

by blhack 9y ago

Shank 9y ago

> Can somebody explain, in detail, the conspiracy theory here? For tether to maintain a 1:1 ratio of 1 USDT to 1 USD, they have to have a backing of $450M from some company or bank that has USD to give them. As of now, they have no US based banks even doing transfers with them, let alone working with them on being solvent. Tether promised to be open to auditing, and none of the latest issuings have been audited as having actual backing currency.

StavrosK 9y ago
I'm far from knowledgeable on this, but, as I understand it, for tether to maintain that ratio, the issuer of tether must both be willing to buy and sell one tether for one dollar, to and from anyone, at any time. The moment that stops, you're operating on faith, and you're no longer pegged to anything.
- FireBeyond 9y ago
  Well, it's a good thing they don't have anything like this in their Terms: > "There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers." Oh, wait, that's exactly what is in their Terms...
mrb 9y ago
Tether the company (Tether Limited) claims that non-US exchanges buy tethers directly from them. At least it seems plausible.
- Shank 9y ago
  I don't think anything says that it isn't plausible. The issue is that $450M appearing with no third party audit in a relatively short time period with no fanfare (e.g., Tether: "We just secured a new deal with a bank and have issued more tethers as a result!") is a bit odd to look at from a normal perspective. If Tether were 10 years old and had established chains of successful audits, this would be less of a big deal (but still a deal).
FireBeyond 9y ago
Let's not forget that they explicitly disclaim that they have any obligation or responsibility to turn the Tethers (that you can't buy, unless of course you're one of the institutional investors supposedly giving them $100MM/day) back into USD at any point in the future.

jameskilton 9y ago

But no-one can actually buy tethers, it's disabled and no-one will say why. This is Bitfinex itself printing and using Tethers to buy BTC. I've been following https://twitter.com/bitfinexed https://twitter.com/bitfinexed

deleted 9y ago
[deleted]
jpmattia 9y ago
> This is Bitfinex itself printing and using Tethers to buy BTC. Who is on the other side of that transaction? ie, who is accepting $450M in tether for their BTC?
- lingben 9y ago
  exchanges clients on exchanges sell BTC and buy USDT thinking they are buying USD not realizing they are buying tethers think of it this way, you can easily put money into the system but you can't get it out, instead you get funny money don't believe me? find me one person who has sold tether and has documentation to prove it when money comes in but can't leave... there's a name for that...
  - jpmattia 9y ago
    > and buy USDT thinking they are buying USD not realizing they are buying tethers There are people buying $450M of USDT thinking that it's actually dollars? And just in the last round? Let's think about how many people, and what average transaction $$: 1M people @ $450 100K people @ $4500 10K people @ $450K Which of those is most plausible? That's a lot of suckers, no matter which choice. And remember that's just the last round, there's nx$1B out there already. It sounds implausible really.

FireBeyond 9y ago

The only "proof" they have is an "audit" that is explicitly disclaimed as "not an audit" by the very party they asked to do it in their summary letter. They've been booted from Wells Fargo, and other banks have refused to do business with them. They say they have a new bank, but refuse to name it. When a reporter asked, they said they'd require an NDA to even name where they are storing their funds. Sounds like an organization that isn't exactly trying to build trust.

mercer 9y ago
On top of that they explicitly lied about the connection between Bitfinex and Tether. I'd say that's a huge red flag.

withdavidli 9y ago

It works based on it being redeemable for USD. It says it has frequent audits, but only recent one made public was not considered an audit by their own words. US residents on their legal page and updates is stated to not be legal customers of USDT. Answered this in another thread that includes citation from their own site: https://news.ycombinator.com/item?id=16141938 https://news.ycombinator.com/item?id=16141938

gnarcoregrizz 9y ago

The theory is that Bitfinex creates these out of thin air and buys other cryptos with them, thus raising the prices across the board (the prices quickly bleeds into all the other exchanges because arb). Crypto holders buy tethers when they want to short crypto against "USD" since tethers are supposedly equal to usd. Often times the entire market swings at once and lots of it dumps into usdt during downturns ("tether up!"), and back again into crypto on an upswing. Anyway, if you look at Bitfinex, you'll notice they have pairs like BTC/USD... except that USD is really USDT. It's basically counterfeit usd and it seems like all exchanges that can't trade actual usd use it Right now its almost like tether is like the central bank of crypto, constantly bailing out the market during downturns and pumping the price up. They've really upped their printing the past few days due to the massive downturn.

ghthor 9y ago
Alternatively, You could make the argument that what Bitfinex has done here is really smart. It's really expensive, engineering & risk wise, to setup payout links at consumer scale. There really is no difference between me holding Tether's and holding a USD balance on Coinbase. But in actuality Coinbase is in more danger here than Bitfinex. If all the Coinbase users cashed out, they'd be unable to payout, but Bitfinex is secure from this. This is the pattern we will see moving forward. Robot Cache is adopting it, and we'll see more. It'll be easy to put money into crypto, move crypto around and trade crypto. But to get money back out as real physical money will always be a hard problem, and I predict it will come down to a distributed effort by the banks. I'll walk into my branch and they'll transfer X USDT to they're account from mine and hand me physical dollars.
- banderman 9y ago
  Those are extremely bold assertions with no evidence provided to back them up. How is Bitfinex secured from an inability to pay out? To my knowledge, they have never published an independent 3rd party audit showing that they actually have the reserves that would be required.

deleted 9y ago

[deleted]