4 ms·

It is /possible/ that their books add up, in a technical sense which would make wall street blush. They never claim that USDT are backed up by USD. They claim

by elif 9y ago

It is /possible/ that their books add up, in a technical sense which would make wall street blush. They never claim that USDT are backed up by USD. They claim that every USDT is backed up 1:1 by "Assets." Here's the scene: BFX is hacked, loses banking, and has tens of thousands of crypto millionaires ready to sue them. What they /do/ have is cold storage of lots of crypto under their control. Say they start with 0 holdings of their own, generate 100M in USDT, and use it to buy up e.g. 10k bitcoin. However, due to that price movement, those are now worth 120M. That gives them 20M of "assets" which are not 1:1 matched to their tether, so they print 20M more. The cycle continues ad infinitum (until it doesn't). Every time It becomes more effective as their previous crypto holdings also increase in value. Technically they are always "backed" 1:1 by "assets" for as long as they sustain upward momentum on crypto prices. But really it only needs to last long enough to dip set.

cstejerean 9y ago
They absolutely used to claim that each tether is backed up by 1 USD in their reserve account, and that’s precisely what the audits were supposed to prove. Maybe they are backpedaling away from that now, but it’s not right to say that they never claimed this. This was the whole point of Tether.
joosters 9y ago
From their homepage: Every tether is always backed 1-to-1, by traditional currency held in our reserves
- argc_argv 9y ago
  Read the legal fine print... They say it's backed yes, but they did not say how to redeem. (hint: they have full right of controlling how usdt is "redeemed")
  - joosters 9y ago
    I'm not arguing that they're genuine, the quote was simply to show that they do in fact claim to hold $/£/etc to back the tokens, and not just general 'assets' that the parent comment described.
    - cryptoz 9y ago
      Your quote says "traditional currency", but now you are claiming that it is dollars and euros. That's not what they said. Maybe they mean gold coins. As an aside, I decided to google "traditional currency" and found that Google has absolutely no clue how to do searches any more. https://imgur.com/a/3I5Ok https://imgur.com/a/3I5Ok https://www.google.com/search?q=traditional+currency https://www.google.com/search?q=traditional+currency
      - vinniejames 9y ago
        Seems ok to me. There was nothing to compare "traditional currency" to before crypto currency came along, therefore no one would have been searching for it
  - notahacker 9y ago
    The fact the small print relieves them of any contractual obligation to ever redeem USDT for anything doesn't mean they don't claim - almost certainly fraudulently - in the middle of their home page that "Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD"
- elif 9y ago
  traditional is not a technical qualifier, as far as i'm aware. If you were trying to assert that something was equivalent to dollars, and were backing it by dollars, would you say "traditional currency"? or would you say "US Dollars"?
djrogers 9y ago
You're describing a one-man Ponzi scheme, and it cannot work in the long run - it only works as long as more money is coming in, which requires the value of BTC to rise indefinitely. Consider what happened in your scenario when BTC lost ~40% of it's value essentially overnight. Did BFX have enough extra BTC reserves to cover? What if they did but it had dropped 50, 60, or 70%? It doesn't take much work to see the impossibility of 'backing' a stablecoin with an asset other than what it's value is tied to...
- vkou 9y ago
  I think the parent poster is well aware that this is a pyramid scheme that can only keep going as long as Bitcoin is growing in price. But here's an important thing - even if BTC drops in price, they aren't obligated to give you a broken penny for your tether. It is unredeemable for USD.
rhino369 9y ago
Tether claims on its main webpage to be 1:1 backed by "by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD." If they are really just "backing" it with bitcoin then it is fraud.

by elif 9y ago

cstejerean 9y ago

They absolutely used to claim that each tether is backed up by 1 USD in their reserve account, and that’s precisely what the audits were supposed to prove. Maybe they are backpedaling away from that now, but it’s not right to say that they never claimed this. This was the whole point of Tether.

joosters 9y ago

From their homepage: Every tether is always backed 1-to-1, by traditional currency held in our reserves

argc_argv 9y ago
Read the legal fine print... They say it's backed yes, but they did not say how to redeem. (hint: they have full right of controlling how usdt is "redeemed")
- joosters 9y ago
  I'm not arguing that they're genuine, the quote was simply to show that they do in fact claim to hold $/£/etc to back the tokens, and not just general 'assets' that the parent comment described.
  - cryptoz 9y ago
    Your quote says "traditional currency", but now you are claiming that it is dollars and euros. That's not what they said. Maybe they mean gold coins. As an aside, I decided to google "traditional currency" and found that Google has absolutely no clue how to do searches any more. https://imgur.com/a/3I5Ok https://imgur.com/a/3I5Ok https://www.google.com/search?q=traditional+currency https://www.google.com/search?q=traditional+currency
    - vinniejames 9y ago
      Seems ok to me. There was nothing to compare "traditional currency" to before crypto currency came along, therefore no one would have been searching for it
- notahacker 9y ago
  The fact the small print relieves them of any contractual obligation to ever redeem USDT for anything doesn't mean they don't claim - almost certainly fraudulently - in the middle of their home page that "Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD"
elif 9y ago
traditional is not a technical qualifier, as far as i'm aware. If you were trying to assert that something was equivalent to dollars, and were backing it by dollars, would you say "traditional currency"? or would you say "US Dollars"?

djrogers 9y ago

You're describing a one-man Ponzi scheme, and it cannot work in the long run - it only works as long as more money is coming in, which requires the value of BTC to rise indefinitely. Consider what happened in your scenario when BTC lost ~40% of it's value essentially overnight. Did BFX have enough extra BTC reserves to cover? What if they did but it had dropped 50, 60, or 70%? It doesn't take much work to see the impossibility of 'backing' a stablecoin with an asset other than what it's value is tied to...

vkou 9y ago
I think the parent poster is well aware that this is a pyramid scheme that can only keep going as long as Bitcoin is growing in price. But here's an important thing - even if BTC drops in price, they aren't obligated to give you a broken penny for your tether. It is unredeemable for USD.

rhino369 9y ago

Tether claims on its main webpage to be 1:1 backed by "by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD." If they are really just "backing" it with bitcoin then it is fraud.