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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
by 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 agoI 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.