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I saw a couple of comments today about the price of USDT so I think it's worth while explaining how it works just in case anyone is interested in knowing more.

I saw a couple of comments today about the price of USDT so I think it's worth while explaining how it works just in case anyone is interested in knowing more. USDT is a pegged-currency. It's often described as a stablecoin but that's not correct because it doesn't have an inbuilt stabilisation mechanism unlike Maker's DAI for instance. The way it works is purely based on well known legal mechanisms that have no cryptoeconomic properties on its own. The issuer holds a USD balance at a bank, then commissions a receipt that proves their balance and issues an equal number of USDT. 1 USD = 1 USDT at issuance time and the trustworthiness of both the issuer, the auditor and banks involved. The token itself is used to facilitate trading and many investors 'park' their gains in USDT while waiting for the market to reach a certain point or just in between trades, but that means that the token's FX value is set by the open market itself so if there are more buy orders than available USDT the price goes up and if there are more sell orders than demand the price goes down. Where this gets interesting is that some exchanges list assets based on the USDT fx and not USD which opens some arbitrage opportunities like we are seeing today. For more info: https://github.com/jpantunes/awesome-cryptoeconomics#stablecoins https://github.com/jpantunes/awesome-cryptoeconomics#stablec... https://stablecoinindex.com/ https://stablecoinindex.com/

celticninja 8y ago
Do you know if any tethers have ever been destroyed? I have not seen it confirmed that this has occurred and if people were withdrawing to the dollar via USDT I would expect there to have been destructions.
- decentralised 8y ago
  To the best of my knowledge, exchanges do not allow redeeming USDT for USD.
  - Animats 8y ago
    Kraken allows selling USDT for USD. The current price is $0.94 USD.[1] [1] https://cryptocoincharts.info/pair/usdt/usd/kraken/today https://cryptocoincharts.info/pair/usdt/usd/kraken/today
    - evancox100 8y ago
      Redemption != Sell Redemption implies a non-market transaction to turn in an asset for a guaranteed face value. For example, you redeem bonds (and bond coupons) for the face amount with the original issuer, once the bond or coupon has matured
- Mithorium 8y ago
  No tether has ever been destroyed. While tether in its terms maintains that Tethers are redeemable "provided that you are a fully verified customer of Tether" [1], there is no known case of this ever happening, in fact it is a running joke that the tether signup page [2] is permanently suspended. Nor does anyone know who is buying them (and causing their creation). For example, when $250m of them were printed in june [3], which customer was it that deposited $250m USD? Or did they print them out of thin air? Nobody knows for sure. But if they are in fact backed 1:1 with USDs, then it raises the question: if the tether peg is slipping below $1, why doesn't Tether or one of these alleged "verified customers" buy them up at a discount, redeem and destroy them for USD, and bank the difference? The answer to this question is left as an exercise for the reader. [1] https://tether.to/legal/ https://tether.to/legal/ [2] https://wallet.tether.to/app/#!/signup https://wallet.tether.to/app/#!/signup [3] https://omniexplorer.info/tx/bd9520b9aea701e9606ad8a8f4d6852d70f2013b12df19b6d58147038392354e https://omniexplorer.info/tx/bd9520b9aea701e9606ad8a8f4d6852...
  - FireBeyond 8y ago
    Oh yes, to actually sign up with Tether, you had to be not affiliated with the US in any way, have a minimum of $10,000/$30,000 to give them, and wait for 90 days or more. The moon also had to be in full eclipse while in Mercury retrograde.
  - A2017U1 8y ago
    > No tether has ever been destroyed. Here's 30 million being destroyed earlier this year: https://omniexplorer.info/tx/24db40680654b8b505fda3e96be722ca10f341a129c99260509eb5d84655f1f0 https://omniexplorer.info/tx/24db40680654b8b505fda3e96be722c...
    - makomk 8y ago
      Yeah, and if I remember correctly a bunch more were returned to the issuer account, presumably in preparation for being destroyed, but ended up being reissued instead.
raesene9 8y ago
Except of course that in the case of tether there has (AFAIK) never actually been a completed audit of their USD holdings. the closest there has ever been is a letter from a law firm that was related to the owners and which clearly stated that it was not an audit.
- decentralised 8y ago
  I think you're right. I saw a document that I thought was the audit report but it's a simple memorandum. https://tether.to/announcement-transparency-update/ https://tether.to/announcement-transparency-update/
  - ceejayoz 8y ago
    That's exactly what Tether wanted you to think. They also parted ways with that firm because they were unwilling to provide what the auditor requested. They've never completed an audit, despite their website claiming "subject to frequent professional audits".
    - FireBeyond 8y ago
      > They also parted ways with that firm because they were unwilling to provide what the auditor requested. Yeah. "Our auditor wanted to actually conduct an audit to say we had been audited." Tether tried to give them an instantaneous bank account balance of an account with no history, and say "Yes, on day x, there's this much in the account". Whereas, of course, there should have been nine digit deposits (sometimes multiple times a week, lol) showing on this account. Not so much.
      - Animats 8y ago
        The real question is whether Tether can survive a substantial net outflow of funds. So far, that hasn't happened. Someday it will. Tether was basically a workaround for the severe problems that cryptocurrency exchanges seem to have paying out real money. "Withdrawal limits", "pauses", "verification", and just not paying withdrawals are continuing problems. Kraken: [1] Coinbase: [2] (Over 1000 Better Business Bureau complaints!) But getting money out of Tether is hard, too. [1] https://www.bbb.org/us/ca/san-francisco/profile/financial-services/payward-kraken-bitcoin-exchange-1116-463144/complaints https://www.bbb.org/us/ca/san-francisco/profile/financial-se... [2] https://www.bbb.org/us/ca/san-francisco/profile/financial-services/coinbase-inc-1116-454104/complaints https://www.bbb.org/us/ca/san-francisco/profile/financial-se...
acchow 8y ago
> then commissions a receipt that proves their balance Why would this report be believable?
- decentralised 8y ago
  The legal principle is that the receipts are audited and signed by a recognised/ accredited entity. If I'm not mistaken, that's how other commodities are traded in regulated markets today.
vkou 8y ago
> The token itself is used to facilitate trading and many investors 'park' their gains in USDT while waiting for the market to reach a certain point or just in between trades, but that means that the token's FX value is set by the open market itself so if there are more buy orders than available USDT the price goes up and if there are more sell orders than demand the price goes down. If the USDT to USD ratio fluctuates so much, what is the point of 'parking' your money in USDT?
- roywiggins 8y ago
  In theory you could just redeem your money from the Tether issuer, if it's actually backed by USD and they deign to let you redeem them.
  - lawn 8y ago
    AFAIK nobody has ever redeemed any Tether.
  - vkou 8y ago
    In theory, cows are spherical. In practice, you can't actually do this.
- decentralised 8y ago
  It usually fluctuates by 2 or 3 cents ( ~0.98 to ~1.03). https://coincodex.com/crypto/tether/ https://coincodex.com/crypto/tether/
hal9000xp 8y ago
Thanks for mentioning DAI. I mentioned DAI today in comment and essentially got banned for doing it. In comment I provided link to interview with Olaf on blog.ycombinator.com where MakerDAO was mentioned. So I got banned as spammer in HN for providing link to blog on YC. It tells a lot about the level of average HN reader.
- Tomte 8y ago
  You got flagged, not banned. But if you keep rambling about readers' intelligence, it might yet happen.
  - hal9000xp 8y ago
    "you keep rambling", I do not keep rambling. Essentially, Hacker News readers marked me as a spammer who trying to promote fraud even in case when I gave a link to blog.ycombinator.com which is not untrusted resource. It's both very offensive and stupid. Or you have to agree that ycombinator.com promotes fraud which is ridiculous. So it's not rambling, I think it's totally fair what I said. You can reverse it back and remove flag, upvote my comment and then I take my words back. Here is exact text of my flagged comment: >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> As tensions with USDT rise, my prediction is that MakerDAO decentralized stablecoin will take over the market in 2019. You can see how issued DAI market cap pumping up steadily all year long almost with no break: https://mkr.tools/ https://mkr.tools/ So I'm accumulating position in MKR. Here is YC interview with backer of MakerDAO: https://blog.ycombinator.com/blockchain-investing-with-olaf-.. https://blog.ycombinator.com/blockchain-investing-with-olaf-.... Andressen Horrowitz also increasing their position in MKR: https://medium.com/makerdao/a16z-crypto-purchases-6-of-mkr-b.. https://medium.com/makerdao/a16z-crypto-purchases-6-of-mkr-b.... https://medium.com/makerdao/maker-sells-12m-of-mkr-to-partne.. https://medium.com/makerdao/maker-sells-12m-of-mkr-to-partne.... Although there are some concerns that it's economically impossible to create fully decentralized stablecoin. Historical example: https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday Failed stablecoin example: https://coinmarketcap.com/currencies/nubits/ https://coinmarketcap.com/currencies/nubits/ We will see as time goes on. Anyway, it's very interesting economic experiment. <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< As you can see it was totally neutral comment. For years, I highly respected HN. I also gave it as an example of awesome community. I deeply respect Paul Graham and big fan of his essays. But recently, I've noticed that HN community is far, far, far away from what I thought it to be (kinda old school hacker/enterpreneur/libertarian community of Paul Graham fans). I'm very sad, annoyed and frustrated.
nosuchthing 8y ago
Stabilisation mechanism unlike Maker's DAI for instance What? The Maker DAI relies on users trading Etherium for another token DAI. It’s essentially a mortgage backed security derivative, except instead of houses it’s a speculative database token swap. Certainly not safe.

celticninja 8y ago

Do you know if any tethers have ever been destroyed? I have not seen it confirmed that this has occurred and if people were withdrawing to the dollar via USDT I would expect there to have been destructions.

decentralised 8y ago
To the best of my knowledge, exchanges do not allow redeeming USDT for USD.
- Animats 8y ago
  Kraken allows selling USDT for USD. The current price is $0.94 USD.[1] [1] https://cryptocoincharts.info/pair/usdt/usd/kraken/today https://cryptocoincharts.info/pair/usdt/usd/kraken/today
  - evancox100 8y ago
    Redemption != Sell Redemption implies a non-market transaction to turn in an asset for a guaranteed face value. For example, you redeem bonds (and bond coupons) for the face amount with the original issuer, once the bond or coupon has matured
Mithorium 8y ago
No tether has ever been destroyed. While tether in its terms maintains that Tethers are redeemable "provided that you are a fully verified customer of Tether" [1], there is no known case of this ever happening, in fact it is a running joke that the tether signup page [2] is permanently suspended. Nor does anyone know who is buying them (and causing their creation). For example, when $250m of them were printed in june [3], which customer was it that deposited $250m USD? Or did they print them out of thin air? Nobody knows for sure. But if they are in fact backed 1:1 with USDs, then it raises the question: if the tether peg is slipping below $1, why doesn't Tether or one of these alleged "verified customers" buy them up at a discount, redeem and destroy them for USD, and bank the difference? The answer to this question is left as an exercise for the reader. [1] https://tether.to/legal/ https://tether.to/legal/ [2] https://wallet.tether.to/app/#!/signup https://wallet.tether.to/app/#!/signup [3] https://omniexplorer.info/tx/bd9520b9aea701e9606ad8a8f4d6852d70f2013b12df19b6d58147038392354e https://omniexplorer.info/tx/bd9520b9aea701e9606ad8a8f4d6852...
- FireBeyond 8y ago
  Oh yes, to actually sign up with Tether, you had to be not affiliated with the US in any way, have a minimum of $10,000/$30,000 to give them, and wait for 90 days or more. The moon also had to be in full eclipse while in Mercury retrograde.
- A2017U1 8y ago
  > No tether has ever been destroyed. Here's 30 million being destroyed earlier this year: https://omniexplorer.info/tx/24db40680654b8b505fda3e96be722ca10f341a129c99260509eb5d84655f1f0 https://omniexplorer.info/tx/24db40680654b8b505fda3e96be722c...
  - makomk 8y ago
    Yeah, and if I remember correctly a bunch more were returned to the issuer account, presumably in preparation for being destroyed, but ended up being reissued instead.

raesene9 8y ago

Except of course that in the case of tether there has (AFAIK) never actually been a completed audit of their USD holdings. the closest there has ever been is a letter from a law firm that was related to the owners and which clearly stated that it was not an audit.

decentralised 8y ago
I think you're right. I saw a document that I thought was the audit report but it's a simple memorandum. https://tether.to/announcement-transparency-update/ https://tether.to/announcement-transparency-update/
- ceejayoz 8y ago
  That's exactly what Tether wanted you to think. They also parted ways with that firm because they were unwilling to provide what the auditor requested. They've never completed an audit, despite their website claiming "subject to frequent professional audits".
  - FireBeyond 8y ago
    > They also parted ways with that firm because they were unwilling to provide what the auditor requested. Yeah. "Our auditor wanted to actually conduct an audit to say we had been audited." Tether tried to give them an instantaneous bank account balance of an account with no history, and say "Yes, on day x, there's this much in the account". Whereas, of course, there should have been nine digit deposits (sometimes multiple times a week, lol) showing on this account. Not so much.
    - Animats 8y ago
      The real question is whether Tether can survive a substantial net outflow of funds. So far, that hasn't happened. Someday it will. Tether was basically a workaround for the severe problems that cryptocurrency exchanges seem to have paying out real money. "Withdrawal limits", "pauses", "verification", and just not paying withdrawals are continuing problems. Kraken: [1] Coinbase: [2] (Over 1000 Better Business Bureau complaints!) But getting money out of Tether is hard, too. [1] https://www.bbb.org/us/ca/san-francisco/profile/financial-services/payward-kraken-bitcoin-exchange-1116-463144/complaints https://www.bbb.org/us/ca/san-francisco/profile/financial-se... [2] https://www.bbb.org/us/ca/san-francisco/profile/financial-services/coinbase-inc-1116-454104/complaints https://www.bbb.org/us/ca/san-francisco/profile/financial-se...

acchow 8y ago

> then commissions a receipt that proves their balance Why would this report be believable?

decentralised 8y ago
The legal principle is that the receipts are audited and signed by a recognised/ accredited entity. If I'm not mistaken, that's how other commodities are traded in regulated markets today.

vkou 8y ago

> The token itself is used to facilitate trading and many investors 'park' their gains in USDT while waiting for the market to reach a certain point or just in between trades, but that means that the token's FX value is set by the open market itself so if there are more buy orders than available USDT the price goes up and if there are more sell orders than demand the price goes down. If the USDT to USD ratio fluctuates so much, what is the point of 'parking' your money in USDT?

roywiggins 8y ago
In theory you could just redeem your money from the Tether issuer, if it's actually backed by USD and they deign to let you redeem them.
- lawn 8y ago
  AFAIK nobody has ever redeemed any Tether.
- vkou 8y ago
  In theory, cows are spherical. In practice, you can't actually do this.
decentralised 8y ago
It usually fluctuates by 2 or 3 cents ( ~0.98 to ~1.03). https://coincodex.com/crypto/tether/ https://coincodex.com/crypto/tether/

hal9000xp 8y ago

Thanks for mentioning DAI. I mentioned DAI today in comment and essentially got banned for doing it. In comment I provided link to interview with Olaf on blog.ycombinator.com where MakerDAO was mentioned. So I got banned as spammer in HN for providing link to blog on YC. It tells a lot about the level of average HN reader.

Tomte 8y ago
You got flagged, not banned. But if you keep rambling about readers' intelligence, it might yet happen.
- hal9000xp 8y ago
  "you keep rambling", I do not keep rambling. Essentially, Hacker News readers marked me as a spammer who trying to promote fraud even in case when I gave a link to blog.ycombinator.com which is not untrusted resource. It's both very offensive and stupid. Or you have to agree that ycombinator.com promotes fraud which is ridiculous. So it's not rambling, I think it's totally fair what I said. You can reverse it back and remove flag, upvote my comment and then I take my words back. Here is exact text of my flagged comment: >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> As tensions with USDT rise, my prediction is that MakerDAO decentralized stablecoin will take over the market in 2019. You can see how issued DAI market cap pumping up steadily all year long almost with no break: https://mkr.tools/ https://mkr.tools/ So I'm accumulating position in MKR. Here is YC interview with backer of MakerDAO: https://blog.ycombinator.com/blockchain-investing-with-olaf-.. https://blog.ycombinator.com/blockchain-investing-with-olaf-.... Andressen Horrowitz also increasing their position in MKR: https://medium.com/makerdao/a16z-crypto-purchases-6-of-mkr-b.. https://medium.com/makerdao/a16z-crypto-purchases-6-of-mkr-b.... https://medium.com/makerdao/maker-sells-12m-of-mkr-to-partne.. https://medium.com/makerdao/maker-sells-12m-of-mkr-to-partne.... Although there are some concerns that it's economically impossible to create fully decentralized stablecoin. Historical example: https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday Failed stablecoin example: https://coinmarketcap.com/currencies/nubits/ https://coinmarketcap.com/currencies/nubits/ We will see as time goes on. Anyway, it's very interesting economic experiment. <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< As you can see it was totally neutral comment. For years, I highly respected HN. I also gave it as an example of awesome community. I deeply respect Paul Graham and big fan of his essays. But recently, I've noticed that HN community is far, far, far away from what I thought it to be (kinda old school hacker/enterpreneur/libertarian community of Paul Graham fans). I'm very sad, annoyed and frustrated.

nosuchthing 8y ago

Stabilisation mechanism unlike Maker's DAI for instance What? The Maker DAI relies on users trading Etherium for another token DAI. It’s essentially a mortgage backed security derivative, except instead of houses it’s a speculative database token swap. Certainly not safe.