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Everyone talking about how tether should have profited from either investing the cash, or buying and selling tethers at slightly different rates is missing the

Everyone talking about how tether should have profited from either investing the cash, or buying and selling tethers at slightly different rates is missing the point. The original value propitiation of tether was... "A one to one, 100% reserved USD backed cryptocurrency that you can buy/sell any time directly from them" They originally promised a website where you could buy/sell tethers directly for 1 USD. This is different from all the other stable type coins that achieve their pegs using various chain and exchange strategies. Tethers proposition was to maintain it's peg to USD by literally holding the cash and being the primary point of purchase/sale. Not investing it. Not operating fractional reserve. And not buying/selling with a spread. Every profit making strategy goes against their original proposition. The reason this was the proposition was to supposedly make it easier for crypto traders. At the time everyone was having problems cashing out their cryoto. Tether was basically promising that they could fix the USD exchange problem by holding all the cash and not being an exchange. Now they never actually delivered any of that. The website never reliably appeared and now tethers are traded on an exchange like any other crypto coin. And I suspect they did actually make a stack of profit by printing tether and selling them on exchanges. But that makes it a scam because they weren't following their own rules that they laid down at the start.

luckydata 7y ago
Wow, an actor of the crypto-verse doing something unethical, almost unheard of.
askmike 7y ago
> Now they never actually delivered any of that. Yes they did, they delivered exactly this for years, ever since US banks shut them down. A whole ecosystem was built on top of this which to this day seems to run smooth (poloniex, bittrex, binance). > And I suspect they did actually make a stack of profit by printing tether and selling them on exchanges. But that makes it a scam because they weren't following their own rules that they laid down at the start. The only thing that has come to light after numerous of subpoenas and investigations is the Crypto Capital mess. Your claim is very much unsubstantiated. Yes, Bitfinex&Tether did some things against their original promises, but clearly to keep the system running. And clearly with the intention to resolve everything once they got their money from CC back (I'm not saying that was ever going to work).
- SimonPStevens 7y ago
  No, they didn't. Their original proposition was that you could buy and sell tether from them at exactly 1 USD. What happened was that website for doing that was only ever available for very short periods and instead tether was traded on exchanges. Poloniex/bitfinex etc are exchanges, not the promised single source of tether. Exchange trading with a market set price and a bid/offer spread is not the same as a direct purchase website from the creator. It means the price moves. The original promise was for a fixed price set buy the sole supplier.
  - askmike 7y ago
    > Their original proposition was that you could buy and sell tether from them at exactly 1 USD. That depends on who "you" is, as far as I know this was possible for retail until a few years back. But I wouldn't say it was "promised" at all (or are you referring to the whietpaper?). It's still possible for trading firms right this very moment. Active OTC markets for tether right now as well. Note that even though it's possible for some to redeem a Tethers 1:1, that doesn't mean the price is always exactly worth 1 USD. Just like how USD stored in Coinbase is not worth exactly the same as USD stored in Bitstamp. Of course you can transfer them between each other, but that takes days - after which certain price spreads caused by temporary offer/demand discrepancies have ceased to exist. Also, thanks for the downvote!
    - SimonPStevens 7y ago
      (BTW, not me doing the downvoting) I don't think that only allowing the purchase of tether to retail really meets their original plan. The whole point was meant to be that anyone could take their coins and go to tether and get exactly 1 USD for each one. It was designed to solve the problems people were having cashing out from exchanges. The idea was that you sold your bitcoin on poleniex or wherever for USDT the then took that to the tether website and got your USD. Safe in the knowledge that your USDT would be exchanged exactly 1-1, with no bid/offer spread or moving price. The reason this was needed was because most exchanges were really struggling to get their banks to allow the USD processing. In reality, you could never really do that. And now exchanges have been able to get the USD payments working, so the USDT<->USD exchange market has picked up the slack and now serves the purpose that the tether website never realised. Although it's now not quite 1-1, there is a market and a spread and prices move. As others have mentioned, the likely reason they never have is that they would hit exactly the same challenge all the exchanges did with their bank and the KYC rules.
village-idiot 7y ago
The reason why those other exchanges had a USD problem was because they didn’t want to do enough KYC/AML to gain access to legitimate banking. Providing an entrance and exit ramp for exchanges that are enabling money laundering probably put them in legal risk from day 1.

luckydata 7y ago

Wow, an actor of the crypto-verse doing something unethical, almost unheard of.

askmike 7y ago

> Now they never actually delivered any of that. Yes they did, they delivered exactly this for years, ever since US banks shut them down. A whole ecosystem was built on top of this which to this day seems to run smooth (poloniex, bittrex, binance). > And I suspect they did actually make a stack of profit by printing tether and selling them on exchanges. But that makes it a scam because they weren't following their own rules that they laid down at the start. The only thing that has come to light after numerous of subpoenas and investigations is the Crypto Capital mess. Your claim is very much unsubstantiated. Yes, Bitfinex&Tether did some things against their original promises, but clearly to keep the system running. And clearly with the intention to resolve everything once they got their money from CC back (I'm not saying that was ever going to work).

SimonPStevens 7y ago
No, they didn't. Their original proposition was that you could buy and sell tether from them at exactly 1 USD. What happened was that website for doing that was only ever available for very short periods and instead tether was traded on exchanges. Poloniex/bitfinex etc are exchanges, not the promised single source of tether. Exchange trading with a market set price and a bid/offer spread is not the same as a direct purchase website from the creator. It means the price moves. The original promise was for a fixed price set buy the sole supplier.
- askmike 7y ago
  > Their original proposition was that you could buy and sell tether from them at exactly 1 USD. That depends on who "you" is, as far as I know this was possible for retail until a few years back. But I wouldn't say it was "promised" at all (or are you referring to the whietpaper?). It's still possible for trading firms right this very moment. Active OTC markets for tether right now as well. Note that even though it's possible for some to redeem a Tethers 1:1, that doesn't mean the price is always exactly worth 1 USD. Just like how USD stored in Coinbase is not worth exactly the same as USD stored in Bitstamp. Of course you can transfer them between each other, but that takes days - after which certain price spreads caused by temporary offer/demand discrepancies have ceased to exist. Also, thanks for the downvote!
  - SimonPStevens 7y ago
    (BTW, not me doing the downvoting) I don't think that only allowing the purchase of tether to retail really meets their original plan. The whole point was meant to be that anyone could take their coins and go to tether and get exactly 1 USD for each one. It was designed to solve the problems people were having cashing out from exchanges. The idea was that you sold your bitcoin on poleniex or wherever for USDT the then took that to the tether website and got your USD. Safe in the knowledge that your USDT would be exchanged exactly 1-1, with no bid/offer spread or moving price. The reason this was needed was because most exchanges were really struggling to get their banks to allow the USD processing. In reality, you could never really do that. And now exchanges have been able to get the USD payments working, so the USDT<->USD exchange market has picked up the slack and now serves the purpose that the tether website never realised. Although it's now not quite 1-1, there is a market and a spread and prices move. As others have mentioned, the likely reason they never have is that they would hit exactly the same challenge all the exchanges did with their bank and the KYC rules.

village-idiot 7y ago

The reason why those other exchanges had a USD problem was because they didn’t want to do enough KYC/AML to gain access to legitimate banking. Providing an entrance and exit ramp for exchanges that are enabling money laundering probably put them in legal risk from day 1.