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This is what I was thinking but I didn’t have a way to phrase it. Many people are convinced that fractional reserve banking is terrible without understanding th

This is what I was thinking but I didn’t have a way to phrase it. Many people are convinced that fractional reserve banking is terrible without understanding the basics of how it work, writing it off as too complicated for people to comprehend and therefore bad... but their solution is a system which is orders of magnitude more complicated and, in all likelihood, will still result in fractional reserve banking entities popping up. Tether isn’t a fractional reserve bank. It’s far worse. It’s just taking your money and showing that that they “only” spent some of it. But people in this thread are comparing it __favorably__ to traditional banks.

gridlockd 7y ago
I never said that Crypto was any good or that fractional reserve was bad. It obviously works for the banks (until it doesn't), it seems to work for Tether as well. I'm just pointing out the parallels, which are far more striking than the differences. People here point out that fractional reserves is backed by loans and securities of (supposedly) equal value, or that it's all regulated and insured, but it wasn't always like that, it's not a strict requirement for the system to work.
- b_tterc_p 7y ago
  > but it wasn't always like that, Insurance and regulation is good for you as a consumer, and yeah that is new. But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Tether is not a bank. You have no guarantee of being allowed to exchange tether for dollars. It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything
  - gridlockd 7y ago
    > But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Greater or equal face value, not actual value. Tether is basically making the same claim. > Tether is not a bank. I never said that Tether was a bank. > You have no guarantee of being allowed to exchange tether for dollars. To be pedantic, no such guarantee exists for bank deposits either. > It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything. Tether obviously does work, it's probably the most stable cryptocurrency out there, despite being run by sketchy people. You can exchange it for other cryptocurrencies and you can exchange cryptocurrencies for ordinary currencies. Absent proper access to ordinary banking, Tether has been a tool for exchanges to perform settlements in the hundreds of millions of dollars. The view that Tether "does nothing" is just uninformed.
    - arcticbull 7y ago
      The guarantee you can withdraw funds from a bank account does exist, it’s the FDIC. Tethers terms of service specifically state you’re buying funbucks / chuck-e-cheese tokens and they have no redemption value. A unit of value in your bank account represents a claim you have against the assets held in the bank backed by the weight of the US government. A Tether is worth whatever you can get the next guy to buy your bags for representing no obligations on anyone.
      - gridlockd 7y ago
        > The guarantee you can withdraw funds from a bank account does exist, it’s the FDIC. Like I said, I'm being pedantic. The FDIC doesn't give you a guarantee that you can withdraw any money from a bank account. It offers you insurance on the amount - up to 250,000$ - in the event of bank failure. > Tethers terms of service specifically state you’re buying funbucks / chuck-e-cheese tokens and they have no redemption value. A unit of value in your bank account represents a claim you have against the assets held in the bank backed by the weight of the US government. While I think the characterization of Tether as "Chuck-E-Cheese tokens" is fair, a claim beyond 250,000$ against a bankrupt bank may well be worth 0$, despite the (considerable!) "weight of the US government". In that event, I would probably prefer to have the Chuck-E-Cheese tokens instead. > A Tether is worth whatever you can get the next guy to buy your bags for representing no obligations on anyone. While there may be no legal obligation for Tether to exchange its tokens for actual dollars, there still is a reputational obligation to do so, if we're assuming that Tether is intended to run as a legitimate business (which is admittedly a big assumption). In that sense it's somewhat comparable to PayPal.
        arcticbull 7y ago
        Haha I think we’re on the same page.
    - b_tterc_p 7y ago
      From my perspective you’re just justifying tether’s failure to keep its promises by saying it’s not as bad as banks, but also saying it’s not a bank when it’s pointed out how it utterly fails as a bank replacement; when it’s then pointed out that tether doesn’t serve any real purpose and is just a temporary store of value before it eventually collapses, you go back to the fractional reserve comparison. It also feels like you’re jumping on a worn out bridge and telling me it hasn’t broke yet. Look! It only lost 30% of my money so far!
  - village-idiot 7y ago
    Tether works great in the actual goal: give shady exchanges access to USD without having to do all the KYC/AML it takes to get access to traditional financing.

gridlockd 7y ago

I never said that Crypto was any good or that fractional reserve was bad. It obviously works for the banks (until it doesn't), it seems to work for Tether as well. I'm just pointing out the parallels, which are far more striking than the differences. People here point out that fractional reserves is backed by loans and securities of (supposedly) equal value, or that it's all regulated and insured, but it wasn't always like that, it's not a strict requirement for the system to work.

b_tterc_p 7y ago
> but it wasn't always like that, Insurance and regulation is good for you as a consumer, and yeah that is new. But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Tether is not a bank. You have no guarantee of being allowed to exchange tether for dollars. It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything
- gridlockd 7y ago
  > But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks. Greater or equal face value, not actual value. Tether is basically making the same claim. > Tether is not a bank. I never said that Tether was a bank. > You have no guarantee of being allowed to exchange tether for dollars. To be pedantic, no such guarantee exists for bank deposits either. > It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything. Tether obviously does work, it's probably the most stable cryptocurrency out there, despite being run by sketchy people. You can exchange it for other cryptocurrencies and you can exchange cryptocurrencies for ordinary currencies. Absent proper access to ordinary banking, Tether has been a tool for exchanges to perform settlements in the hundreds of millions of dollars. The view that Tether "does nothing" is just uninformed.
  - arcticbull 7y ago
    The guarantee you can withdraw funds from a bank account does exist, it’s the FDIC. Tethers terms of service specifically state you’re buying funbucks / chuck-e-cheese tokens and they have no redemption value. A unit of value in your bank account represents a claim you have against the assets held in the bank backed by the weight of the US government. A Tether is worth whatever you can get the next guy to buy your bags for representing no obligations on anyone.
    - gridlockd 7y ago
      > The guarantee you can withdraw funds from a bank account does exist, it’s the FDIC. Like I said, I'm being pedantic. The FDIC doesn't give you a guarantee that you can withdraw any money from a bank account. It offers you insurance on the amount - up to 250,000$ - in the event of bank failure. > Tethers terms of service specifically state you’re buying funbucks / chuck-e-cheese tokens and they have no redemption value. A unit of value in your bank account represents a claim you have against the assets held in the bank backed by the weight of the US government. While I think the characterization of Tether as "Chuck-E-Cheese tokens" is fair, a claim beyond 250,000$ against a bankrupt bank may well be worth 0$, despite the (considerable!) "weight of the US government". In that event, I would probably prefer to have the Chuck-E-Cheese tokens instead. > A Tether is worth whatever you can get the next guy to buy your bags for representing no obligations on anyone. While there may be no legal obligation for Tether to exchange its tokens for actual dollars, there still is a reputational obligation to do so, if we're assuming that Tether is intended to run as a legitimate business (which is admittedly a big assumption). In that sense it's somewhat comparable to PayPal.
      - arcticbull 7y ago
        Haha I think we’re on the same page.
  - b_tterc_p 7y ago
    From my perspective you’re just justifying tether’s failure to keep its promises by saying it’s not as bad as banks, but also saying it’s not a bank when it’s pointed out how it utterly fails as a bank replacement; when it’s then pointed out that tether doesn’t serve any real purpose and is just a temporary store of value before it eventually collapses, you go back to the fractional reserve comparison. It also feels like you’re jumping on a worn out bridge and telling me it hasn’t broke yet. Look! It only lost 30% of my money so far!
- village-idiot 7y ago
  Tether works great in the actual goal: give shady exchanges access to USD without having to do all the KYC/AML it takes to get access to traditional financing.