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This suggests that there is no genuine demand for stablecoins That just suggests that "audited" and "100% reserve" are not the most important features to peopl

by lacker 7y ago

This suggests that there is no genuine demand for stablecoins That just suggests that "audited" and "100% reserve" are not the most important features to people using stablecoins. What is more important is having a deep market on Binance, which is where most BTC <-> stablecoin trading happens. Despite these terrible news articles, which are indeed reporting accurately that there are terrible flaws in Tether, you can still trade Tether for $1 right now. A hundred dollars worth of Tether is still more valuable than a hundred dollar payment made via a credit card.

teej 7y ago
> What is more important is having a deep market on Binance It sounds like you are arguing that being popular is what matters more to being popular
- hanniabu 7y ago
  Yes, and being where the users are being available for users to use it without performing KYC.
- deleted 7y ago
  [deleted]
- lacker 7y ago
  Well, yes. There are huge network effects for stablecoins. Let's go for a more specific example. Let's say that you hold one bitcoin on Binance, and you believe the price of bitcoin will go down today. You would like to exchange your bitcoin for dollars, and then tomorrow, exchange your dollars back into bitcoin. Ideally you would just use plain old US dollars. But since it's crypto, you can't. What you can have is a stablecoin. So which stablecoin should you use? There are two costs to using a stablecoin. Cost #1 is that when you exchange, you won't get the perfect rate. You'll have to pay some fee, and the precise exchange rate you get will depend on the liquidity of the market. Cost #2 is the chance that this stablecoin collapses in value while you're using it. For Tether, in my opinion cost #2 is high. All these dubious stories about the underpinning of Tether are true. That means the risk it collapses tomorrow are higher than the risks that other stablecoins collapse tomorrow. However, cost #1 is probably lower for Tether than it is for any other stablecoin. Because there are more traders operating in Tether, you get a better exchange rate. This is why Tether isn't just hype, it is providing real value to people through being the most popular stablecoin. Would we be better off in a world where the most popular stablecoin also had a solid financial backing? Yeah, I think so. But that isn't the same as saying that Tether has no utility today.
  - sjy 7y ago
    > Ideally you would just use plain old US dollars. But since it's crypto, you can't. Because unbanked cryptocurrency exchanges are essentially in the business of money laundering. A service that facilitates illegal transactions has obvious value to any libertarian or criminal, but I’m not sure that counts as “providing real value to people.”
  - vkou 7y ago
    Why not just use a reputable exchange, which actually lets you exchange your BTC into real dollars, as opposed to funny money dollars, like Coinbase? I understand why a money launderer wants to trade on an exchange which does not let them withdraw USD. But why would a normie (who, at some point, wants USD) want to do so?
    - lacker 7y ago
      This specific example is why you wouldn't want to exchange your BTC into real dollars. The user doesn't want to withdraw fiat dollars, they just want to exchange Bitcoins into a dollar proxy, then exchange back. Sometimes the cost of a less-liquid exchange is higher than the cost of using stablecoins instead of dollars.
JumpCrisscross 7y ago
> you can still trade Tether for $1 right now Aren't stories [1] about withdrawals being delayed or unreasonably conditioned abundant? [1] https://tether.to/announcement/ https://tether.to/announcement/
- lacker 7y ago
  That's just for interactions with the company behind Tether itself. That isn't how most people exchange their USDT. The most common way to get rid of USDT is to exchange it on Binance, where the market for Tether is very liquid, and the going rate as I write this is right around one dollar. Plenty of other exchanges besides Binance too. See: https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/
  - JumpCrisscross 7y ago
    > The most common way to get rid of USDT is to exchange it on Binance Exchange it for what? If you exchange it for a record entry for anything (whether dollars or Bitcoin) in a Binance (or affiliate's) account, you're exchanging one IOU for another. Given most USDT trades on Binance and its affiliated entities, this loops right back to the withdrawal problem. A "stable" coin that cannot be readily redeemed and is not fully reserved is a Ponzi scheme with extra steps.
    - ChainOfFools 7y ago
      > A "stable" coin that cannot be readily redeemed and is not fully reserved is a Ponzi scheme with extra steps. Extra steps, and the delay they introduce, may be all a ponzi needs to sustain itself sufficiently to permit quiet exits. That the market will eventually be consistent is, alas, not the current manipulators' problem.
    - lacker 7y ago
      USDT is most commonly exchanged for Bitcoin. You can withdraw the Bitcoin from Binance to your own wallet, so you aren't really "exchanging one IOU for another". There are plenty of valid criticisms of USDT. Saying that it is hard to exchange 1 USDT for a dollar's worth of Bitcoin that you control is not one of them.
jki275 7y ago
Well, clearly Tether will take your $1 and issue you USDT. The problem is that for the most part, you cannot get that dollar back for it. 100 units of USDT is worth $100 only if you can get someone to trade it to for that. For the moment, you actually cannot -- you have to trade it through BTC or one of the other crypto coins that are actually paired with USD first.
- lacker 7y ago
  You do have to trade it on an exchange to get the value, I just mean that right now one USDT is trading for right around $1. https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/
  - jki275 7y ago
    You can't though. That's the problem. Nobody will actually exchange USDT for USD 1-1 unless something has changed very recently.
    - jwinterm 7y ago
      This market has been operational for a couple years now I think: https://trade.kraken.com/markets/kraken/usdt/usd https://trade.kraken.com/markets/kraken/usdt/usd That is a San Francisco based exchange with USD deposits and withdrawals. There's been a couple times where tether has been under a dollar during times of high uncertainty (and I think relatively low liquidity of this trading pair), but generally you can trade tether for USD and withdraw here.
      - jki275 7y ago
        Interesting to see that it exists -- I know there was a great deal of controversy over the fact that Tether would not redeem them ever. The order book there is awfully thin for an asset worth the billions USDT is supposed to be though.
    - lacker 7y ago
api 7y ago
Maybe the most important feature is related to Tether's uses as a criminal money laundering vehicle? Maybe Tether's sketchiness is a feature, not a bug, at least to its users.

by lacker 7y ago

teej 7y ago

> What is more important is having a deep market on Binance It sounds like you are arguing that being popular is what matters more to being popular

hanniabu 7y ago
Yes, and being where the users are being available for users to use it without performing KYC.
deleted 7y ago
[deleted]
lacker 7y ago
Well, yes. There are huge network effects for stablecoins. Let's go for a more specific example. Let's say that you hold one bitcoin on Binance, and you believe the price of bitcoin will go down today. You would like to exchange your bitcoin for dollars, and then tomorrow, exchange your dollars back into bitcoin. Ideally you would just use plain old US dollars. But since it's crypto, you can't. What you can have is a stablecoin. So which stablecoin should you use? There are two costs to using a stablecoin. Cost #1 is that when you exchange, you won't get the perfect rate. You'll have to pay some fee, and the precise exchange rate you get will depend on the liquidity of the market. Cost #2 is the chance that this stablecoin collapses in value while you're using it. For Tether, in my opinion cost #2 is high. All these dubious stories about the underpinning of Tether are true. That means the risk it collapses tomorrow are higher than the risks that other stablecoins collapse tomorrow. However, cost #1 is probably lower for Tether than it is for any other stablecoin. Because there are more traders operating in Tether, you get a better exchange rate. This is why Tether isn't just hype, it is providing real value to people through being the most popular stablecoin. Would we be better off in a world where the most popular stablecoin also had a solid financial backing? Yeah, I think so. But that isn't the same as saying that Tether has no utility today.
- sjy 7y ago
  > Ideally you would just use plain old US dollars. But since it's crypto, you can't. Because unbanked cryptocurrency exchanges are essentially in the business of money laundering. A service that facilitates illegal transactions has obvious value to any libertarian or criminal, but I’m not sure that counts as “providing real value to people.”
- vkou 7y ago
  Why not just use a reputable exchange, which actually lets you exchange your BTC into real dollars, as opposed to funny money dollars, like Coinbase? I understand why a money launderer wants to trade on an exchange which does not let them withdraw USD. But why would a normie (who, at some point, wants USD) want to do so?
  - lacker 7y ago
    This specific example is why you wouldn't want to exchange your BTC into real dollars. The user doesn't want to withdraw fiat dollars, they just want to exchange Bitcoins into a dollar proxy, then exchange back. Sometimes the cost of a less-liquid exchange is higher than the cost of using stablecoins instead of dollars.

JumpCrisscross 7y ago

> you can still trade Tether for $1 right now Aren't stories [1] about withdrawals being delayed or unreasonably conditioned abundant? [1] https://tether.to/announcement/ https://tether.to/announcement/

lacker 7y ago
That's just for interactions with the company behind Tether itself. That isn't how most people exchange their USDT. The most common way to get rid of USDT is to exchange it on Binance, where the market for Tether is very liquid, and the going rate as I write this is right around one dollar. Plenty of other exchanges besides Binance too. See: https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/
- JumpCrisscross 7y ago
  > The most common way to get rid of USDT is to exchange it on Binance Exchange it for what? If you exchange it for a record entry for anything (whether dollars or Bitcoin) in a Binance (or affiliate's) account, you're exchanging one IOU for another. Given most USDT trades on Binance and its affiliated entities, this loops right back to the withdrawal problem. A "stable" coin that cannot be readily redeemed and is not fully reserved is a Ponzi scheme with extra steps.
  - ChainOfFools 7y ago
    > A "stable" coin that cannot be readily redeemed and is not fully reserved is a Ponzi scheme with extra steps. Extra steps, and the delay they introduce, may be all a ponzi needs to sustain itself sufficiently to permit quiet exits. That the market will eventually be consistent is, alas, not the current manipulators' problem.
  - lacker 7y ago
    USDT is most commonly exchanged for Bitcoin. You can withdraw the Bitcoin from Binance to your own wallet, so you aren't really "exchanging one IOU for another". There are plenty of valid criticisms of USDT. Saying that it is hard to exchange 1 USDT for a dollar's worth of Bitcoin that you control is not one of them.

jki275 7y ago

Well, clearly Tether will take your $1 and issue you USDT. The problem is that for the most part, you cannot get that dollar back for it. 100 units of USDT is worth $100 only if you can get someone to trade it to for that. For the moment, you actually cannot -- you have to trade it through BTC or one of the other crypto coins that are actually paired with USD first.

lacker 7y ago
You do have to trade it on an exchange to get the value, I just mean that right now one USDT is trading for right around $1. https://coinmarketcap.com/currencies/tether/ https://coinmarketcap.com/currencies/tether/
- jki275 7y ago
  You can't though. That's the problem. Nobody will actually exchange USDT for USD 1-1 unless something has changed very recently.
  - jwinterm 7y ago
    This market has been operational for a couple years now I think: https://trade.kraken.com/markets/kraken/usdt/usd https://trade.kraken.com/markets/kraken/usdt/usd That is a San Francisco based exchange with USD deposits and withdrawals. There's been a couple times where tether has been under a dollar during times of high uncertainty (and I think relatively low liquidity of this trading pair), but generally you can trade tether for USD and withdraw here.
    - jki275 7y ago
      Interesting to see that it exists -- I know there was a great deal of controversy over the fact that Tether would not redeem them ever. The order book there is awfully thin for an asset worth the billions USDT is supposed to be though.
  - lacker 7y ago

api 7y ago

Maybe the most important feature is related to Tether's uses as a criminal money laundering vehicle? Maybe Tether's sketchiness is a feature, not a bug, at least to its users.