3 ms·

What seems fishy about it? Each tether is created when someone gives up a dollar. That’s why the conversion rate of dollars to tether is (almost always) 1. Ther

What seems fishy about it? Each tether is created when someone gives up a dollar. That’s why the conversion rate of dollars to tether is (almost always) 1. There is no mystery here. The only concern is that maybe they don’t have enough reserves to cover all the tether they created. They say they do, but there was some audit drama in recent years. Anyway, this and other comments here all point to how much the Hacker News community grossly misunderstands markets and economics.

CamelCaseName 6y ago
> Each tether is created when someone gives up a dollar. This is an opinion, not a fact.
trhway 6y ago
>Each tether is created when someone gives up a dollar. > The only concern is that maybe they don’t have enough reserves to cover all the tether they created. So, it sounds like selling 1 USDT for $1 the Tether people put, lets be optimists here, $0.1 into the bank as reserve and pocket $0.9. Or do i miss something here?
- spiralx 6y ago
  More that nobody buys any USDT with $ at all, and then Tether announces that there are two billion new USDT, which are then used to buy BTC. The trick is that lots of exchanges don't have any way to convert from crypto to real currency at all so use USDT as a stand-in, USDT's supposed backing 1:1 with $ means it's a stable place during crypto volatility, and it's next to impossible to actually get $ from directly exchanging USDT.
PragmaticPulp 6y ago
How do you reconcile this: > Each tether is created when someone gives up a dollar. With this: > The only concern is that maybe they don’t have enough reserves to cover all the tether they created If they're accepting dollars and creating Tethers in exchange, then they should have 1:1 reserves as they claim, right? The concern is that they're creating Tethers without having the cash to back it up, indirectly using those Tethers to prop up the price of BTC, and hoping that no one tries to withdraw Tethers beyond their ability to pay out. For comparison, consider that Bernie Madoff ran his ponzi scheme out of his bank account for almost two decades. He created imaginary "profits" on paper and paid out "returns" to investors who wanted to cash out. The scheme worked as long as no one tried to withdraw enough returns to take his bank account balance below $0. The fear is that Tether is a similar scheme to inject fake money into the Bitcoin ecosystem, which can't realistically be proved unless people try to withdraw more USDT than Tether has in their bank account, at which point the system implodes.
- im3w1l 6y ago
  The way I would reconcile it is: 1. Only create tether when someone gives up a dollar 2. Treat the "reserve" as your wallet, and use it to cover operational expenses or yachts or escorts or whatever
mekster 6y ago
> Anyway, this and other comments here all point to how much the Hacker News community grossly misunderstands markets and economics. And you think you're right that running a fractional reserve would not create any consequences if spotted?

CamelCaseName 6y ago

> Each tether is created when someone gives up a dollar. This is an opinion, not a fact.

trhway 6y ago

>Each tether is created when someone gives up a dollar. > The only concern is that maybe they don’t have enough reserves to cover all the tether they created. So, it sounds like selling 1 USDT for $1 the Tether people put, lets be optimists here, $0.1 into the bank as reserve and pocket $0.9. Or do i miss something here?

spiralx 6y ago
More that nobody buys any USDT with $ at all, and then Tether announces that there are two billion new USDT, which are then used to buy BTC. The trick is that lots of exchanges don't have any way to convert from crypto to real currency at all so use USDT as a stand-in, USDT's supposed backing 1:1 with $ means it's a stable place during crypto volatility, and it's next to impossible to actually get $ from directly exchanging USDT.

PragmaticPulp 6y ago

How do you reconcile this: > Each tether is created when someone gives up a dollar. With this: > The only concern is that maybe they don’t have enough reserves to cover all the tether they created If they're accepting dollars and creating Tethers in exchange, then they should have 1:1 reserves as they claim, right? The concern is that they're creating Tethers without having the cash to back it up, indirectly using those Tethers to prop up the price of BTC, and hoping that no one tries to withdraw Tethers beyond their ability to pay out. For comparison, consider that Bernie Madoff ran his ponzi scheme out of his bank account for almost two decades. He created imaginary "profits" on paper and paid out "returns" to investors who wanted to cash out. The scheme worked as long as no one tried to withdraw enough returns to take his bank account balance below $0. The fear is that Tether is a similar scheme to inject fake money into the Bitcoin ecosystem, which can't realistically be proved unless people try to withdraw more USDT than Tether has in their bank account, at which point the system implodes.

im3w1l 6y ago
The way I would reconcile it is: 1. Only create tether when someone gives up a dollar 2. Treat the "reserve" as your wallet, and use it to cover operational expenses or yachts or escorts or whatever

mekster 6y ago

> Anyway, this and other comments here all point to how much the Hacker News community grossly misunderstands markets and economics. And you think you're right that running a fractional reserve would not create any consequences if spotted?