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It’s an apt comparison for the US dollar before they abandoned fractional reserve banking in 1971. The US went bankrupt, having more foreign dollar holders requ

It’s an apt comparison for the US dollar before they abandoned fractional reserve banking in 1971. The US went bankrupt, having more foreign dollar holders requesting their gold than they had gold. But now the US dollar isn’t redeemable for anything, so they can’t go bankrupt.

anonymouse008 6y ago
So I guess Tether is ‘on that path’ — if it ever goes bankrupt it’s perfectly situated to knight itself crypto-inflation czar.
- alexmingoia 6y ago
  Sure, Tether may become worthless but I doubt Bitcoin will. Bitcoin gained a lot of value before Tether existed. Tether could disappear and Bitcoin may still continue to strengthen.
  - mckirk 6y ago
    The problem is that, if the allegations are correct, Tether was used to inflate Bitcoin's price just in time for the miners to stay profitable after the 'halving' of the mining reward. Should Tether be revealed as a fraud and the price collapse below that level again as a result, I'm not sure if there'd still be enough miners to keep the show going.
    - alexmingoia 6y ago
      The cost to mine adjusts to ensure blocks are mined. Bitcoin does not depend on a specific dollar value to ensure nodes add blocks. Nodes that add new blocks earn both new Bitcoin rewards (until ~21 million bitcoins are created) and transaction fees. If hash power drops from miners going out of business, then difficulty adjusts and competition for fees is reduced, reducing the cost of mining until there are miners again. When all Bitcoins are mined, nodes that add blocks are still compensated from transaction fees. They compete for transactions by offering lower fees, and in this way the transaction fee is determined by the market for Bitcoin transactions.
      - mckirk 6y ago
        You are correct, I hadn't taken the difficulty-adjustment into account. So that means a lower Bitcoin price does force miners out of the market, but after at most 14 days, the difficulty would adjust to stabilize at 10 minutes/block. That might still create a period of instability where the network lacks hashing power, but it's not nearly as bad as I thought. And since the same number of transactions would be achieved with less hashing power, I guess the environment would gladly see Tether collapse :P
      - garaetjjte 6y ago
        There's some speculation that bitcoin will be unstable without block rewards, though. https://www.cs.princeton.edu/~arvindn/publications/mining_CCS.pdf https://www.cs.princeton.edu/~arvindn/publications/mining_CC...
    - spiralx 6y ago
      Look at how much the price changes based on a small number of trades - sometimes even from a single large trade - to see how little money is really in the BTC ecosystem. The whole idea of the Tether fraud is to pump the price of BTC higher and higher in order to capture an ever smaller and smaller amount of new dollars entering the ecosystem.

anonymouse008 6y ago

So I guess Tether is ‘on that path’ — if it ever goes bankrupt it’s perfectly situated to knight itself crypto-inflation czar.

alexmingoia 6y ago
Sure, Tether may become worthless but I doubt Bitcoin will. Bitcoin gained a lot of value before Tether existed. Tether could disappear and Bitcoin may still continue to strengthen.
- mckirk 6y ago
  The problem is that, if the allegations are correct, Tether was used to inflate Bitcoin's price just in time for the miners to stay profitable after the 'halving' of the mining reward. Should Tether be revealed as a fraud and the price collapse below that level again as a result, I'm not sure if there'd still be enough miners to keep the show going.
  - alexmingoia 6y ago
    The cost to mine adjusts to ensure blocks are mined. Bitcoin does not depend on a specific dollar value to ensure nodes add blocks. Nodes that add new blocks earn both new Bitcoin rewards (until ~21 million bitcoins are created) and transaction fees. If hash power drops from miners going out of business, then difficulty adjusts and competition for fees is reduced, reducing the cost of mining until there are miners again. When all Bitcoins are mined, nodes that add blocks are still compensated from transaction fees. They compete for transactions by offering lower fees, and in this way the transaction fee is determined by the market for Bitcoin transactions.
    - mckirk 6y ago
      You are correct, I hadn't taken the difficulty-adjustment into account. So that means a lower Bitcoin price does force miners out of the market, but after at most 14 days, the difficulty would adjust to stabilize at 10 minutes/block. That might still create a period of instability where the network lacks hashing power, but it's not nearly as bad as I thought. And since the same number of transactions would be achieved with less hashing power, I guess the environment would gladly see Tether collapse :P
    - garaetjjte 6y ago
      There's some speculation that bitcoin will be unstable without block rewards, though. https://www.cs.princeton.edu/~arvindn/publications/mining_CCS.pdf https://www.cs.princeton.edu/~arvindn/publications/mining_CC...
  - spiralx 6y ago
    Look at how much the price changes based on a small number of trades - sometimes even from a single large trade - to see how little money is really in the BTC ecosystem. The whole idea of the Tether fraud is to pump the price of BTC higher and higher in order to capture an ever smaller and smaller amount of new dollars entering the ecosystem.