3 ms·

It is said about all fiats, of which tether is one. And the confidence seems to be at the endpoint.

by insert_coin 5y ago

munk-a 5y ago
I don't know if the confidence actually is at an endpoint, it depends if this article and similar sentiments get widespread acceptance. If people disregard this article as irrelevant because we're all just amicably agreeing that one USDT is still worth one USD then there isn't a problem (today - the potential for a problem doesn't go away). Economics is like 90% whatever people say it is, and if we say this isn't a problem then it isn't - if we say it is that's when people start accepting USDT at fractional values of what USD is and then USDT will quickly hit hyper inflation and become worthless... down to a limit! And that limit is the reserve they have, which is why a 100% guaranteed currency backing for a coin like this is so critical since, if users start refusing to accept coins at 80% of USD value then middle men will step in to happily execute the transaction at full value in a different medium and the only result will be that the consumers that refuse to accept the coin at stated value will lose their ability to compete with consumers that do accept that value due to losses from arbitrage. If confidence is done and the backing isn't there then we can expect to see a quick inflation - if the confidence isn't done or the backing is there then we're safe. But if we're relying on confidence alone then at some point that rug will be pulled from under our feet - and this effect will be accelerated if the company loses confidence dramatically fast (i.e. by being exposed as fraudulent). Also, whenever this happens it's not unlikely that the fuse will be partially lit by some people that are hedging bets against USDT by having, for instance, outstanding options to buy as part of an ongoing non-instantaneous transaction.

3 ms·

It is said about all fiats, of which tether is one. And the confidence seems to be at the endpoint.

by insert_coin 5y ago

It is said about all fiats, of which tether is one. And the confidence seems to be at the endpoint.

munk-a 5y ago
I don't know if the confidence actually is at an endpoint, it depends if this article and similar sentiments get widespread acceptance. If people disregard this article as irrelevant because we're all just amicably agreeing that one USDT is still worth one USD then there isn't a problem (today - the potential for a problem doesn't go away). Economics is like 90% whatever people say it is, and if we say this isn't a problem then it isn't - if we say it is that's when people start accepting USDT at fractional values of what USD is and then USDT will quickly hit hyper inflation and become worthless... down to a limit! And that limit is the reserve they have, which is why a 100% guaranteed currency backing for a coin like this is so critical since, if users start refusing to accept coins at 80% of USD value then middle men will step in to happily execute the transaction at full value in a different medium and the only result will be that the consumers that refuse to accept the coin at stated value will lose their ability to compete with consumers that do accept that value due to losses from arbitrage. If confidence is done and the backing isn't there then we can expect to see a quick inflation - if the confidence isn't done or the backing is there then we're safe. But if we're relying on confidence alone then at some point that rug will be pulled from under our feet - and this effect will be accelerated if the company loses confidence dramatically fast (i.e. by being exposed as fraudulent). Also, whenever this happens it's not unlikely that the fuse will be partially lit by some people that are hedging bets against USDT by having, for instance, outstanding options to buy as part of an ongoing non-instantaneous transaction.