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USDT has to be minted through the Tether Treasury. Exchanges cannot create USDT themselves. As I understand it, exchanges wire Tether large amounts of USD, an
by anon9001 5y ago
USDT has to be minted through the Tether Treasury. Exchanges cannot create USDT themselves.
As I understand it, exchanges wire Tether large amounts of USD, and then Tether mints and equal amount of USDT and sends it back to exchanges.
- grey-area 5y agoThat's the story, what probably happens is Tether just prints larger amounts of USDT and sends that to the exchanges in exchange for 'commercial paper' or some other nonsense. Exchanges keep quiet because the whole ecosystem is rife with fraud and it's in their interest for crypto to constantly go to the moon. Then one day it all blows up, the fraud is exposed, and everything goes to zero.
- anon9001 5y agoI don't understand. Why would Tether send USDT if they didn't receive a true deposit of an equal amount of USD? That doesn't seem like it would help Tether at all.
- maxerickson 5y agoYeah, the scam would be if they aren't holding the deposits in reserve.
- CTDOCodebases 5y agoWhat if the USDT was loaned to the exchanges with interest not purchased outright? That way Tether prints USDT out of thin air and makes an income from a sum of money they largely don’t hold while the exchanges get to hold the bulk of fiat that gets deposited. The “commercial paper” could just be these loans owed by exchanges via a seperate shell company.
- jkhdigital 5y agoThis is almost certainly what is happening. Tether is just a central bank for shady crypto exchanges.
- anon9001 5y agoOh, that does make sense.
- cinquemb 5y ago> What if the USD was loaned to the _x_ counterparty who has _y_ cashflows with interest not purchased outright? How existing eurodollar system works… yet people constantly whine about USDT… lol
- CTDOCodebases 5y agoMaybe thats because a government that issues a currency also provides goods and services to its citizens and guarantees to those holding the currency in its banks. Tether is essentially crypto with all the properties of fiat except the good ones. A tool that allows people to trade and avoid triggering tax events in certain jurisdictions because it is still technically a cryptocurrency.
- cinquemb 5y ago> Maybe thats because a government that issues a currency also provides goods and services to its citizens and guarantees to those holding the currency in its banks. Sure, _maybe_ for a US bank with another US bank within the US (you have to ignore collateral rehypothication, which in practice you really can't ignore…). But this is not how it works with an Indonesian bank dealing with a Chinese bank when they denominate their OTC bilateral transactions in USD… Unless you think that their respective governments are issuing USD and not just those banks swapping USD liabilities with one another, as well as unless you also think that those respective governments are guaranteeing USD deposits in those banks are fully backed by USD in a bank account somewhere and not just mostly USD denominated "assets" (future USD cashflow on those swapped liabilities)… > A tool that allows people to trade and avoid triggering tax events in certain jurisdictions Which is not even unique to Tether… who operates just like any other bank in eurodollar markets (and withdrawls from blockchains to tradfi fiat will trigger easily taxable events, $100k min with USDT). Like i said in another comment, i fully expect peoples minds to be blown (if they are currently clutching their pearls with USDT) with an on chain entity does exactly what tether does but has no physical offices nor employees because its a DAO…
- CTDOCodebases 5y ago
- jkhdigital 5y agoTether receives “commercial paper” i.e. an IOU from the exchange. Nobody in their right mind would give Tether real cash.
- onlyrealcuzzo 5y agoIf you're an exchange - why on earth would you give up your USD for USDT - which has never been redeemed for USD - and you can't use for anything except to BUY crypto - when your business is to SELL crypto?? It doesn't make any sense. What does make sense is the exchange wants to do business. No one wants to give the exchange USD. So they accept USDT. 1. Tether prints USDT then offers above market price on the exchange. 2. People put their crypto in the exchange to arbitrage the high/fake price. 3. Tether buys real bitcoins for fake printed money. 4. The exchange is happy with taking a small cut, even if it's just fake USDT money. 5. Now Tether is backed by Bitcoin - an asset they can guarantee appreciates. 6. The exchanges can use their USDT cut to buy crypto on their exchanges, too. This is risk free for Tether as long as they can keep the scheme going. It also makes complete sense to me why when Tether is printing vast sums - meme coins explode. It's easier for the exchanges to convert their USDT into meme coins. No one wants to hand over their bitcoins to a shady exchange for fake money. But they'll fork over their Shiba Inu coins for 1000x the price. Why not? Just look at the volumes on the exchanges that trade Tether and meme coins while Tether is printing money.
- jkhdigital 5y agoYes, this is the most likely scenario: exchanges issue IOUs to Tether, who prints tokens in return. Nothing in exchange for nothing. If Tether blows up then some exchanges will go down with them, but exchanges are replaceable so who cares.
- FireBeyond 5y agoExcept if you believe Tether, exchanges are sending billions of dollars a week to Tether. In 2019, Tether's lifetime holdings were $2.1B and even that was not fully backed, and they're now printing nearly $4B a week. At this rate, and recognizing that comparing to revenue is not a strict apples-to-apples, this would put them on track by the end of 2021 within the top 20 largest companies in the world, eclipsing Alphabet, AT&T, even Samsung and Saudi Aramco. How anyone can say that with a straight face beggars belief.