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Like I said, USDC is not dollars. If you're betting on Tether collapsing you sure as hell aren't going to take payment on that bet in USDC.

X6S1x6Okd1st 5y ago
They're different organizations, few people seriously think that USDC is going to 0.
- jkhdigital 5y ago
  And USDC can be converted back into actual dollars, on demand, not via a market transaction but literally a 1:1 conversion, through a variety of exchanges. You cannot say the same of Tether.
TacticalCoder 5y ago
USDC is backed by Coinbase (USDC are issued by Centre, a joint venture of Coinbase and Circle if I'm not mistaken). And Coinbase is an HN unicorn. Everybody at Coinbase is known, it's operated from the US. Coinbase ain't anywhere, not even remotely, like tether/bitfinex. There totally exists a world in which USDT goes to 0 while USDC is still worth 1 USD.
- endisneigh 5y ago
  So your logic is that big, known entities can’t go bankrupt or be scams?
  - jkhdigital 5y ago
    No, the logic is that it is less likely. Anyways, Coinbase allows on-demand conversion of USDC to USD so you really only have to hold the USDC (and Coinbase’s counterparty risk) for about a day for that process to complete. At some point that window might close but given that Coinbase is a publicly traded stock in the US and must report financials, there is quite a bit less risk compared to Tether.
    - marton78 5y ago
      Agreed, the risk that it goes bust by itself is less than that Tether goes bust. However, what we are taking about is repercussions of Tether going bust: how will it affect Coinbase if suddenly 69B are trying to get cashed out?
    - Asparagirl 5y ago
      Bernie Madoff was the chairman of the NASDAQ stock exchange. Being a known entity with cred doesn’t mean anything.
- NelsonMinar 5y ago
  It's like you never heard of the 2008/2009 financial crisis and how financial contagion works. Also Coinbase is not so pristine or pure. They were misleading customers with a gentler version of the same thing Tether did. "Coinbase Vowed Token’s All-Cash Backing; That’s Not True". https://www.bloomberg.com/news/articles/2021-08-11/coinbase-drops-promise-of-token-s-cash-backing-that-wasn-t-true https://www.bloomberg.com/news/articles/2021-08-11/coinbase-...
  - jkhdigital 5y ago
    Doesn’t matter that much whether it’s “100% backed” or whatever. The time it takes to (1) send USDC to Coinbase, (2) convert that USDC to USD, and (3) withdraw the USD to a bank account is short enough (less than a day by wire transfer) that the counterparty risk is pretty darn minimal.
    - jaggederest 5y ago
      Until it's not. Part 1 and 2 of your list require Coinbase's implicit consent and cooperation, and if there is a bank run on USDT, that cooperation may be in short supply. I would bet money that Coinbase has a button on their admin panel that says "Pause redemption of USDC" or equivalent, so you're just hoping they don't push that button in extremis. I find that silly, if what we're hypothetically betting on is that the crypto system will be in extremis.
aqme28 5y ago
Coinbase will swap your USDC for dollars. It's pretty painless.
- dboreham 5y ago
  Today they will, for a few people, for small amounts. The problem being discussed here is that they can't every day for arbitrary numbers of people and amounts, because they don't have enough USD on hand.
  - X6S1x6Okd1st 5y ago
    Tether USDT is being discussed in this article. USDC is a different organization that has many partners, Tether is one extremely sketchy organization.
    - carnitine 5y ago
      Yes, but no money market fund (which is how any centralised stable coin is structured) can face extremely high redemptions (which a collapse of Tether would likely trigger) without breaking the buck.
jaggederest 5y ago
It's like people didn't live through 2008 and discover the magic phrase "counterparty risk", or something. I guess that was 13 years ago, so maybe they didn't.
- htrp 5y ago
  Every crypto bro was like 10.....
jkhdigital 5y ago
…okay, so if I deposit USDC at Coinbase, I can instantly convert the entire balance into USD, and then withdraw that USD to my bank account. The statement that “USDC is not USD” means nothing to anyone who has access to instant and reliable conversion between the two.
- arlcode 5y ago
  How much USD does Coinbase hold at any given moment? What you are missing is "counterparty" risk in the sense that Coinbases coffers are not infinite and certainly not 100% cash. In the event of a bank run they would have to say "sorry we can't pay you right now...maybe later...maybe never...nobody knows". That would effectively kill any trust in USDC and it's value plummets through the floor.
- dustintrex 5y ago
  Are you serious? When there's a run on something, like Tether, by definition everybody is going to be trying to dump their crypto simultaneously and cash it out for dollars. And the entire problem here is that the system does not have $69B cold hard cash floating around, meaning that the vast majority of people will be left with nothing if (when) the crash happens.
- dboreham 5y ago
  "instant" really doesn't exist in cryptocurrencies.

X6S1x6Okd1st 5y ago

They're different organizations, few people seriously think that USDC is going to 0.

jkhdigital 5y ago
And USDC can be converted back into actual dollars, on demand, not via a market transaction but literally a 1:1 conversion, through a variety of exchanges. You cannot say the same of Tether.

TacticalCoder 5y ago

USDC is backed by Coinbase (USDC are issued by Centre, a joint venture of Coinbase and Circle if I'm not mistaken). And Coinbase is an HN unicorn. Everybody at Coinbase is known, it's operated from the US. Coinbase ain't anywhere, not even remotely, like tether/bitfinex. There totally exists a world in which USDT goes to 0 while USDC is still worth 1 USD.

endisneigh 5y ago
So your logic is that big, known entities can’t go bankrupt or be scams?
- jkhdigital 5y ago
  No, the logic is that it is less likely. Anyways, Coinbase allows on-demand conversion of USDC to USD so you really only have to hold the USDC (and Coinbase’s counterparty risk) for about a day for that process to complete. At some point that window might close but given that Coinbase is a publicly traded stock in the US and must report financials, there is quite a bit less risk compared to Tether.
  - marton78 5y ago
    Agreed, the risk that it goes bust by itself is less than that Tether goes bust. However, what we are taking about is repercussions of Tether going bust: how will it affect Coinbase if suddenly 69B are trying to get cashed out?
  - Asparagirl 5y ago
    Bernie Madoff was the chairman of the NASDAQ stock exchange. Being a known entity with cred doesn’t mean anything.
NelsonMinar 5y ago
It's like you never heard of the 2008/2009 financial crisis and how financial contagion works. Also Coinbase is not so pristine or pure. They were misleading customers with a gentler version of the same thing Tether did. "Coinbase Vowed Token’s All-Cash Backing; That’s Not True". https://www.bloomberg.com/news/articles/2021-08-11/coinbase-drops-promise-of-token-s-cash-backing-that-wasn-t-true https://www.bloomberg.com/news/articles/2021-08-11/coinbase-...
- jkhdigital 5y ago
  Doesn’t matter that much whether it’s “100% backed” or whatever. The time it takes to (1) send USDC to Coinbase, (2) convert that USDC to USD, and (3) withdraw the USD to a bank account is short enough (less than a day by wire transfer) that the counterparty risk is pretty darn minimal.
  - jaggederest 5y ago
    Until it's not. Part 1 and 2 of your list require Coinbase's implicit consent and cooperation, and if there is a bank run on USDT, that cooperation may be in short supply. I would bet money that Coinbase has a button on their admin panel that says "Pause redemption of USDC" or equivalent, so you're just hoping they don't push that button in extremis. I find that silly, if what we're hypothetically betting on is that the crypto system will be in extremis.

aqme28 5y ago

Coinbase will swap your USDC for dollars. It's pretty painless.

dboreham 5y ago
Today they will, for a few people, for small amounts. The problem being discussed here is that they can't every day for arbitrary numbers of people and amounts, because they don't have enough USD on hand.
- X6S1x6Okd1st 5y ago
  Tether USDT is being discussed in this article. USDC is a different organization that has many partners, Tether is one extremely sketchy organization.
  - carnitine 5y ago
    Yes, but no money market fund (which is how any centralised stable coin is structured) can face extremely high redemptions (which a collapse of Tether would likely trigger) without breaking the buck.

jaggederest 5y ago

It's like people didn't live through 2008 and discover the magic phrase "counterparty risk", or something. I guess that was 13 years ago, so maybe they didn't.

htrp 5y ago
Every crypto bro was like 10.....

jkhdigital 5y ago

…okay, so if I deposit USDC at Coinbase, I can instantly convert the entire balance into USD, and then withdraw that USD to my bank account. The statement that “USDC is not USD” means nothing to anyone who has access to instant and reliable conversion between the two.

arlcode 5y ago
How much USD does Coinbase hold at any given moment? What you are missing is "counterparty" risk in the sense that Coinbases coffers are not infinite and certainly not 100% cash. In the event of a bank run they would have to say "sorry we can't pay you right now...maybe later...maybe never...nobody knows". That would effectively kill any trust in USDC and it's value plummets through the floor.
dustintrex 5y ago
Are you serious? When there's a run on something, like Tether, by definition everybody is going to be trying to dump their crypto simultaneously and cash it out for dollars. And the entire problem here is that the system does not have $69B cold hard cash floating around, meaning that the vast majority of people will be left with nothing if (when) the crash happens.
dboreham 5y ago
"instant" really doesn't exist in cryptocurrencies.