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The promise of a stablecoin, in this case Tether, is that you can always change 1 USDT into $1. When people buy Tether, they pay then $1 and believe the promise

The promise of a stablecoin, in this case Tether, is that you can always change 1 USDT into $1. When people buy Tether, they pay then $1 and believe the promise that they will get $1 when they want to.

irjustin 4y ago
Right but how... where does physical money come into play? How can I or anyone get 1 physical dollar from selling USDT? All I've ever done is exchange some coin => USDT and vice versa. So if no one is actually asking for a physical dollar, why does it need to be backed by a physical dollar?
- FabHK 4y ago
  There are exchanges (such as FTX) where you can trade USDT/USD. The basic premise is that USDT/USD will always be around 1, because Tether (the organisation) stands ready (always) to give you a) 1 USDT for a USD, and b) 1 USD for a USDT. Any USDT/USD deviation from 1 thus gives rise to arbitrage opportunities. Tether can guarantee a) because they can issue an unlimited amount of USDT, so when you give them 1 USD, they can definitely give you 1 USDT, and b) because b1) they do not issue USDT without someone giving them the equivalent amount of USD, and b2) they keep those USD safe in cash, deposits, or equivalent, without price, credit, and FX risk. a) is undisputed. b) is the tricky part, both b1) - they could just issue USDT without having received USD. Who's checking? b2) - they could just take the USD they've received and buy a yacht, or put it in shares (price risk!) or commercial paper (credit risk!) or Chinese Yuan (FX risk!) or anything else. Who's checking?
- alexb_ 4y ago
  Idk, try paying your rent or buying lunch with Tether and see how that goes for you.
- LegitShady 4y ago
  90% of the value is allowong people to dump crypto to anltber asset that is crypto-osh but is "pegged" (the truth of which is more like a consensus of biased investors) to USD but doesnt trigger tax problems the dame way axtjally cashing out would. the backing by a physical dollar is whats supposed to peg it to make the fiction that holding $1m in tether is equivelant to holdong $1m.

irjustin 4y ago

Right but how... where does physical money come into play? How can I or anyone get 1 physical dollar from selling USDT? All I've ever done is exchange some coin => USDT and vice versa. So if no one is actually asking for a physical dollar, why does it need to be backed by a physical dollar?

FabHK 4y ago
There are exchanges (such as FTX) where you can trade USDT/USD. The basic premise is that USDT/USD will always be around 1, because Tether (the organisation) stands ready (always) to give you a) 1 USDT for a USD, and b) 1 USD for a USDT. Any USDT/USD deviation from 1 thus gives rise to arbitrage opportunities. Tether can guarantee a) because they can issue an unlimited amount of USDT, so when you give them 1 USD, they can definitely give you 1 USDT, and b) because b1) they do not issue USDT without someone giving them the equivalent amount of USD, and b2) they keep those USD safe in cash, deposits, or equivalent, without price, credit, and FX risk. a) is undisputed. b) is the tricky part, both b1) - they could just issue USDT without having received USD. Who's checking? b2) - they could just take the USD they've received and buy a yacht, or put it in shares (price risk!) or commercial paper (credit risk!) or Chinese Yuan (FX risk!) or anything else. Who's checking?
alexb_ 4y ago
Idk, try paying your rent or buying lunch with Tether and see how that goes for you.
LegitShady 4y ago
90% of the value is allowong people to dump crypto to anltber asset that is crypto-osh but is "pegged" (the truth of which is more like a consensus of biased investors) to USD but doesnt trigger tax problems the dame way axtjally cashing out would. the backing by a physical dollar is whats supposed to peg it to make the fiction that holding $1m in tether is equivelant to holdong $1m.