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I don't understand how you bodge a stable coin startup. Surely you just mint the tokens in exchange for dollars, and then put ~50% of the dollars in zero risk

I don't understand how you bodge a stable coin startup. Surely you just mint the tokens in exchange for dollars, and then put ~50% of the dollars in zero risk investments (some form of treasury bonds), and then take the 0.5-1% interest per year as your revenue. Tether currently has $81b marketcap so you could be making $400-800m per year doing basically nothing?

myle 4y ago
Greediness.
- draw_down 4y ago
likpok 4y ago
It’s hard to find a bank to take your money, since you’re something that rhymes with money laundering. Tether had a bunch of money stolen from them because the money launderer they used turned out to be a crook. It also takes a long time to get this going and there are moderately high costs to a minimally viable financial entity (reporting, compliance). A few years ago they only had a couple billion which makes it hard. And all of that sets aside the allegation that tether has been printing tethers it’s entire life — that it’s basically never been fully backed by dollars.
- mewse 4y ago
  > something that rhymes with money laundering Oo, sign me up for some "bunny conjuring", please! Alternately, "sunny wandering" and "honey squandering" both sound like they could be delightful ways to pass an afternoon. But I can tell you right now that "funny pondering" is hella overrated.
closedloop129 4y ago
A slightly better strategy: You do exactly this, but you don't proof it to anybody. Then there is constant doubt and the price can fall down a bit, e.g. to 0.97. Then, you buy back your stable coins and you make an additional nice profit. As long as there is no other more trusted stable coin demand will increase again and you will regain your market share.
pjc50 4y ago
> Surely you just mint the tokens in exchange for dollars Step 1: find someone willing to give you dollars in exchange for a token that's guaranteed to be worth something between 0 and 1 dollars. Step 2: find a bank willing to let you be a money transmitter for millions of anonymous pseudo-dollars whose owner you have no idea of, setting off every single money laundering alarm in the building.
- ckastner 4y ago
  > Step 2: find a bank willing to let you be a money transmitter for millions of anonymous pseudo-dollars whose owner you have no idea of, setting off every single money laundering alarm in the building. This was the biggest red flag behind Tether to me, where we are talking about not millions but billions of pseudo-dollars. The risk profile is beyond anything reasonable that a bank could or would accept. Tether minting $2bn in a week means $2bn cash inflows from mostly people that the bank probably doesn't know, all for what can only be a negligible fee.
  - pjc50 4y ago
    The billions of dollars of _backing_ should show up somewhere. https://twitter.com/dsquareddigest/status/1402914286285033478 https://twitter.com/dsquareddigest/status/140291428628503347... > again - who is on the CP desk at Tether? Who is their account manager at Goldman Sachs? Who do they talk to at, say, the GE corporate treasury? Commercial paper is a short term money market that has to be managed and rolled - you can't just buy and hold the bonds anonymously. Dan's argument is that the alleged size of their holding implies doing a lot of business, which should be being done by humans making phone calls to each other, and the gossip network doesn't seem to be able to locate any such people. Given that there are market participants whose job is e.g. "today I need to sell $100m of three month commercial debt to someone, time to start calling", one of them ought to know who's running the Tether business. That nobody can see them in the market is a red flag.
    - jiggawatts 4y ago
      From what I heard, Tether had invested heavily in "emerging markets" instead of the established US markets, which explains why nobody at Goldman Sachs has dealt with them.
raverbashing 4y ago
> I don't understand how you bodge a stable coin startup. You're assuming "bodging" wasn't part of the plan all along
ForHackernews 4y ago
Great, you've invented a boring old bank. That's not innovation. (Well, technically an unlicensed wildcat bank, but still) Literally the only new thing about blockchains is an ecologically destructive brute-force solution to the byzantine generals problem. However, it turns out nobody except CS students cares much about that, so they have to dress it up with cartoon apes and web3 buzzwords.
- vineyardmike 4y ago
  It’s also a bank with low Tx fees and fast Tx at any time of day, anywhere in the world. Something that is bafflingly still hard to find.
  - ForHackernews 4y ago
    Only in the USA. The UK Faster Payments Service transfers between any accounts for free in minutes: https://en.wikipedia.org/wiki/Faster_Payments https://en.wikipedia.org/wiki/Faster_Payments The US is actually building their own similar service (based directly on UK FPS), which will be available...eventually https://www.theclearinghouse.org/payment-systems/rtp/institution https://www.theclearinghouse.org/payment-systems/rtp/institu...
andy81 4y ago
Anyone making $500m/year legit could rug for $20bn+, so they walk away before that point. Tether have a great business model but seem to spend 90% of their time falsifying reserves instead. It certainly gives the impression they're planning on taking the capital rather than interest. They're already in breach of the NYAG agreement, with three+ more cases pending. It actually seems like a great project for e.g. Fidelity or Vanguard to set up a mutual fund that doesn't pay interest. With the name recognition it would be immediate #1 stablecoin assuming they offered the same level of audit scrutiny and reserves breakdown as their other products (i.e. 100x anything offered in the cryptocurrency space currently).

myle 4y ago

Greediness.

draw_down 4y ago

likpok 4y ago

It’s hard to find a bank to take your money, since you’re something that rhymes with money laundering. Tether had a bunch of money stolen from them because the money launderer they used turned out to be a crook. It also takes a long time to get this going and there are moderately high costs to a minimally viable financial entity (reporting, compliance). A few years ago they only had a couple billion which makes it hard. And all of that sets aside the allegation that tether has been printing tethers it’s entire life — that it’s basically never been fully backed by dollars.

mewse 4y ago
> something that rhymes with money laundering Oo, sign me up for some "bunny conjuring", please! Alternately, "sunny wandering" and "honey squandering" both sound like they could be delightful ways to pass an afternoon. But I can tell you right now that "funny pondering" is hella overrated.

closedloop129 4y ago

A slightly better strategy: You do exactly this, but you don't proof it to anybody. Then there is constant doubt and the price can fall down a bit, e.g. to 0.97. Then, you buy back your stable coins and you make an additional nice profit. As long as there is no other more trusted stable coin demand will increase again and you will regain your market share.

pjc50 4y ago

> Surely you just mint the tokens in exchange for dollars Step 1: find someone willing to give you dollars in exchange for a token that's guaranteed to be worth something between 0 and 1 dollars. Step 2: find a bank willing to let you be a money transmitter for millions of anonymous pseudo-dollars whose owner you have no idea of, setting off every single money laundering alarm in the building.

ckastner 4y ago
> Step 2: find a bank willing to let you be a money transmitter for millions of anonymous pseudo-dollars whose owner you have no idea of, setting off every single money laundering alarm in the building. This was the biggest red flag behind Tether to me, where we are talking about not millions but billions of pseudo-dollars. The risk profile is beyond anything reasonable that a bank could or would accept. Tether minting $2bn in a week means $2bn cash inflows from mostly people that the bank probably doesn't know, all for what can only be a negligible fee.
- pjc50 4y ago
  The billions of dollars of _backing_ should show up somewhere. https://twitter.com/dsquareddigest/status/1402914286285033478 https://twitter.com/dsquareddigest/status/140291428628503347... > again - who is on the CP desk at Tether? Who is their account manager at Goldman Sachs? Who do they talk to at, say, the GE corporate treasury? Commercial paper is a short term money market that has to be managed and rolled - you can't just buy and hold the bonds anonymously. Dan's argument is that the alleged size of their holding implies doing a lot of business, which should be being done by humans making phone calls to each other, and the gossip network doesn't seem to be able to locate any such people. Given that there are market participants whose job is e.g. "today I need to sell $100m of three month commercial debt to someone, time to start calling", one of them ought to know who's running the Tether business. That nobody can see them in the market is a red flag.
  - jiggawatts 4y ago
    From what I heard, Tether had invested heavily in "emerging markets" instead of the established US markets, which explains why nobody at Goldman Sachs has dealt with them.

raverbashing 4y ago

> I don't understand how you bodge a stable coin startup. You're assuming "bodging" wasn't part of the plan all along

ForHackernews 4y ago

Great, you've invented a boring old bank. That's not innovation. (Well, technically an unlicensed wildcat bank, but still) Literally the only new thing about blockchains is an ecologically destructive brute-force solution to the byzantine generals problem. However, it turns out nobody except CS students cares much about that, so they have to dress it up with cartoon apes and web3 buzzwords.

vineyardmike 4y ago
It’s also a bank with low Tx fees and fast Tx at any time of day, anywhere in the world. Something that is bafflingly still hard to find.
- ForHackernews 4y ago
  Only in the USA. The UK Faster Payments Service transfers between any accounts for free in minutes: https://en.wikipedia.org/wiki/Faster_Payments https://en.wikipedia.org/wiki/Faster_Payments The US is actually building their own similar service (based directly on UK FPS), which will be available...eventually https://www.theclearinghouse.org/payment-systems/rtp/institution https://www.theclearinghouse.org/payment-systems/rtp/institu...

andy81 4y ago

Anyone making $500m/year legit could rug for $20bn+, so they walk away before that point. Tether have a great business model but seem to spend 90% of their time falsifying reserves instead. It certainly gives the impression they're planning on taking the capital rather than interest. They're already in breach of the NYAG agreement, with three+ more cases pending. It actually seems like a great project for e.g. Fidelity or Vanguard to set up a mutual fund that doesn't pay interest. With the name recognition it would be immediate #1 stablecoin assuming they offered the same level of audit scrutiny and reserves breakdown as their other products (i.e. 100x anything offered in the cryptocurrency space currently).