9 ms·

Stablecoin Mechanics 2: Tether-Celsius

170 points by janandonly 4y ago

dragontamer 4y ago
Reminder: If you want a "legitimate stablecoin", get a savings account and/or money-market account and/or money market fund. Prime money market funds are kept at $1 as long as "all is well", while the bank responsible buys and sells dollar-based instruments (such as commercial paper and US Treasuries). Also the whole SEC regulation thing to ensure proper liquidity levels (30% must mature in a week), and other such guarantees. Savings accounts have additional requirements that allow for FDIC insurance. Money market is "risk" but not much risk (one fund dropped to 97-cents per dollar back in 2007 for example). So its possible to "break the buck" but very very rare. And US Laws/regulations changed in response to that 2007 failure. ------ Real life money markets are yielding about 2.95% right now. Anyone offering more than that is taking on risk and/or lying to you. That's what highly ranked commercial paper can get you today. In a few weeks, the Fed is expected to raise rates. We'll be at 3.75%, then 4.5% probably by the end of the year (?? Hard to tell the future though). So we're back into a realm where cash holdings can generate returns. Anyone seeking 10% to 20% returns from a "Stablecoin" is taking on some kind of risk. Much like Celsius, any one returning that much is lying about something (or trusting somebody else's money and that someone else is lying to them).
- ikeboy 4y ago
  Tether offers 0% returns, though. It's a great business for them, they can get riskless 3% yields and pay nothing on 50B+ in float.
- notch656a 4y ago
  Those accounts require KYC. >If you want a "legitimate stablecoin", get a savings account and/or money-market account and/or money market fund. In my state, I can walk into a bank and legally carry a concealed firearm without any ID whatsoever -- and yet not be allowed to open an account and put $20, even with a valid US passport (it doesn't show proof of address). Want to put a damper on stablecoins? End KYC/AML/FATCA. If you can be trusted to carry a gun in the bank you ought to be trusted to put $20 into a new account.
  - wcfields 4y ago
    So, then the main purpose of stablecoins is crime.
    - notch656a 4y ago
      Perhaps to you. You can confess your crimes here if you like. Where I live, in the United States, there is no requirement to conduct KYC to create a wallet that holds stablecoins and thus creating such a self-custody 'account' is not evidence of crime.
    - matheusmoreira 4y ago
      Anyone opposing the financial arm of total global surveillance must be a criminal, right? What do they have to hide, and all that.
  - Eisenstein 4y ago
    I fail to see the connection between carrying a concealed weapon and opening a bank account. How does one correlate to the other? If I am a licensed pyrotechnician and have legal access to high explosives, does that also mean I should be able to open a daycare with no additional checks or licenses? What am I missing?
    - notch656a 4y ago
      Since you conveniently removed the correlation so you could complain the correlation is missing, lets re-insert it. If I am a licensed pyrotechnician and am allowed to bring high explosives in the bank, does that also mean I should be able to deposit $20 into a new account at the bank? I would hope the answer is yes; if you can be trusted with high explosives in the bank you ought to be trusted to open the account and put $20 in.
      - Eisenstein 4y ago
        > I would hope the answer is yes Why? What does holding a pyrotechnician's license have to do with opening a bank account? Can you get a driver's license automatically as well when you are a pyrotechnician? The reason that bank accounts need proper identification is not something that I can comment on with authority, but whatever the reasoning is, it has nothing to do with whether you can carry and operate a firearm responsibly. The two have nothing to do with each other.
- smoovb 4y ago
  All great US-centric points! If you're living in Venezuela, Turkey, Argentina, Russia, Poland or other country with anywhere from 15 to 167% inflation, you might just be happy to have access to USD via easy to get stablecoins.
  - phreack 4y ago
    I'm glad you wrote this. It's eroding to constantly see financial advice that is impossible to apply in countries like these except for crypto and are mostly US/Europe centric. Sometimes, there simply is no other choice and that's crypto's killer use-case.
    - deleted 4y ago
      [deleted]
  - notch656a 4y ago
    If the argument it allows these people more stability / wealth to circumvent currency controls of their country, I don't see why the argument can't be extended to first / wealthy worlders as well. To note, I'm for deregulating these currency controls and deregulating the banking system, but giving 3rd worlders a pass while being harsher on those richer than us just seems like crab in a bucket mentality (not accusing you of that, but I've noticed HN exhibiting this duality).
  - democracy 4y ago
    what))) nobody in their right mind would buy magic internet coins when you can just buy USD/EUR at any bank branch with zero tax implications/risks.
    - ex3ndr 4y ago
      Is this a joke? Russia literally restricted foreign currency usage, you can't get USD with you anywhere and you can't transfer it overseas. And no-one is able to use banking obviously. I bet in other countries there are the same issues and many people are unbanked.
- jcfrei 4y ago
  Everything you said is correct, just wanna add that with inflation at around 8% you'll still be losing purchasing power with said money market funds.
  - technotony 4y ago
    Depends what you want to buy. Asset prices (property, stocks, bonds) are deflating right now, so your purchasing power is actually increasing in regards to those investments.
    - dharma1 4y ago
      Yep - asset price deflation, consumer price inflation. But there's only so many consumer goods you need to/want to buy. Things to buy with currencies experiencing inflation - hard assets with steady or increasing demand will probably do well over the next decade, but even those still have downside market risk as recession starts to bite, central banks keep tightening and all assets get repriced lower - likely lower than than current inflation. With cash the only downside risk is persistent inflation - holding cash is ok for some time, but not forever. The value will get eaten away with inflation over time. This is assuming you have available access to financial markets and US dollars. If you don't, I can see how stablecoins like USDC become attractive, perhaps even crypto like bitcoin and ethereum. Just stay away from the dodgy stuff - if it looks too good to be true, it probably is.
- joshfraser 4y ago
  As long as you're not born in the wrong country and wake up to find all your accounts have been frozen like the guy I met last night.
- yieldcrv 4y ago
  > Anyone seeking 10% to 20% returns from a "Stablecoin" is taking on some kind of risk. Acceptable to me. Consumer/investors just need to be more discerning and pragmatic. There is nothing wrong with risk. There is something wrong with obsessing over there being no risk till you get duped by a fantasy you wanted to hear. Fortunately, many crypto interest rates are really just shares of a revenue stream - usually transaction volume where some value is being extracted - and this revenue collection velocity is repackaged as "interest rates" because it is familiar to passive-income obsessed people. on top of that, the "rates" are juiced by the issuance of an additional new token. So that will remain attractive as a human and capital coordination mechanism.
yoquan 4y ago
For a deeper look into stablecoin mechanism and performance of them during May 2022 event, I would recommend [1] which I think is much more interesting for curious readers. [1] https://www.fdic.gov/analysis/cfr/bank-research-conference/annual-21st/papers/davernas-paper.pdf https://www.fdic.gov/analysis/cfr/bank-research-conference/a...
- junofan 4y ago
  The modeling of convenience yield looks way off. Some actors get way more utility; there’s an impact cost to purchasing large amounts; bounding utility by r makes no sense in real-world markets.
joshfraser 4y ago
Terrible start with that first sentence "Canonically a stablecoin is only issued in return for fiat currency." What about DAI that is backed by ETH and other volatile assets? What about OUSD, which is a yield-bearing stablecoin that is backed by other stablecoins? If they were borrowing stables against their BTC, they could deploy those into Anchor for 20% APY which was far higher than they could have gotten lending out BTC directly. It was still a terrible idea, but it's not accurate to say the collateral was not being used productively to generate yield.
m00dy 4y ago
Why Tether has not been collapsing during this bear market ?
- ac29 4y ago
  In the world of Crypto, Tether is actually one of the least sketchy players. Not because Tether is fully solvent, there are just a lot of straight up ponzi schemes and various other scams and frauds that have collapsed first. Tether having any % of actual dollars makes them more resilient to market pressure than schemes with zero real backing.
- csomar 4y ago
  People hate on Tether because they have a thing against crypto. Also these sort of headlines are click-bait and attract readers. What they don't know, as someone involved in this space, is that Tether is insanely profitable. Putting the legality of their business aside, Tether generates mad yields on their assets; which made them able to absorb lots of losses. It's profitable business and that's why they keep doing it. Also Tether is not completely the wild west as some people here assumes. They have lots of scrutiny from different US government institutions. The US could have shut them down overnight but they didn't. The US probably had its reasons for that.
- chowells 4y ago
  Because there hasn't been a run. They're definitely insolvent, but that only causes immediate failure when enough people try to withdraw at once.
  - dereg 4y ago
    “Because there hasn't been a run.” There were over $10b in redemptions over a couple days in may. “They’re definitely insolvent”. Source on the “definitely”? “but that only causes immediate failure when enough people try to withdraw at once” You mean illiquid, not insolvent.
    - JumpCrisscross 4y ago
delabay 4y ago
related: Tether, biggest stablecoin, cuts its commercial paper holdings to zero(https://www.cnbc.com/2022/10/13/tether-worlds-biggest-stablecoin-cuts-commercial-paper-to-zero.html https://www.cnbc.com/2022/10/13/tether-worlds-biggest-stable...) Tether now only holds US treasury assets.
- overtonwhy 4y ago
  "according to a blog post" they must be trying to get ahead of something pretty bad
- flooow 4y ago
  My understanding is that Tether have repeatedly refused to allow an audit of their holdings, therefore everyone assumes everything they say is a flat-out lie.
  - FireBeyond 4y ago
    They did once say they had an audit done, but would be unable to release it... "because it is in Mandarin." Like what the actual fuck.
    - jrochkind1 4y ago
      Too bad so few on the planet read Mandarin who might be able to understand it, right? Such a rare language...
      - FireBeyond 4y ago
        Some of them may even be able to speak both English and Mandarin! Like some of their employees for but one example…
        hef19898 4y ago
        And now imagine if those people would do a, hold on, translation of the audit report...
FireBeyond 4y ago
> can therefore prove a lot about ... questionable conduct by Tether Shocking! The company that lied about their holdings, that lied about providing audit results, that lied about their relationship with Bitfinex? That company is still acting questionably? I'm shocked.
- deleted 4y ago
  [deleted]
KaiserPro 4y ago
Can someone please explain the point of a stablecoin? from the outside it looks like an unregulated, impossibly opaque fractional reserve system. Its pegged to the dollar, or what ever. But none of them are resilient against a run, well, not and be profitable.
- CodeArtisan 4y ago
  IIRC you can use them to circumvent USA gambling laws.
- democracy 4y ago
  Because blockchain, bitcoin and cryptography! You just don't lose money with bitcoin. It's mathematically impossible. Even if you lose money with bitcoin - it's good for bitcoin. It's free currency. Democracy. Bank the unbanked.
- ex3ndr 4y ago
  Did you ever have issues sending money overseas? It is almost always painful and even sometimes money lost. Transact USDC/USDT is so much easier than anything else on global scale.
- seanhunter 4y ago
  Two use cases for businesses that have nothing to do with avoiding KYC or currency controls etc which other people have mentioned 1)say you are a business who wants to accept crypto but doesn't want the volatility associated with holding crypto 2)...or say you want to sell something for either dollars or crypto and don't want to have to reprice your product every time USD/ETH moves In either case offering a price in USDC for example would meet your needs. Your customers can pay in crypto but what you get is essentially the same as dollars (excluding transaction fees), so goods can be priced the same in crypto and cash and you're not exposed to crypto volatility on your holdings for the most part. So if you have a use case for businesses to price things in a stablecoin, then it follows that there are use cases for people to get stablecoin to use and therefore usecases for creating stablecoins, exchanging them for other crypto etc.
- vkou 4y ago
zamalek 4y ago
> We know Celsius borrowed about a billion dollars from Tether (and then defaulted) I wonder if all this money that these people keep "misplacing" is softening inflation at all.
- rossdavidh 4y ago
  My goodness I hope they are not burning enough money to do that, it would be a cure worse than the disease. But since not much crypto is used as actual currency, probably not. If people spend their fiat currency more freely because they think they are rich due to holding Tether or whatever, possibly so.
Defitio 4y ago
I buy a stable coin, the seller now has a dollar and I have a stable coin which has a value of nearly a dollar. Now the seller has real money and does something with it and either makes more real money or looses it. I get my dollar back or not. I mean don't get me wrong but even Ponzi had to work a little bit more for his thing?!
- sangnoir 4y ago
  I think the most common use-cases is to sell your crypto and get an almost-dollar without triggering a taxable event, since you're changing from one security for another.
  - Sevii 4y ago
    Trading from one security to another is a taxable event in the US.
    - peab 4y ago
      You can get a stable coin loan, while using your non stable crypto as collateral.
- PragmaticPulp 4y ago
  > I get my dollar back or not. This is the core issue. Note that you can't go to Tether and demand your $1 back as an individual. You would have to use an exchange and hope that you can trade 1 Tether for 1 dollar on an exchange where you can cash out. Note that the company that owns Tether also owns and exchange, which further opens the door for a lot of fraud and shenanigans as they co-mingle exchange deposits with their Tether reserves. It's possible for exchanges to run for a long time without actually having 100% of funds in reserve as long as the customers don't all withdraw their funds at the same time. In other words: A hypothetical fraudulent stable coin could "work" for a long time, until it suddenly doesn't work at all and the value plummets.
  - anonporridge 4y ago
deleted 4y ago
[deleted]

170 points by janandonly 4y ago

Reminder: If you want a "legitimate stablecoin", get a savings account and/or money-market account and/or money market fund. Prime money market funds are kept at $1 as long as "all is well", while the bank responsible buys and sells dollar-based instruments (such as commercial paper and US Treasuries). Also the whole SEC regulation thing to ensure proper liquidity levels (30% must mature in a week), and other such guarantees. Savings accounts have additional requirements that allow for FDIC insurance. Money market is "risk" but not much risk (one fund dropped to 97-cents per dollar back in 2007 for example). So its possible to "break the buck" but very very rare. And US Laws/regulations changed in response to that 2007 failure. ------ Real life money markets are yielding about 2.95% right now. Anyone offering more than that is taking on risk and/or lying to you. That's what highly ranked commercial paper can get you today. In a few weeks, the Fed is expected to raise rates. We'll be at 3.75%, then 4.5% probably by the end of the year (?? Hard to tell the future though). So we're back into a realm where cash holdings can generate returns. Anyone seeking 10% to 20% returns from a "Stablecoin" is taking on some kind of risk. Much like Celsius, any one returning that much is lying about something (or trusting somebody else's money and that someone else is lying to them).

ikeboy 4y ago
Tether offers 0% returns, though. It's a great business for them, they can get riskless 3% yields and pay nothing on 50B+ in float.
notch656a 4y ago
Those accounts require KYC. >If you want a "legitimate stablecoin", get a savings account and/or money-market account and/or money market fund. In my state, I can walk into a bank and legally carry a concealed firearm without any ID whatsoever -- and yet not be allowed to open an account and put $20, even with a valid US passport (it doesn't show proof of address). Want to put a damper on stablecoins? End KYC/AML/FATCA. If you can be trusted to carry a gun in the bank you ought to be trusted to put $20 into a new account.
- wcfields 4y ago
  So, then the main purpose of stablecoins is crime.
  - notch656a 4y ago
    Perhaps to you. You can confess your crimes here if you like. Where I live, in the United States, there is no requirement to conduct KYC to create a wallet that holds stablecoins and thus creating such a self-custody 'account' is not evidence of crime.
  - matheusmoreira 4y ago
    Anyone opposing the financial arm of total global surveillance must be a criminal, right? What do they have to hide, and all that.
- Eisenstein 4y ago
  I fail to see the connection between carrying a concealed weapon and opening a bank account. How does one correlate to the other? If I am a licensed pyrotechnician and have legal access to high explosives, does that also mean I should be able to open a daycare with no additional checks or licenses? What am I missing?
  - notch656a 4y ago
    Since you conveniently removed the correlation so you could complain the correlation is missing, lets re-insert it. If I am a licensed pyrotechnician and am allowed to bring high explosives in the bank, does that also mean I should be able to deposit $20 into a new account at the bank? I would hope the answer is yes; if you can be trusted with high explosives in the bank you ought to be trusted to open the account and put $20 in.
    - Eisenstein 4y ago
      > I would hope the answer is yes Why? What does holding a pyrotechnician's license have to do with opening a bank account? Can you get a driver's license automatically as well when you are a pyrotechnician? The reason that bank accounts need proper identification is not something that I can comment on with authority, but whatever the reasoning is, it has nothing to do with whether you can carry and operate a firearm responsibly. The two have nothing to do with each other.
smoovb 4y ago
All great US-centric points! If you're living in Venezuela, Turkey, Argentina, Russia, Poland or other country with anywhere from 15 to 167% inflation, you might just be happy to have access to USD via easy to get stablecoins.
- phreack 4y ago
  I'm glad you wrote this. It's eroding to constantly see financial advice that is impossible to apply in countries like these except for crypto and are mostly US/Europe centric. Sometimes, there simply is no other choice and that's crypto's killer use-case.
  - deleted 4y ago
    [deleted]
- notch656a 4y ago
  If the argument it allows these people more stability / wealth to circumvent currency controls of their country, I don't see why the argument can't be extended to first / wealthy worlders as well. To note, I'm for deregulating these currency controls and deregulating the banking system, but giving 3rd worlders a pass while being harsher on those richer than us just seems like crab in a bucket mentality (not accusing you of that, but I've noticed HN exhibiting this duality).
- democracy 4y ago
  what))) nobody in their right mind would buy magic internet coins when you can just buy USD/EUR at any bank branch with zero tax implications/risks.
  - ex3ndr 4y ago
    Is this a joke? Russia literally restricted foreign currency usage, you can't get USD with you anywhere and you can't transfer it overseas. And no-one is able to use banking obviously. I bet in other countries there are the same issues and many people are unbanked.
jcfrei 4y ago
Everything you said is correct, just wanna add that with inflation at around 8% you'll still be losing purchasing power with said money market funds.
- technotony 4y ago
  Depends what you want to buy. Asset prices (property, stocks, bonds) are deflating right now, so your purchasing power is actually increasing in regards to those investments.
  - dharma1 4y ago
    Yep - asset price deflation, consumer price inflation. But there's only so many consumer goods you need to/want to buy. Things to buy with currencies experiencing inflation - hard assets with steady or increasing demand will probably do well over the next decade, but even those still have downside market risk as recession starts to bite, central banks keep tightening and all assets get repriced lower - likely lower than than current inflation. With cash the only downside risk is persistent inflation - holding cash is ok for some time, but not forever. The value will get eaten away with inflation over time. This is assuming you have available access to financial markets and US dollars. If you don't, I can see how stablecoins like USDC become attractive, perhaps even crypto like bitcoin and ethereum. Just stay away from the dodgy stuff - if it looks too good to be true, it probably is.
joshfraser 4y ago
As long as you're not born in the wrong country and wake up to find all your accounts have been frozen like the guy I met last night.
yieldcrv 4y ago
> Anyone seeking 10% to 20% returns from a "Stablecoin" is taking on some kind of risk. Acceptable to me. Consumer/investors just need to be more discerning and pragmatic. There is nothing wrong with risk. There is something wrong with obsessing over there being no risk till you get duped by a fantasy you wanted to hear. Fortunately, many crypto interest rates are really just shares of a revenue stream - usually transaction volume where some value is being extracted - and this revenue collection velocity is repackaged as "interest rates" because it is familiar to passive-income obsessed people. on top of that, the "rates" are juiced by the issuance of an additional new token. So that will remain attractive as a human and capital coordination mechanism.

yoquan 4y ago

For a deeper look into stablecoin mechanism and performance of them during May 2022 event, I would recommend [1] which I think is much more interesting for curious readers. [1] https://www.fdic.gov/analysis/cfr/bank-research-conference/annual-21st/papers/davernas-paper.pdf https://www.fdic.gov/analysis/cfr/bank-research-conference/a...

junofan 4y ago
The modeling of convenience yield looks way off. Some actors get way more utility; there’s an impact cost to purchasing large amounts; bounding utility by r makes no sense in real-world markets.

joshfraser 4y ago

Terrible start with that first sentence "Canonically a stablecoin is only issued in return for fiat currency." What about DAI that is backed by ETH and other volatile assets? What about OUSD, which is a yield-bearing stablecoin that is backed by other stablecoins? If they were borrowing stables against their BTC, they could deploy those into Anchor for 20% APY which was far higher than they could have gotten lending out BTC directly. It was still a terrible idea, but it's not accurate to say the collateral was not being used productively to generate yield.

m00dy 4y ago

Why Tether has not been collapsing during this bear market ?

ac29 4y ago
In the world of Crypto, Tether is actually one of the least sketchy players. Not because Tether is fully solvent, there are just a lot of straight up ponzi schemes and various other scams and frauds that have collapsed first. Tether having any % of actual dollars makes them more resilient to market pressure than schemes with zero real backing.
csomar 4y ago
People hate on Tether because they have a thing against crypto. Also these sort of headlines are click-bait and attract readers. What they don't know, as someone involved in this space, is that Tether is insanely profitable. Putting the legality of their business aside, Tether generates mad yields on their assets; which made them able to absorb lots of losses. It's profitable business and that's why they keep doing it. Also Tether is not completely the wild west as some people here assumes. They have lots of scrutiny from different US government institutions. The US could have shut them down overnight but they didn't. The US probably had its reasons for that.
chowells 4y ago
Because there hasn't been a run. They're definitely insolvent, but that only causes immediate failure when enough people try to withdraw at once.
- dereg 4y ago
  “Because there hasn't been a run.” There were over $10b in redemptions over a couple days in may. “They’re definitely insolvent”. Source on the “definitely”? “but that only causes immediate failure when enough people try to withdraw at once” You mean illiquid, not insolvent.
  - JumpCrisscross 4y ago

delabay 4y ago

related: Tether, biggest stablecoin, cuts its commercial paper holdings to zero(https://www.cnbc.com/2022/10/13/tether-worlds-biggest-stablecoin-cuts-commercial-paper-to-zero.html https://www.cnbc.com/2022/10/13/tether-worlds-biggest-stable...) Tether now only holds US treasury assets.

overtonwhy 4y ago
"according to a blog post" they must be trying to get ahead of something pretty bad
flooow 4y ago
My understanding is that Tether have repeatedly refused to allow an audit of their holdings, therefore everyone assumes everything they say is a flat-out lie.
- FireBeyond 4y ago
  They did once say they had an audit done, but would be unable to release it... "because it is in Mandarin." Like what the actual fuck.
  - jrochkind1 4y ago
    Too bad so few on the planet read Mandarin who might be able to understand it, right? Such a rare language...
    - FireBeyond 4y ago
      Some of them may even be able to speak both English and Mandarin! Like some of their employees for but one example…
      - hef19898 4y ago
        And now imagine if those people would do a, hold on, translation of the audit report...

FireBeyond 4y ago

> can therefore prove a lot about ... questionable conduct by Tether Shocking! The company that lied about their holdings, that lied about providing audit results, that lied about their relationship with Bitfinex? That company is still acting questionably? I'm shocked.

deleted 4y ago
[deleted]

KaiserPro 4y ago

Can someone please explain the point of a stablecoin? from the outside it looks like an unregulated, impossibly opaque fractional reserve system. Its pegged to the dollar, or what ever. But none of them are resilient against a run, well, not and be profitable.

CodeArtisan 4y ago
IIRC you can use them to circumvent USA gambling laws.
democracy 4y ago
Because blockchain, bitcoin and cryptography! You just don't lose money with bitcoin. It's mathematically impossible. Even if you lose money with bitcoin - it's good for bitcoin. It's free currency. Democracy. Bank the unbanked.
ex3ndr 4y ago
Did you ever have issues sending money overseas? It is almost always painful and even sometimes money lost. Transact USDC/USDT is so much easier than anything else on global scale.
seanhunter 4y ago
Two use cases for businesses that have nothing to do with avoiding KYC or currency controls etc which other people have mentioned 1)say you are a business who wants to accept crypto but doesn't want the volatility associated with holding crypto 2)...or say you want to sell something for either dollars or crypto and don't want to have to reprice your product every time USD/ETH moves In either case offering a price in USDC for example would meet your needs. Your customers can pay in crypto but what you get is essentially the same as dollars (excluding transaction fees), so goods can be priced the same in crypto and cash and you're not exposed to crypto volatility on your holdings for the most part. So if you have a use case for businesses to price things in a stablecoin, then it follows that there are use cases for people to get stablecoin to use and therefore usecases for creating stablecoins, exchanging them for other crypto etc.
vkou 4y ago

zamalek 4y ago

> We know Celsius borrowed about a billion dollars from Tether (and then defaulted) I wonder if all this money that these people keep "misplacing" is softening inflation at all.

rossdavidh 4y ago
My goodness I hope they are not burning enough money to do that, it would be a cure worse than the disease. But since not much crypto is used as actual currency, probably not. If people spend their fiat currency more freely because they think they are rich due to holding Tether or whatever, possibly so.

Defitio 4y ago

I buy a stable coin, the seller now has a dollar and I have a stable coin which has a value of nearly a dollar. Now the seller has real money and does something with it and either makes more real money or looses it. I get my dollar back or not. I mean don't get me wrong but even Ponzi had to work a little bit more for his thing?!

sangnoir 4y ago
I think the most common use-cases is to sell your crypto and get an almost-dollar without triggering a taxable event, since you're changing from one security for another.
- Sevii 4y ago
  Trading from one security to another is a taxable event in the US.
  - peab 4y ago
    You can get a stable coin loan, while using your non stable crypto as collateral.
PragmaticPulp 4y ago
> I get my dollar back or not. This is the core issue. Note that you can't go to Tether and demand your $1 back as an individual. You would have to use an exchange and hope that you can trade 1 Tether for 1 dollar on an exchange where you can cash out. Note that the company that owns Tether also owns and exchange, which further opens the door for a lot of fraud and shenanigans as they co-mingle exchange deposits with their Tether reserves. It's possible for exchanges to run for a long time without actually having 100% of funds in reserve as long as the customers don't all withdraw their funds at the same time. In other words: A hypothetical fraudulent stable coin could "work" for a long time, until it suddenly doesn't work at all and the value plummets.
- anonporridge 4y ago

deleted 4y ago

[deleted]