6 ms·

That might explain why it has not crashed completely yet. As a rule of thumb, never trust service providers that should, by all common sense, fail, but miraculo

That might explain why it has not crashed completely yet. As a rule of thumb, never trust service providers that should, by all common sense, fail, but miraculously don't.

codebolt 3y ago
For me the test is: What unethical action would optimize profits for company X? And what is the control mechanism that prevents them from doing so? If the answer to question 2 is None, there's a good possibility the answer to 1 is already happening.
bilbo0s 3y ago
The thing is, a lot of people just assume they must simply be doing good business. The continued existence of the economically impossible entity is, to many, proof not only of its solvency, but also of it's quality as a financial partner. Most people don't look any further than that. Obviously, a large number do look further than that, and many, many people would never take the bait. But don't underestimate the number of people, even well resourced people, who would fall for this sort of scheme.
- hanniabu 3y ago
  You're acting like people just have blind faith, ignoring they undergo routine audits
  - agentgumshoe 3y ago
    Tether has not completed a single audit yet
    - hanniabu 3y ago
      https://tether.to/en/transparency/#reports https://tether.to/en/transparency/#reports
      - SpicyLemonZest 3y ago
        These reports are not full audits, although Tether would certainly like us to think they are! If you click into one of the reports, the auditors list the steps they took, and they're focused almost entirely on verifying the existence of Tether's self-reported assets on the report date. They would not, for example, have uncovered an FTX-style "hidden, poorly internally labeled fiat@ account" by following these procedures. You'll also note that they're following the "International Standard on Assurance Engagements 300 (Revised) ~ Assurance Engagements Other than Audits or Reviews of Historical Financial Information", which heavily suggests that this is not an audit and they did not review historical financial information.
      - deleted 3y ago
        [deleted]
      - agentgumshoe 3y ago
        It's not an audit. Attestations mean they move a bunch of funds into the account, get the auditor to check that indeed that money was there at that point of time, then move it away again. Every legitimate auditor they've engaged has quit. Also, the 'auditors' they are approaching are more and more into the 'not quite competent' end of the line if you look into them.
kranke155 3y ago
This totally explains it. Tether should have been on the same court as FTX.
- Facemelters 3y ago
  ?
  - redcobra762 3y ago
    Crypto bad, can’t you see? No need to justify claims when you’re bashing The Bad Thing.
    - kranke155 3y ago
      Tether is a well known scam. We have no idea that they have any backing for the amount of tokens they’ve issued and we have significant indications they don’t.
      - Jerrrry 3y ago
        It may be insolvent, and that may mean "scam" to you, but those words are different. Even if they claim full backing and don't, they have lied. Whether that is substantially and materially a sole qualifier in determining them a fraud and scam, is for the legal system, not an assortment of most vocal persons, to decide.
        kranke155 3y ago
        An insolvent pseudo stablecoin that swears to be solvent (pinky finger) is the very definition of a scam.
        redcobra762 3y ago
        You beg the question by claiming it’s insolvent and calling it a “pseudo stablecoin”. So no, it’s not the “very definition” of a scam.
scaredginger 3y ago
Can you explain this 'common sense'? I was under the impression that Tether was in the business of taking USD (with the promise of returning it) and earning interest on that USD without paying any interest on it. If that's true, it sounds like a dream business to me
- wmf 3y ago
  That's what business they say they're in, but in reality they do things like (A) get nearly a billion dollars seized by the US for money laundering, (B) invest in risky Chinese corporate bonds, and (C) issue USDT loans backed by volatile crypto. They're usually solvent but they have been insolvent at various points in their history.
- fsmv 3y ago
  The common sense is that they would make a lot more money by doing fractional reserve (leaving them open to a bank run collapse) and there is nothing really to stop them from doing that.
  - mteam88 3y ago
    Tether makes money from interest on the funds that they do actually have. Maximizing the amount of money that they hold would actually increase the amount of profit they make. They have no incentive (and a pretty strong disincentive) to be insolvent.
  - redcobra762 3y ago
    As with most common sense, that’s completely wrong. Deceptively operating at a fractional reserve would eventually end with everyone involved losing everything and spending large portions of their remaining lives in prison. Common sense is rarely either.
    - ForHackernews 3y ago
      Certainly nobody involved in cryptocurrency has ever been known to take dumb risks, lose everything, and end up rotting in prison.
roenxi 3y ago
The difference between Tether and a standard bank actually seems pretty small to me. Tether doesn't look like they have enough money to pay back people holding Tether tokens. Banks don't have enough money to pay back depositors. Both muddle along fine. Theoretically the banks have lower risk due to regulatory actions. We've had enough financial crisises now that a reasonable person could discount that. Given the levels of debt and spring-loaded derivatives, any institution is at risk these days. We can imagine a history book entry saying "XYZ couldn't return their depositors money" for pretty any actor in these markets. The banks get bailouts of course, but that tends to be action outside the official rules; so maybe Tether will get it to? The differences here are mostly about how long the game has been played, not what the game is. Tether doesn't seem to be less reputable than the banks. It outlasted Credit Suisse for example. I'm not calling anything, but maybe Tether is going to behave a lot like another bank.
nostrademons 3y ago
Does that include the banking system? Because fractional reserve banking is definitely one of those systems that should never work in theory but miraculously works in practice.
Baldbvrhunter 3y ago
When you're running low on funds, just mint yourself $1bn Dec 26, 2023 Tether mints $1B USDT for ‘inventory replenish’ [0] Sep 19, 2023 Tether authorizes $1B USDT to ‘replenish’ Tron network [1] Feb 3, 2021 Tether pays $18.5 million in penalties; NY Attorney General alleges they don't have the cash reserves they claim [2] [0] https://cointelegraph.com/news/tether-1-billion-usdt-inventory-replenish https://cointelegraph.com/news/tether-1-billion-usdt-invento... [1] https://cointelegraph.com/news/tether-authorizes-1-b-usdt-to-replenish-tron-network https://cointelegraph.com/news/tether-authorizes-1-b-usdt-to... [2] https://web3isgoinggreat.com/?id=tether-pays-18-5-million-in-penalties https://web3isgoinggreat.com/?id=tether-pays-18-5-million-in...

That might explain why it has not crashed completely yet. As a rule of thumb, never trust service providers that should, by all common sense, fail, but miraculously don't.

codebolt 3y ago

For me the test is: What unethical action would optimize profits for company X? And what is the control mechanism that prevents them from doing so? If the answer to question 2 is None, there's a good possibility the answer to 1 is already happening.

bilbo0s 3y ago

The thing is, a lot of people just assume they must simply be doing good business. The continued existence of the economically impossible entity is, to many, proof not only of its solvency, but also of it's quality as a financial partner. Most people don't look any further than that. Obviously, a large number do look further than that, and many, many people would never take the bait. But don't underestimate the number of people, even well resourced people, who would fall for this sort of scheme.

hanniabu 3y ago
You're acting like people just have blind faith, ignoring they undergo routine audits
- agentgumshoe 3y ago
  Tether has not completed a single audit yet
  - hanniabu 3y ago
    https://tether.to/en/transparency/#reports https://tether.to/en/transparency/#reports
    - SpicyLemonZest 3y ago
      These reports are not full audits, although Tether would certainly like us to think they are! If you click into one of the reports, the auditors list the steps they took, and they're focused almost entirely on verifying the existence of Tether's self-reported assets on the report date. They would not, for example, have uncovered an FTX-style "hidden, poorly internally labeled fiat@ account" by following these procedures. You'll also note that they're following the "International Standard on Assurance Engagements 300 (Revised) ~ Assurance Engagements Other than Audits or Reviews of Historical Financial Information", which heavily suggests that this is not an audit and they did not review historical financial information.
    - deleted 3y ago
      [deleted]
    - agentgumshoe 3y ago
      It's not an audit. Attestations mean they move a bunch of funds into the account, get the auditor to check that indeed that money was there at that point of time, then move it away again. Every legitimate auditor they've engaged has quit. Also, the 'auditors' they are approaching are more and more into the 'not quite competent' end of the line if you look into them.

kranke155 3y ago

This totally explains it. Tether should have been on the same court as FTX.

Facemelters 3y ago
?
- redcobra762 3y ago
  Crypto bad, can’t you see? No need to justify claims when you’re bashing The Bad Thing.
  - kranke155 3y ago
    Tether is a well known scam. We have no idea that they have any backing for the amount of tokens they’ve issued and we have significant indications they don’t.
    - Jerrrry 3y ago
      It may be insolvent, and that may mean "scam" to you, but those words are different. Even if they claim full backing and don't, they have lied. Whether that is substantially and materially a sole qualifier in determining them a fraud and scam, is for the legal system, not an assortment of most vocal persons, to decide.
      - kranke155 3y ago
        An insolvent pseudo stablecoin that swears to be solvent (pinky finger) is the very definition of a scam.
        redcobra762 3y ago
        You beg the question by claiming it’s insolvent and calling it a “pseudo stablecoin”. So no, it’s not the “very definition” of a scam.

scaredginger 3y ago

Can you explain this 'common sense'? I was under the impression that Tether was in the business of taking USD (with the promise of returning it) and earning interest on that USD without paying any interest on it. If that's true, it sounds like a dream business to me

wmf 3y ago
That's what business they say they're in, but in reality they do things like (A) get nearly a billion dollars seized by the US for money laundering, (B) invest in risky Chinese corporate bonds, and (C) issue USDT loans backed by volatile crypto. They're usually solvent but they have been insolvent at various points in their history.
fsmv 3y ago
The common sense is that they would make a lot more money by doing fractional reserve (leaving them open to a bank run collapse) and there is nothing really to stop them from doing that.
- mteam88 3y ago
  Tether makes money from interest on the funds that they do actually have. Maximizing the amount of money that they hold would actually increase the amount of profit they make. They have no incentive (and a pretty strong disincentive) to be insolvent.
- redcobra762 3y ago
  As with most common sense, that’s completely wrong. Deceptively operating at a fractional reserve would eventually end with everyone involved losing everything and spending large portions of their remaining lives in prison. Common sense is rarely either.
  - ForHackernews 3y ago
    Certainly nobody involved in cryptocurrency has ever been known to take dumb risks, lose everything, and end up rotting in prison.

roenxi 3y ago

The difference between Tether and a standard bank actually seems pretty small to me. Tether doesn't look like they have enough money to pay back people holding Tether tokens. Banks don't have enough money to pay back depositors. Both muddle along fine. Theoretically the banks have lower risk due to regulatory actions. We've had enough financial crisises now that a reasonable person could discount that. Given the levels of debt and spring-loaded derivatives, any institution is at risk these days. We can imagine a history book entry saying "XYZ couldn't return their depositors money" for pretty any actor in these markets. The banks get bailouts of course, but that tends to be action outside the official rules; so maybe Tether will get it to? The differences here are mostly about how long the game has been played, not what the game is. Tether doesn't seem to be less reputable than the banks. It outlasted Credit Suisse for example. I'm not calling anything, but maybe Tether is going to behave a lot like another bank.

nostrademons 3y ago

Does that include the banking system? Because fractional reserve banking is definitely one of those systems that should never work in theory but miraculously works in practice.

Baldbvrhunter 3y ago

When you're running low on funds, just mint yourself $1bn Dec 26, 2023 Tether mints $1B USDT for ‘inventory replenish’ [0] Sep 19, 2023 Tether authorizes $1B USDT to ‘replenish’ Tron network [1] Feb 3, 2021 Tether pays $18.5 million in penalties; NY Attorney General alleges they don't have the cash reserves they claim [2] [0] https://cointelegraph.com/news/tether-1-billion-usdt-inventory-replenish https://cointelegraph.com/news/tether-1-billion-usdt-invento... [1] https://cointelegraph.com/news/tether-authorizes-1-b-usdt-to-replenish-tron-network https://cointelegraph.com/news/tether-authorizes-1-b-usdt-to... [2] https://web3isgoinggreat.com/?id=tether-pays-18-5-million-in-penalties https://web3isgoinggreat.com/?id=tether-pays-18-5-million-in...