Tether reserves backed by 2.9% cash • Hacker News Board

Re: Tether reserves backed by 2.9% cash

#171

Post by matheusmoreira » Sat, May 15, 2021, 5:41 AM UTC

mdasen wrote: post #137

tjader wrote: post #123

Earlier quoted context omitted.

Real fiat currencies come with much heavier regulation if you want to get money in and out of the traditional banking system. Also, if you want to move money between exchanges or banks you'd have to use the regular transfer methods like ACH, SWIFT, SEPA, which oftentimes are not as fast and cheap as sending USDT between exchanges. That makes it much harder to exploit arbitrage opportunities and drives up the spread o…

To echo this a bit: exchanges were cut off from using USD. I'd recommend reading https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/ (Tether: The Story So Far; by Patrick McKenzie aka patio11) Basically, the US requires money-transmitting entities to know who they're working with ( https://en.wikipedia.org/wiki/Know_your_customer ). When you open a bank account, the bank has to validate your ID. Even if you're…

What a huge mess...

Re: Tether reserves backed by 2.9% cash

#172

Post by atq2119 » Sat, May 15, 2021, 6:12 AM UTC

nlitened wrote: post #105

atq2119 wrote: post #43

Earlier quoted context omitted.

Sibling comments express justified disbelief at this question, but just in case: in our modern monetary system, reserve requirements aren't the "last resort" against bank runs. The central bank will jump in and provide the required liquidity to prevent a bank run as a last resort, and (since it is the entity which ultimately runs the monetary system) the central bank is by definition always able to do so. For a bank…

I believe, in your analogy Tether _is_ the central bank. They don’t need a fall back, they print the money.

Well, they don't print the USD. But you're right, perhaps a better analogy for what people mean is a central bank trying to maintain a currency peg. Which also often ends badly...

Re: Tether reserves backed by 2.9% cash

#173

Post by jqpabc123 » Sat, May 15, 2021, 6:18 AM UTC

35fbe7d3d5b9 wrote: post #139

seanhunter wrote: post #134

If you wanted to operate a fully legitimate tethered cryptocurrency, you have to do two things. Firstly you have to make public the basket of holdings backing the currency and secondly you have to bake in an arbitrage mechachanism to ensure the price of the basket and the price of teh currency don't drift too much. The way this works for the most obvious analogous product I can think of in the financial markets (inde…

> It's incredibly important for this mechanism (and the public record of assets in the basket it relies on) to be built in to the process if the price is to be truly tethered. Otherwise the tether is just an illusion and in the ETF world, ETFs which didn't have this type of mechanism went completely haywire and became defunct. This is what's so surprising to me. Markets are efficient and rational, right? (;-)) Well,…

...or that USDT:USD has never been priced based on fundamentals.

It's simple and easy to do this when one entity has control of both the currency minting and the market pricing mechanism.

In other words, USDT would be an ideal mechanism for perpetrating widespread fraud in the crypto marketplace, one that would likely never be tolerated in "regulated" markets.

Note that USDT is underpinning the entire crypto marketplace --- the majority of bitcoin and other crypto trades involve USDT.

Re: Tether reserves backed by 2.9% cash

#174

Post by jqpabc123 » Sat, May 15, 2021, 7:09 AM UTC

Marazan wrote: post #71

I run ScamStableCrypto. I create a billion ScamStableCoins and claim they are worth $1 each. I give a billion ScamStableCoins to ScamCryptoExchange. ScamCryptoExchange is run by me. ScamCryptoExchange writes an IOU for one billion US dollars and gives it ScamStableCrypto (my right hand gives something to my left hand). I, as ScamStableCrypto, write down in my balance book that I have a billion dollars of Commercial P…

Wait? Are you saying that ScamStableCoin is a "scam"?

I think you just don't really understand the ScamStableCoin market. I know lots of people making money with ScamStableCoin.

Re: Tether reserves backed by 2.9% cash

#175

Post by whywhywhywhy » Sat, May 15, 2021, 6:26 PM UTC

joering2 wrote: post #163

whywhywhywhy wrote: post #113

Earlier quoted context omitted.

Stealing a car is an act of aggression against an individual. Crimes are not simply about the monetary damages.

But wouldn't you argue that a guy who stole a car and was peacefully caught with no damage to car, people or property, caused less damage than what $850,000,000 stolen from gullible investors did? I mean - wouldn't that turn off victims from ever entering any stock market, be it NASDAQ or even their 401k found, causing more damage to the US financial ecosystem?

Out of interest what violent crime would you consider comparable to "$850,000,000 stolen from gullible investors"?

What should the prison sentence be for that in your eyes? and what would a violent crime that gets a similar sentence be?

Re: Tether reserves backed by 2.9% cash

#176

Post by hakfoo » Sat, May 15, 2021, 11:54 PM UTC

ur-whale wrote: post #55

sickmate wrote: post #15

As a comparison, USDC reserves are 100% backed by US dollars held in custody accounts, currently 9.3B. https://www.centre.io/hubfs/pdfs/attestation/grant-thorton_c...

One very interesting sentence in that document is the "100'000 USDC token blacklisted" If you ever thought govt-backed cryptos and centralized tokens like USDC were a good idea, ask yourself this: Could a stack of greenbacks ever be "blacklisted" (I mean, people have certainly tried with various "tricks")? One of the nice property of money as we've known it so far was fungibility. With govt-backed (e-dollar) and/or c…

The US issued currency during WWII with that explicit plan-- notes counterstamped "HAWAII" in huge letters, or with different colour seals.

If Hawaii fell, or a large stash of notes intended for overseas use were diverted, they could easily demonetize them.

The reason it's not done on a more precise level is probably a UX issue-- you can easily remember "The $10 notes with yellow seals are void" but roadcasting and getting understanding of thousands of "$10 note Series 2024 serial number QL34567846A is void" is infeasible.

Re: Tether reserves backed by 2.9% cash

#177

Post by csomar » Sun, May 16, 2021, 10:43 AM UTC

SilasX wrote: post #149

csomar wrote: post #34

Earlier quoted context omitted.

> you agree Circle is free to use the funds provided for its own purposes prior to redemption subject to the terms of this Agreement. > Circle may also invest these fiat funds in highly-liquid, AAA-rated fixed income securities. I wrote about this here: https://omarabid.com/usd-stable-coins Only Gemini USD is fully backed by US treasuries. Everyone else is using this money to play roulette.

Yes! And it redeems on demand! But what’s perplexed me is, the Gemini dollar (GUSD) is somehow more volatile than Dai, which uses much more complex, experimental means of stabilizing its value: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/gemini-dollar/

That's economics for you! Your perception doesn't not much reality. The idea that because you can redeem at face value for 1:1 and you have stronger guarantees, then it should have a less volatile price.

In reality, it comes down to market makers and market adoption/liquidity. That's why Tether could keep the beg at 1:1 despite having very little liquid cash. Liquidity will come from investors, and actually the more the better. Smaller fish like GUSD will not have that much interest from market makers.

Re: Tether reserves backed by 2.9% cash

#178

Post by SilasX » Sun, May 16, 2021, 4:29 PM UTC

csomar wrote: post #177

SilasX wrote: post #149

Earlier quoted context omitted.

Yes! And it redeems on demand! But what’s perplexed me is, the Gemini dollar (GUSD) is somehow more volatile than Dai, which uses much more complex, experimental means of stabilizing its value: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/gemini-dollar/

That's economics for you! Your perception doesn't not much reality. The idea that because you can redeem at face value for 1:1 and you have stronger guarantees, then it should have a less volatile price. In reality, it comes down to market makers and market adoption/liquidity. That's why Tether could keep the beg at 1:1 despite having very little liquid cash. Liquidity will come from investors, and actually the more…

It doesn't need interest from market makers. You want GUSD, you can buy it from Gemini at 1:1. You want to sell, they redeem at 1:1. You don't need market makers unless you want to get ripped off.

Re: Tether reserves backed by 2.9% cash

#179

Post by user-the-name » Sun, May 16, 2021, 7:29 PM UTC

wslh wrote: post #87

sickmate wrote: post #15

As a comparison, USDC reserves are 100% backed by US dollars held in custody accounts, currently 9.3B. https://www.centre.io/hubfs/pdfs/attestation/grant-thorton_c...

You missed the "USDC hasn't published audits since Jan 2021" https://amp.reddit.com/r/CryptoCurrency/comments/mycfm9/usdc... now February is the last report. They just reported February a few days ago.

Those aren't audits, either, they are attestations, which are very different.

Re: Tether reserves backed by 2.9% cash

#180

Post by user-the-name » Sun, May 16, 2021, 7:32 PM UTC

TrackerFF wrote: post #58

ur-whale wrote: post #8

> Chief Technical Officer Paolo Ardoino Can't say this news comes out as a surprise. I'm actually surprised by the fact that there are any reserves at all. What is really interesting about Bitfinex / Tether is to research the history of the people who started these entities, especially their history prior to Bitcoin's existence. Here's a taste: https://nicolaborzi.medium.com/the-lawless-rollercoaster-of-... As much a…

On a tangent - ever since cryptocurrencies gained popularity, every known crook and MLM scam-artist here in Europe shifted their focus to some coin service. Some of these are of course difficult to soit, as they tend to use numerous different names and identities, and have been in the scamming "game" for decades. The takeaway from all of this is that one should absolutely do a quick research on founders and key figur…

There's not much point in doing research like that, given that the vast majority of cryptocurrency businesses are scams, whether or not the founders are known or unknown scammers.

Just assume it's a scam from the off, it will save you a lot of work and money.