Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Tether Required Recapitalization in May 2022

kalzumeus.com

Post reply on HN
Print view View original

301–310 of 336 posts

Re: Tether Required Recapitalization in May 2022

#301

Post by csense »

Claims have been circulating for years, now, about Tether's lack of adequate collateralization, and the lack of trustworthiness of their people.

And yet, users out there are holding a total of $73 billion worth of Tether.

Who are those users holding Tether? Who wants to hold Tether? What's the motive of Tether holders? What market need is Tether addressing, and how can that need be addressed while avoiding Tether's issues?

Doesn't DAI work toward basically the same market need as Tether, but in a way that's actually decentralized and actually has checkable reserves? Why don't people desert Tether for DAI?

Re: Tether Required Recapitalization in May 2022

#302

Post by PKop »

jazzyjackson wrote: post #119
PKop wrote: post #59

Earlier quoted context omitted.

If you just sit in Tether sure, but the ecosystem of stablecoins gives you access to DeFi yield opportunities with much better "passive" interest than bank deposits or treasuries, so the bet is a little more sophisticated than dollar for dollar.

> sophisticated aka obfuscated does the yield come from anywhere other than funds deposited by new users?

Interest on lending, and trading fees from liquidity pools. During a bear market in crypto certainly these yields will decline.

The 2 sources I mentioned above are essentially flows that accrue during the bull markets. It's not magic, when people want to long assets they borrow stables. If you lend into these markets you'll get the yield. With liquidity pools you can get some transaction fees even during market volatility and draw-downs, in the short term at least.

Re: Tether Required Recapitalization in May 2022

#303

Post by PKop »

nradov wrote: post #86
PKop wrote: post #59

Earlier quoted context omitted.

If you just sit in Tether sure, but the ecosystem of stablecoins gives you access to DeFi yield opportunities with much better "passive" interest than bank deposits or treasuries, so the bet is a little more sophisticated than dollar for dollar.

Actually the DeFi yield opportunities are not any better than Treasuries on a risk-adjusted basis. You might not be familiar with the actual risk level, including counterparty risk. Some of the cryptocurrency grifters have intentionally obscured that issue.

Treasuries pay negative real yields, so I'm not sure there's any opportunity there. More of a guaranteed loss.

Re: Tether Required Recapitalization in May 2022

#305

Post by tyrfing »

runarberg wrote: post #290
tyrfing wrote: post #283

Earlier quoted context omitted.

> If that were to be sustainable you would have charge higher interest on the loans then you give to savings. Which is exactly how protocols like Compound work, although 'governance tokens' are also issued simply for using the system. > These DeFi yields must be funded in other ways than just loans. Which? DeFi stands for Decentralized Finance, which pretty much means the rules are easily available - as long as you t…

I’m sorry but I’m still confused. Who are the people taking these inconvenient, unoptimal and expensive loans, when they can get better and cheaper loans through traditional means? Something doesn’t smell right. Also ‘governance tokens’? This smells like another term for “money from new users entering the system”. Which is precisely how Ponzi schemes work. EDIT: I went on a little scouting mission on google (well DDG…

> Who are the people taking these inconvenient, unoptimal and expensive loans, when they can get better and cheaper loans through traditional means?

USDC is at 2.3% APR, USDT 3.78%. I think you'll find that most people cannot obtain unsecured loans that low, and the forms of collateral a bank will accept are much more limited. The biggest reason is also the reason why people like Elon Musk have massive loans: avoiding taxes on realized gains.

https://compound.finance/markets

> Also ‘governance tokens’? This smells like another term for “money from new users entering the system”. Which is precisely how Ponzi schemes work.

Sure, just like how "startups" are actually Ponzi schemes with early investors preying on the later ones. Same people owning it, too!

Re: Tether Required Recapitalization in May 2022

#306

Post by nradov »

runarberg wrote: post #291
zionic wrote: post #122

Earlier quoted context omitted.

>This is true for every pile of toxic crap that's ever been financially engineered. I have a radical idea that I'm fairly sure would get me killed if I ever stood a chance of implementing it: A complete ban on all non-productive financial schemes. We have an entire parasite class that grown unfathomably wealthy while providing no real value to the rest of society. The "futures trader" extracting value from the system…

I would really like to know what would happen if—in a wave of international solidarity between all the workers in the world—workers would take their profits in their own hands and away from any shareholder and overpaid non-contributing CEOs. What would happen to all these markets. Would a company controlled by their own workers choice to funnel parts of their profits to wall street traders? Probably not. Would there…

Eventually most of those companies controlled by their own workers would need to raise capital again, and then we'd quickly end up back where we started. Plus employee control hasn't worked well in most of the companies where it was tried. Look what happened to United Airlines. They were majority employee owned for a while, but the different groups of employees never agreed on how to run the company.

Re: Tether Required Recapitalization in May 2022

#307

Post by [deleted] »

tyrfing wrote: post #305
runarberg wrote: post #290

Earlier quoted context omitted.

I’m sorry but I’m still confused. Who are the people taking these inconvenient, unoptimal and expensive loans, when they can get better and cheaper loans through traditional means? Something doesn’t smell right. Also ‘governance tokens’? This smells like another term for “money from new users entering the system”. Which is precisely how Ponzi schemes work. EDIT: I went on a little scouting mission on google (well DDG…

> Who are the people taking these inconvenient, unoptimal and expensive loans, when they can get better and cheaper loans through traditional means? USDC is at 2.3% APR, USDT 3.78%. I think you'll find that most people cannot obtain unsecured loans that low, and the forms of collateral a bank will accept are much more limited. The biggest reason is also the reason why people like Elon Musk have massive loans: avoidin…

[deleted]

Re: Tether Required Recapitalization in May 2022

#308

Post by eis »

ZephyrBlu wrote: post #298
eis wrote: post #288

Earlier quoted context omitted.

Because that is not what happened. Grimburger did not offer (from his point of view) worse odds than 1:1. And patio11 refused 1:1 because it was apparently not interesting to him. Now one could take that as a salesmans tactic to try and extract better odds from Grimburger but at that point the monetary aspect would become the focus and not the wager itself. A wager between two people who are in it for the sport and b…

Patrick refused because other people were offering worse odds...

Yup exactly. But other bets (surely they are not betting on the exact same thing with just different odds and even if they were they) don't influence the chances of this bet. These are independent events. Either you think you are likely to win or not. To refuse 1:1 odds on the grounds that you could make more money somewhere else means either A: you do it for the money and not the sport or B: don't have enough money to wager on all these bets but then he should ask for a lower amount or refuse with that reasoning. Maybe I am missing some other possible explanation? The reason of refusal is very important to understanding the motivation behind it.

If there are two people offering you a bet:

Person A offers you 5:1 odds in your favor saying that a random dice throw will yield a number small than 3.

Person B offers you 1:1 odds in your favor saying that a random number chosen between 1 and 10 will yield a number bigger than 6.

Thinking about the wager with Person B is independent of the wager with Person A. When deciding which bet to engage in the answer is both because in both cases you should be convinced that your chances of winning are >50%. Refusing the second bet would lower your overall expected winnings.

Re: Tether Required Recapitalization in May 2022

#309

Post by sushid »

fshbbdssbbgdd wrote: post #167
thedstrat wrote: post #76

Its pretty frustrating that people are using these shady stablecoins where you can't see the code or assets backing them (eg USDT), when there are stablecoins that are fully open source and you can see the backing in real time (eg DAI)

DAI is to Ether as Terra was to Luna?

Your analogy doesn't make sense for a multitude of reasons. Terra is the blockchain that Luna and UST ran on, not the stablecoin on the ecosystem.

More importantly, DAI is overcollateralized using ETH and other coins. UST was algorithmically pegged to the USD with an implicit backing by Luna. DAI still technically has a depeg risk (e.g. if ETH has a flash crash of > 50% that it doesn't recover from) but the risks are much lower. It's _probably_ safe in the long term although my stablecoin of choice is USDC.

Re: Tether Required Recapitalization in May 2022

#310

Post by blitzar »

PKop wrote: post #303
nradov wrote: post #86

Earlier quoted context omitted.

Actually the DeFi yield opportunities are not any better than Treasuries on a risk-adjusted basis. You might not be familiar with the actual risk level, including counterparty risk. Some of the cryptocurrency grifters have intentionally obscured that issue.

Treasuries pay negative real yields, so I'm not sure there's any opportunity there. More of a guaranteed loss.

Luna had a real negative yield as well
Post reply on HN