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An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

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Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#41

Post by grandalf »

jpereira wrote: post #17

Stable coin systems are going to be massively important and there's a ton of different projects trying to make it happen. This [1] is a really solid explanation on how one of them, Dai from MakerDAO, works. [1] https://medium.com/cryptolinks/maker-for-dummies-a-plain-eng...

Dai seems like a clever idea, but I'm not convinced it will ultimately be necessary.

For one thing, the idea that dollars are stable is illusory. And the volatility we see in BTC these days is largely due to the ratio of speculation to storing value in its usage pattern.

So if you buy 500 Dai with Bitcoin today, and the price of Bitcoin goes up, you simply have more Dai to spend, and if the price goes down, you have less to spend, but all the while Dai was pegged to USD and the exchange was going on behind the scenes.

Two factual quibbles with the article, in case you can offer insight:

The example about doing a bet using Ether does not make sense, because chances are the smart contract would collect collateral for the bet at the time it was made, with the idea that upon resolution of the outcome the collateral would be used to pay off the bet. So if I bet 1 ETH on the superbowl outcome, 1 ETH is collected from me and from my counter-party, and then after the game finishes the smart contract awards 2 ETH to the winner.

The other issue has to do with commerce. What's the difference between a store marking prices in USD and also accepting payment in BTC vs marking prices in Dai?

During checkout, if I'm paying with BTC I'll see how much BTC my purchase will cost. If the price in dollars is more useful to shoppers than the price in BTC, then merchants will denominate in dollars. Dai would seemingly just involve a predefined method of doing the exchange rate math (and fees), but I'm not clear on why this is really a significant advantage.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#42

Post by jnbiche »

wslh wrote: post #35
jnbiche wrote: post #30

Earlier quoted context omitted.

What's the problem? He's talking about a projected related to TFA. We do that all the time on HN, in fact it's encouraged. And if you look at the other responses, people are clearly interested in this project, although many are skeptical (justifiable in the world of cryptocurrencies). I know nothing about it, but on face value it doesn't look like any type of a scam. In fact, it looks like he's trying to solve a big…

His token is not pegged to USD dollars since he doesn't have the reserves to convert back and forth between his token and USDs. Full stop. He should clearly explain upfront what he is doing for the massive public and the risks involved following his approach, which is perfectly understandable as it happens with every other investment.

There's a big difference between a currency being "pegged" to another currency and being "backed" by another currency.

I do agree that it would behoove his project to clearly enumerate that it's experimental and the risks involved. But that's a good comment for him, not a flag.

Edit: The article you linked to is incorrect, unless the word "pegged" is different in cryptocurrencies than elsewhere in the world of finance. Please see: https://en.wikipedia.org/wiki/Fixed_exchange-rate_system

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#43

Post by alexasmyths »

wslh wrote: post #35
jnbiche wrote: post #30

Earlier quoted context omitted.

What's the problem? He's talking about a projected related to TFA. We do that all the time on HN, in fact it's encouraged. And if you look at the other responses, people are clearly interested in this project, although many are skeptical (justifiable in the world of cryptocurrencies). I know nothing about it, but on face value it doesn't look like any type of a scam. In fact, it looks like he's trying to solve a big…

His token is not pegged to USD dollars since he doesn't have the reserves to convert back and forth between his token and USDs. Full stop. He should clearly explain upfront what he is doing for the massive public and the risks involved following his approach, which is perfectly understandable as it happens with every other investment.

I don't think that the specifics of his currency add or remove anything from the nature of the comment having merit or not.

The comment is a little bit off topic, but I for one don't mind though I'm not sure about whether or not it's within the rules.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#44

Post by moduspol »

brndnmtthws wrote: post #24
gthtjtkt wrote: post #18

Earlier quoted context omitted.

Whether the accusations are true or not, I wouldn't hold a single dollar in Tether after reading this on their website: > “There is no contractual right or other right or legal claim against us to redeem or exchange your tethers for money. We do not guarantee any right of redemption or exchange of tethers by us for money.”

I don't use tether either, but this seems like total unsubstantiated nonsense to me.

See the second paragraph of section 3 here [1].

[1] https://tether.to/legal/

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#45

Post by specialp »

brndnmtthws wrote: post #11

There's a lot of FUD, but very little evidence of wrongdoing. It seems mostly like one person on a campaign to discredit Bitfinex because of some grudge. https://twitter.com/Bitfinexed is the person spreading the FUD, they're also shitposting all over Reddit and elsewhere. Seems like now the 'media' is going along for the ride and enjoying the ad revenue.

"FUD" = Fear, Uncertainty, Doubt. That does not imply that spawning FUD means it is some sort of unfounded gossip. Customers should be fearful, uncertain, and doubtful of a completely unregulated company that acts as a bank of sorts with no proof that it has any of the reserves it claims.

So yes it is FUD. In this case it is good FUD. And in this case Bitfinex can easily quell it, but chooses not to which doesn't bode well for them. Could tether be perfectly legit backed by solid reserves? Yes. But this must be verified.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#47

Post by doctoboggan »

For a decentralized solution to the problem of a price stable cryptocurrency check out BitShares and bitUSD

https://bitshares.org/technology/price-stable-cryptocurrenci...

You can see it has not been as stable as USDT but it has certainly been hovering around $1 USD:

https://coinmarketcap.com/currencies/bitusd/

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#48

Post by wslh »

jnbiche wrote: post #42
wslh wrote: post #35

Earlier quoted context omitted.

His token is not pegged to USD dollars since he doesn't have the reserves to convert back and forth between his token and USDs. Full stop. He should clearly explain upfront what he is doing for the massive public and the risks involved following his approach, which is perfectly understandable as it happens with every other investment.

There's a big difference between a currency being "pegged" to another currency and being "backed" by another currency. I do agree that it would behoove his project to clearly enumerate that it's experimental and the risks involved. But that's a good comment for him, not a flag. Edit: The article you linked to is incorrect, unless the word "pegged" is different in cryptocurrencies than elsewhere in the world of financ…

What is a Pegged Cryptocurrency? https://themerkle.com/what-is-a-pegged-cryptocurrency/

You can decide to talk about stable coin approaches which is a more precise term.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#49

Post by thisisit »

Aside from the discussion on Tethers I am sure this is not going to stop cryptocurrency buffs from talking/selling another round of "stable" coins.

The unfortunate thing is time and again same old story is presented about either:

how the company releasing the coins will act as lender/buyer of last resort or

how "markets" will prevent the peg from going out of whack.

The former logic forgets about how it puts a lot of power in hands of one company and leads to questions, like Tether.

While latter logic forgets markets are not efficient. And sometimes it can remain irrational longer than someone can remain solvent.

This whole thing is not a maths problem but an economics and market microstructure problem, two apparently least understood topics in cryptocurrency circles.

Re: An $814M Mystery Near the Heart of the Biggest Bitcoin Exchange

#50

Post by scurvy »

brndnmtthws wrote: post #31
abritinthebay wrote: post #26

Earlier quoted context omitted.

Not in financial businesses it’s not.

You evidently have no idea. At a lot of places, that's the crown jewels, and would never be revealed publicly.

Every publicly traded bank discloses all of their assets each quarter. To claim holdings are the crown jewels is a bit much.
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