>Beyond the fraud allegations, the idea that an organisation can just print extra money as they see fit, doesn’t that go against the principles of crypto finance?
or maybe the crypto community isn't a monolith, and all the cryptoanarchists aren't the people who hold/support tether?
I don’t understand why anyone would be in a rush to take them at their word when every new piece of evidence demonstrates that Tether’s operators are not interested in behaving honestly.
> Also banks do this all the time, every time they issue a loan for instance. The bank only keeps 10-30% collateral on your home.
Fractional reserve banking doesn’t mean banks can simply print more money than they have on the books.
Regardless, if a bank loses funds due to fraud or government intervention or whatever, they can’t simply continue pretending they had the money all along.
I don’t understand the desire to pretend that what Tether is doing is normal or good for the crypto community. It’s not.
> But assets have always been backed by loans of (greater than or) equal value. That’s the point of banks.
Greater or equal face value, not actual value. Tether is basically making the same claim.
> Tether is not a bank.
I never said that Tether was a bank.
> You have no guarantee of being allowed to exchange tether for dollars.
To be pedantic, no such guarantee exists for bank deposits either.
> It’s just... a weird service that doesn’t make sense. Tether doesn’t “work” because tether doesn’t do anything.
Tether obviously does work, it's probably the most stable cryptocurrency out there, despite being run by sketchy people. You can exchange it for other cryptocurrencies and you can exchange cryptocurrencies for ordinary currencies. Absent proper access to ordinary banking, Tether has been a tool for exchanges to perform settlements in the hundreds of millions of dollars. The view that Tether "does nothing" is just uninformed.
> And I honestly am surprised how pedestrian the fraud was. It sounds like they had the cash to back tether and just flat out stole it to cover for a trading loss. This has happened countless times before.
Where do you see anything like that? The report says that their funds were frozen by Crypto Capital as the result of (claimed) seizure by governments. The funds were borrowed from the Tether reserves to cover that shortfall. AFAIK, nowhere does it state that there was any trading loss.
> In other words, this is a fancier version of the kind of attestation that Tether makes, the ones that leave loopholes you can drive dump trucks through.
100% and this just drives me bonkers. I'm not entirely unsympathetic to wanting to avoid financial regulation, like while I disagree it's a good idea, I can understand wanting to build a system that is built on math and not people. Fine.
But isn't the whole point of crypto radical transparency? As in: you know at all times where all the coins are and the details of every transaction that has ever occurred? Shouldn't this meet 100% of your auditing needs? Why are audits even useful? Well, they're really helpful if you want to run a shell game off chain, but still assure customers that you're not gambling with their money so they keep giving you more of it.
Like, arguing in good faith here, this is just a worst of both worlds situation. You have an extremely slow financial transaction system that you still have to hand audit.
> It's crazy that they messed this up, Tether is basically a money printing machine, all they had to do was be solvent.
> Tether is a fundamentally a risk free money making concept
To me it sounds like you don't really understand the risks of tethers business. It is light-years away from being risk free, because you are on the mercy of the banks where you store the fiat. The banks can freeze your money any time, as they now did (AFAIK).
If you are operating a business with unclear regulation at this level, you can't really rely on banks like normal businesses can. The banks will cause problems with pretty high probability.
> Has anyone figured out how to verify the backing on a blockchain? If that was possible Tether's fraud would have been exposed sooner.
And this is always the problem with block chain. You can't cryptographically verify real life things that people care about like how much money is in someone's bank account.
> why are these types of articles not causing Tether
It is indeed a very interesting question.
The scamminess of Tether is pretty much obvious to everyone in the crypto world at this point (this article brings fairly little that's new to light).
As I mentioned somewhere else in the thread, I believe the explanation might be that Tether fills an absolutely essential role in providing liquidity to Cryto markets.
So fundamental that everyone allows it to continue to operate in spite of knowing how rotten to the core the whole thing is.
> Just because you don't think it is useful for you, doesn't mean that it is not legitimate.
That's because it isn't legitimate at all.
> It is what happens in the banking system all day long.
What you've shown me is even worse as this isn't even regulated in any shape or form. We both know that what is happening with Tether is fraudulent as it is backed by nothing and not regulated. ^0, which means that any USDT on AAVE is pretty much assumed to be pumped up by Tether and AAVE is facilitating fraud.
I wouldn't trust a system that holds over $110M of funds that gets 'stuck' because of a bug and users are unable to take their funds out. ^1
How is loaning tokens backed by fraud a legitimate use case?
> I've given you a legitimate use case and all you can do is yell ponzi. That doesn't help your argument at all and makes you look like the greater fool.
So your solution is to use a system that is loaning tokens backed by nothing, propped up by Tether that is backed by nothing, which creates an even bigger decentralised unregulated ponzi scheme?
> Nor would we be able to trustlessly send them anywhere?
That’s not the case anyway, since Tether can retroactively refuse to honor tokens that were allegedly stolen. What if the attacker had traded his 30m Tether-USD in exchange for bitcoins? Then the seller of these bitcoins would be left holding the bag, because the central party that is Tether refuses to honor these obligations.
Tether can never be trustless, because it’s credit. Some party needs to redeem tether tokens for USD, and if that party refuses to do so then your money is gone.
Bingo. For those curious, here is a very thorough history of Tether and how it's use brought chaos to the entire cryptocurrency ecosystem. It was used as a money printer to prop up an insolvent (and criminal) exchange while creating insane volatility in the markets. It is still alive today and continues to be a massive liability for the entire industry.
> this is straight up old-style fraud from a company
Traditional banks definitely go up bankrupt, and regulated financial entities definitely break laws, but it seems to happen with alarming frequency with crypto companies.
Given that the only two proven use-cases for crypto are doing an end-run around regulation/laws (however foolish or unjust people may believe those rules to be) and speculation/gambling, it also doesn't seem that surprising?
> Also, they would not always want it in exact increments of $100 million, as has been the case.
Not to question the Tether story but I don't understand this line of argument. What is the problem with exact increments?
Sure, the tokens have to be issued only if the issuing conditions are met. But given the number of hacks, wouldn't people want to use the issuing account sparingly? You know, use the issuing account to issue tokens in fixed increments to build up reserves. The move these reserves to be held in another account.
> A number of exchanges like bitfinex are in on the scam and are just holding the tether in cold storage
But how can that be a scam if they hold the tether? It can only be a scam if someone else now has the tether and they have the real money. I'm trying to understand who is getting scammed here.
Moreover, why are they printing tether if they already have too much?
or maybe the crypto community isn't a monolith, and all the cryptoanarchists aren't the people who hold/support tether?
reply