from Hacker News

Tether has issued $450M USDT in past 4 days

by ActsJuvenile on 1/18/18, 10:59 PM with 91 comments

• by chx on 1/19/18, 2:07 AM

  https://www.reddit.com/r/Buttcoin/comments/7rad7q/a_reminder...

  > What if the crypto community is simply too stupid to ever let the bubble burst?

  > Like. Literally nobody has ever been able to trade their tethers back into dollars, and they've been around for over a year at this point. How the fuck do people have imaginary money and simply not want to get real money from it, not even once, in over a year?

  > Maybe the buttcoiners were right, and we are witnessing the birth of something completely new here: The market that was too dumb to even realise that it should crash.

• by throwaray122 on 1/19/18, 2:31 AM

  Finally people are waking up to this.

  Summary of Tether for the uninformed:

  1. Their terms state that they owe you nothing in exchange for Tethers you hold

  2. This effectively means Tether is backed by nothing. The 1:1 peg with USD is a total farce

  Tether must and does at all times reserve the right to refuse to issue or redeem Tether Tokens...

  No Representations & Warranties by Tether: Tether makes no representations, warranties, or guarantees to you of any kind. The Site and the Services are offered strictly on an as-is, where-is basis and, without limiting the generality of the foregoing, are offered without any representation as to merchantability or fitness for any particular purpose.

  What this means:

  Tether can print 1 billion Tethers, buy up 1 billion Bitcoin, and then cash out into dollars. In other words, they have engineered a way to more or less counterfeit U.S. dollars by counterfeiting cryptocurrency.

  I hope they go down hard.

• by mancerayder on 1/19/18, 1:44 AM

  How are the big players in cryptocurrency not pushing back on this? It has potential to take down the entire ecosystem.

• by barbegal on 1/19/18, 2:11 AM

  As far as I can tell it has mostly issued Tethers to itself [1](as Bitfinex). Bitfinex/Tether are hoping that they can entice customers to use their platforms for arbitrage with other exchanges such that they can cream off a healthy margin without actually holding much currency themselves.

  [1] https://medium.com/@bitfinexed/spoiler-alert-the-institution...

• by blhack on 1/19/18, 1:54 AM

  Can somebody explain, in detail, the conspiracy theory here? Preferably in a way that doesn't emotionally assume some nefarious action?

  $450M is a lot of money. Why do you assume that tether is lying about this?

  If tether aren't actually backed by anything, isn't that just about the worst ponzi scheme imaginable? Like some sort of reverse ponzi scheme, actually? They give you "fake" tethers, and you get to buy "real" bitcoins with them.

• by modeless on 1/19/18, 3:02 AM

  Disclaimer: I think Tether is shady, likely illegal, and would never use it myself. However, I think there is a perfectly reasonable explanation for where this Tether is coming from and why no existing Tether has ever been redeemed for USD.

  First, understand that Tether and Bitfinex are the same people. Bitfinex has hundreds of millions of dollars in their accounts. It is likely that most or all of the Tether is bought directly by Bitfinex in order to satisfy Tether withdrawal requests. The money comes from USD deposits to Bitfinex.

  When people want to convert Tether to USD, rather than redeeming from Tether.to directly, they send Tether back to Bitfinex, which credits it to their USD balance at a 1:1 rate. The USD can then be withdrawn as a wire transfer. Crucially, this process does not require that Tether be redeemed, because Bitfinex maintains a large balance of both USD and Tether. As long as Tether demand keeps increasing, Bitfinex can simply sit on the Tether they receive until it's time to hand it out to someone else doing a Tether withdrawal.

  The only situation in which Tether would ever be redeemed is if there was a bank run on Bitfinex. As Bitfinex's USD reserves fell they would need to redeem the Tether that they hold for USD. So far, Bitfinex has not faced this situation and so no Tether has ever been redeemed.

  So, I've described a way in which Tether could be relatively legitimate. Is that actually what's going on? Nobody knows except the management of Bitfinex. Personally, I don't trust them. The incentives for fraud are astronomical, and even if it's been entirely legit up to this point it's unlikely to remain so forever.

• by brianpgordon on 1/19/18, 12:16 AM

  And I'm sure every single one is backed by legitimate USD deposits...

• by js2 on 1/19/18, 2:39 AM

  Their terms of service currently has this clause:

  Beginning on January 1, 2018, Tether Tokens will no longer be issued to U.S. Persons.

  https://tether.to/legal/

  So these USDT are being issued to non-U.S. Persons. How does that work? A non-U.S. Person wires funds in their local currency to tether who applies the current exchange rate for that currency to USD then issues an equivalent number of USDT? Why would anyone do that instead of just purchasing the tether for their own currency?

• by StavrosK on 1/19/18, 1:44 AM

  Doesn't "issued" mean sold? Didn't they get $450M in dollars for them? Or did they just give the USDT to themselves or something?

• by lvturner on 1/19/18, 2:56 AM

  Shameless plug, I wrote a little telegram bot to send an alert whenever new Tether are created: http://t.me/TetherAlerterBot

• by 6d6b73 on 1/19/18, 1:55 AM

  Sometimes I wish I could forget all about integrity and honesty and just use my knowledge to make a quick buck by scamming people like all these cryptoscammers do..

• by aviv on 1/19/18, 1:50 AM

  Tether will end up being the pretext US authorities use to raid various exchangers. It's coming folks. Do not leave your coins at an exchange wallet, ever.

• by KasianFranks on 1/19/18, 2:27 AM

  A US public company can do the same thing in terms of their authorized stock vs their shares outstanding. You can print money without it being backed. This means increasing your 'authorized' as you see fit. Just get approval from the SEC/Finra and your buddies and you're good to go. Now lets talk about other organizations printing money that's not backed by anything e.g. the Fed, QE 1-4, countries with inflationary problems. Cryptocurrency offers far more transparency (as we can see here) and has true global reach. This FUD needs to stop and more effort needs to put into understanding financial engineering and it's importance and relation to software engineering.