Tether: not even a scam

[maiiyeuvo]

Tether ( USDT ) Will prolly crash to much negative news about this and who knows is happening behind the scene, also with lots of exchanges suspend USD deposit/withdrawals. I think Tether will be first to crash and exchanges that use this will take a hit, in particular bitfinex.

But we hope that will not happened since it will have a negative effect on BTC but as always it will recover.

[ulhaq]

\ (3) Tether is fully backed by USD but they can't fully say they have the reserves because by making statements like that they could be exposing themselves to libertydollar type prosecution.

what is libertydollar type prosecution, and what would be the downside of having USD reserves?

[ulhaq]

Anyway, im done with so called "digital dollars" that supposedly stay pegged with the dollar. Everything tried thus far has been a failure (anyone remembers nubits?). I wish there was a way to do this so you don't need to get fucked by the taxman if you want to go to fiat temporarily to profit from a bitcoin dip, but all those "cryptodollar" coins keep crashing eventually.

There was no reason for nubits to succeed, I predicted its failure a while ago.

How does bitUSD make any sense? You have to put in 2 USD to get 1 bitUSD. The market seems to agree, less than $1 million in bitUSD.

I don't think its hard to have a digital asset pegged to fiat. As I pointed out, all you need is:

1. 1:1 reserves that are distributed in banks with insurance in different jurisdictions (including security of the bank)
2. third party audit of the bank accounts
3. security of the digital asset
4. agreement of the company to exchange digital assets and fiat, meeting KYC/AML laws.

None of the attempted pegs, including tether, has met these requirements. Yes, this requires a centralized authority, but it is impossible to have a pegged asset without one, simply because a trusted entity has to secure and possess the reserves. All attempts to use financial manipulation to secure a peg are going to fail, including the rolling peg idea someone posted.

On its face, a rolling peg idea doesn't make sense either. People want an absolute peg. If you make it rolling, it defeats the purpose.

[European Central Bank]

\ (3) Tether is fully backed by USD but they can't fully say they have the reserves because by making statements like that they could be exposing themselves to libertydollar type prosecution.

what is libertydollar type prosecution, and what would be the downside of having USD reserves?

https://en.wikipedia.org/wiki/Liberty_Reserve

the guy got 20 years.

usd reserves means centralisation which means the money can be frozen or seized.

that's the whole point of bitcoin. that can't happen.

[nelson4lov]

Tether ( USDT ) Will prolly crash to much negative news about this and who knows is happening behind the scene, also with lots of exchanges suspend USD deposit/withdrawals. I think Tether will be first to crash and exchanges that use this will take a hit, in particular bitfinex.

But we hope that will not happened since it will have a negative effect on BTC but as always it will recover.

I'm not even up for owning Tether. I've already tried trading it on Bittrex Exchanges but It has limitations. Regardless of the fact that It isn't a scam, The USD depo/withdrawal restrictions would slow down it's growth.  

[ulhaq]

\ (3) Tether is fully backed by USD but they can't fully say they have the reserves because by making statements like that they could be exposing themselves to libertydollar type prosecution.

what is libertydollar type prosecution, and what would be the downside of having USD reserves?

https://en.wikipedia.org/wiki/Liberty_Reserve

the guy got 20 years.

usd reserves means centralisation which means the money can be frozen or seized.

that's the whole point of bitcoin. that can't happen.

Clearly there was a lot of shadiness going on by the company, independent of its core business. I imagine that it is possible to run a digital pegged business without running afoul of authorities (tether, eg, adheres to KYC/AML rules). If it would not be possible, then it would be bad for the underlying currency (USD, eg)

[CoinHoarder]

I don't think its hard to have a digital asset pegged to fiat. As I pointed out, all you need is:

1. 1:1 reserves that are distributed in banks with insurance in different jurisdictions (including security of the bank)
2. third party audit of the bank accounts
3. security of the digital asset
4. agreement of the company to exchange digital assets and fiat, meeting KYC/AML laws.

None of the attempted pegs, including tether, has met these requirements. Yes, this requires a centralized authority, but it is impossible to have a pegged asset without one, simply because a trusted entity has to secure and possess the reserves. All attempts to use financial manipulation to secure a peg are going to fail, including the rolling peg idea someone posted.

Your idea for the "ideal" digital asset pegged to FIAT requires heavy centralization and gateways. That defeats the whole purpose of cryptocurrencies and creating an ideal cryptocurrency ecosystem.

Yes, this requires a centralized authority, but it is impossible to have a pegged asset without one, simply because a trusted entity has to secure and possess the reserves.

Bullshit. Bitshares' bitUSD has held a $1 peg since 2014 without any centralized authority.

How does bitUSD make any sense? You have to put in 2 USD to get 1 bitUSD. The market seems to agree, less than $1 million in bitUSD.

Ummm... this is a half truth or you don't understand how bitUSD works. I'm not sure which one.

You can buy 1 bitUSD with $1 USD (plus a small margin for traders) on Bitshares' decentralized exchange. Since bitUSD's inception the ecosystem's dynamics have been heavily fine tuned and experimented with. Also, the market has since matured greatly with the creation of easy to use market makers bots (such as https://btsbots.com/), as well as privately developed and operated bots, which people run to automate market making operations for a profit. That has resulted in the margin of buying 1 bitUSD not being more than $0.05 USD for over a year now. As the market matures further, that $0.05 spread will eventually diminish closer to $0.

The only reason you would need to spend more than 1 USD (plus the small margin) is if you are are bullish on Bitshares' value and sought leverage to increase your trading profits by selling the BTS token during or after a bull run. Your statement that you have to spend $2 USD to buy 1 bitUSD is quite misleading. Possibly that was the intent? I don't know...

[European Central Bank]

\ (3) Tether is fully backed by USD but they can't fully say they have the reserves because by making statements like that they could be exposing themselves to libertydollar type prosecution.

what is libertydollar type prosecution, and what would be the downside of having USD reserves?

https://en.wikipedia.org/wiki/Liberty_Reserve

the guy got 20 years.

usd reserves means centralisation which means the money can be frozen or seized.

that's the whole point of bitcoin. that can't happen.

Clearly there was a lot of shadiness going on by the company, independent of its core business. I imagine that it is possible to run a digital pegged business without running afoul of authorities (tether, eg, adheres to KYC/AML rules). If it would not be possible, then it would be bad for the underlying currency (USD, eg)

Bitfinex is not the company to run a legit business. They don't seem to care very much about ignoring the stuff any diligent people would pay attention to. Stuff like their token issuing might have got the job done but probably flouted a million laws.

[ulhaq]

Yes, this requires a centralized authority, but it is impossible to have a pegged asset without one, simply because a trusted entity has to secure and possess the reserves.

Bullshit. Bitshares' bitUSD has held a $1 peg since 2014 without any centralized authority.

How does bitUSD make any sense? You have to put in 2 USD to get 1 bitUSD. The market seems to agree, less than $1 million in bitUSD.

Ummm... this is a half truth or you don't understand how bitUSD works. I'm not sure which one.

You can buy 1 bitUSD with $1 USD (plus a small margin for traders) on Bitshares' decentralized exchange. Since bitUSD's inception the ecosystem's dynamics have been heavily fine tuned and experimented with. Also, the market has since matured greatly with the creation of easy to use market makers bots (such as https://btsbots.com/), as well as privately developed and operated bots, which people run to automate market making operations for a profit. That has resulted in the margin of buying 1 bitUSD not being more than $0.05 USD for over a year now. As the market matures further, that $0.05 spread will eventually diminish closer to $0.

The only reason you would need to spend more than 1 USD (plus the small margin) is if you are are bullish on Bitshares' value and sought leverage to increase your trading profits by selling the BTS token during or after a bull run. Your statement that you have to spend $2 USD to buy 1 bitUSD is quite misleading. Possibly that was the intent? I don't know...

I found that statement on what I thought was an official bitUSD page, but now I don't find it.
As you state, right now it is 0.05 lower.
If it works, why is the market cap so low?

After doing some looking online, I don't understand how it works. According to this video, https://www.youtube.com/watch?v=YD8i2Py9Paw, a bitUSD is made up of a variable number of bitshares, such that the value will always be $1. But that does not make sense, firstly it is dependent on the viability of bitshares, second, where are the bitshares coming from to insure a constant value?

If it's dependent on bitshares, then how is it not centralized?

[callback]

Who is behind Tether and who owns Tether Ltd?

[CoinHoarder]

If it works, why is the market cap so low?

That is difficult to answer, but from what I can gather there are several reasons:

1. There was a big FUD campaign when Bitshares first came out saying Smartcoins (then named bitAssets) would never work and their value would collapse, and that scared a lot of people away. Google Preston Byrne and bitUSD... his set of three articles were the most quoted "evidence" that bitAssets would collapse. But really those articles were just speculation, and after three years of Bitshares holding its Smartcoin pegs these detractors have pretty much gone silent. I guess they are starting to realize they may have been wrong (if they haven't already).

2. bitUSD had two competitors in the space. Tether and Nubits. Tether and Nubits had much more volume and market depth closer to the $1 pegs than bitUSD. They both put huge buy and sell walls close to the $1 peg. Nubits paid people to do so by use of inflation, and I guess Tether raised investment capital to do so. Up until very recently, there were not many market makers for bitUSD and the spread was much higher than it is today and there was less market depth. Because of the bigger market depth and smaller spreads, Nubits and Tether killed bitUSD as far as usage.

Then Nubits had a big collapse during the summer of 2016 where it went as low as $0.22, and ever since then Nubits has seen much less usage/volume. At this point, Tether is easily the most popular and liquid USD pegged asset. However, recently even Tether is showing some cracks in its armor. There is evidence that they are closely associated with Bitfinex, both of which are having monetary issues. It is showing in Tether's value which is currently $0.968, and has recently gone as low as $0.921. bitUSD has held a tighter peg than Tether for two weeks running. If Tether collapses just like Nubits did, then I think everyone will finally understand that bitUSD is the best solution.

Nubits, Tether, and Bitfinex's issues highlight that they may not be the best solutions, and they are both subject to many issues that bitUSD is not.

Nubits is like a "decentralized" federal reserve, which is still pretty centralized, prone to errors in judgement from Nushare holders, and more vulnerable to exchange default (among other issues.)

Tether is completely centralized, and subject to all of the downfalls that brings... subject to the Tether company not honoring the $1 peg (it is held only by a promise from Tether to do so, and if you read the excerpts from the ToS it is not a promise at all), subject to seizure by governments, and it is also more prone to exchange default (among other things).

bitUSD is completely decentralized and runs on free market principles. Also, recently due to market maker bots being made easier to use (such as https://btsbots.com/), bitUSD is slowly closing the gap as far as liquidity and market depth. Before market maker bots were only ran by a few individuals who kept the source code private, so there was not much market making going on.

After doing some looking online, I don't understand how it works. According to this video, https://www.youtube.com/watch?v=YD8i2Py9Paw, a bitUSD is made up of a variable number of bitshares, such that the value will always be $1. But that does not make sense, firstly it is dependent on the viability of bitshares, second, where are the bitshares coming from to insure a constant value?

Instead of typing up a long post of how it works, which I admit is difficult to grasp at first, I think this answer from Bitcoin's Stack Exchange is a good description. There are a ton of articles and videos on it. Bytemaster released this video in 2013 before starting Bitshares explaining how bitUSD would work, and it helped me understand. I still think it is one of the best descriptions: https://www.youtube.com/watch?v=-8ZJ3xTDwbI

Abstractly spoken, what you have in the current BitAsset 1.0 implementation is that in the market two parties meet that have different estimations for the future price.

Let's define the price to be the price of a bitAsset (i.e. bitUSD) denominated in BTS (base base currency in the BitShares network). For example 0.1 BTS per bitUSD. We need to clarify this here, because every market in BitShares can also be flipped, i.e. we can trade BTS:USD or USD:BTS.

Going Short

Let's say Mark thinks the price (i.e. 0.1BTS per bitUSD) will go up in the future while Nanny expects the price to drop soon. Nanny wants to a bet for this and goes short on bitUSD. Going short on a bitAssets means, that you lend it from the network (i.e. the network creates them for you) and sell it to a buyer (here, Mark).

The collateral

In order to go short, you need to lock up some of your funds (here BitShares) as collateral, you can see this pretty much as a security that you will be able to give back your lent bitUSD eventually. The total collateral is 200% the amount your short payed by both parties of the trade. This means that:

In order to short 1 bitUSD, the amount of BTS worth 2 USD has to be locked up.
The shorter pays half of the collateral and the buys pays half.
If you want to short-sell 1 bitUSD you will have to lock away 1 USD worth of BTS and will not get anything from the trade.
Price movment

If the price (say to 0.09BTS per bitUSD) goes down then the market moved according to Nanny expectations and she should make a profit from the prediction. How is this achieve? As a short-seller, she has to give back the lent bitUSD eventually, so she can decide to do this at a price of 0.09 BTS/USD. This means she needs to buy bitUSD cheaper from the market than she sold it earlier in the short-sell. With the bought bitUSD, she can close her short order (i.e. cover) and give back the lent USD which will free up the collateral, which, considering that she had to buy bitUSD with BTS, should leave her a profit of 10%.

However, if the price goes up she can do one out of three things:

Wait for the 30 day short limits to arrive. The Network will put a buy order for bitUSD and close here order automatically giving her what is left from the collateral
Wait for the price to go up even further and risk a margin call. This will be triggered from the network if the collateral is only 150% (in contrast to the 200%). The network will force (i.e. it does this automatically) you to buy up bitUSD on the market and close the order.
The short seller can decide to cover on her own buy buying up bitUSD and closing the order herself.
All of these options will make the short-seller a loss as the prediction was wrong.

Market Peg

In the end, the market peg is achieved by a social consensus in such that 1 bitUSD should be worth 1 USD. Hence, trading against the peg should make you lose money because someone else will make a profit from trading towards the peg. Wouldn't you want to trade if someone offered you $1 for $90c?

If it's dependent on bitshares, then how is it not centralized?

Bitshares was one of (if not THE) first working smart contracts. The decentralized exchange and shorting/covering/defaulting of Smartcoins like bitUSD is all done autonomously by the Bitshares decentralized network and blockchain.

[CoinHoarder]

Who is behind Tether and who owns Tether Ltd?

Apparently, Bitfinex owns at least some of Tether Ltd. I speculate that they are the ones that started Tether, but they needed to gather investors in order to put up the huge buy and sell walls close to the $1 peg. So, probably miscellaneous private investors hold the rest. This information has never been made public.

[aguila]

Yeah it really sucked how the $1 price went down just when I had a $3k in there >.<, I hope they fix this issue

[ulhaq]

Instead of typing up a long post of how it works, which I admit is difficult to grasp at first, I think this answer from Bitcoin's Stack Exchange is a good description. There are a ton of articles and videos on it. Bytemaster released this video in 2013 before starting Bitshares explaining how bitUSD would work, and it helped me understand. I still think it is one of the best descriptions: https://www.youtube.com/watch?v=-8ZJ3xTDwbI


Abstractly spoken, what you have in the current BitAsset 1.0 implementation is that in the market two parties meet that have different estimations for the future price.

Let's define the price to be the price of a bitAsset (i.e. bitUSD) denominated in BTS (base base currency in the BitShares network). For example 0.1 BTS per bitUSD. We need to clarify this here, because every market in BitShares can also be flipped, i.e. we can trade BTS:USD or USD:BTS.

Going Short

Let's say Mark thinks the price (i.e. 0.1BTS per bitUSD) will go up in the future while Nanny expects the price to drop soon. Nanny wants to a bet for this and goes short on bitUSD. Going short on a bitAssets means, that you lend it from the network (i.e. the network creates them for you) and sell it to a buyer (here, Mark).

The collateral

In order to go short, you need to lock up some of your funds (here BitShares) as collateral, you can see this pretty much as a security that you will be able to give back your lent bitUSD eventually. The total collateral is 200% the amount your short payed by both parties of the trade. This means that:

In order to short 1 bitUSD, the amount of BTS worth 2 USD has to be locked up.
The shorter pays half of the collateral and the buys pays half.
If you want to short-sell 1 bitUSD you will have to lock away 1 USD worth of BTS and will not get anything from the trade.
Price movment

If the price (say to 0.09BTS per bitUSD) goes down then the market moved according to Nanny expectations and she should make a profit from the prediction. How is this achieve? As a short-seller, she has to give back the lent bitUSD eventually, so she can decide to do this at a price of 0.09 BTS/USD. This means she needs to buy bitUSD cheaper from the market than she sold it earlier in the short-sell. With the bought bitUSD, she can close her short order (i.e. cover) and give back the lent USD which will free up the collateral, which, considering that she had to buy bitUSD with BTS, should leave her a profit of 10%.

However, if the price goes up she can do one out of three things:

Wait for the 30 day short limits to arrive. The Network will put a buy order for bitUSD and close here order automatically giving her what is left from the collateral
Wait for the price to go up even further and risk a margin call. This will be triggered from the network if the collateral is only 150% (in contrast to the 200%). The network will force (i.e. it does this automatically) you to buy up bitUSD on the market and close the order.
The short seller can decide to cover on her own buy buying up bitUSD and closing the order herself.
All of these options will make the short-seller a loss as the prediction was wrong.

Market Peg

In the end, the market peg is achieved by a social consensus in such that 1 bitUSD should be worth 1 USD. Hence, trading against the peg should make you lose money because someone else will make a profit from trading towards the peg. Wouldn't you want to trade if someone offered you $1 for $90c?

I have to do more thinking on this, but it does not seem to be fundamentally sound. Social consensus is not enough to maintain a market peg. Saw the video you linked, but if the peg is based on selling long and short, then a stable price would depend on there being an equal volume of long and short selling, which cannot be insured. Here is the link where I got the idea that it takes 2USD for each bitUSD:
https://steemit.com/bitshares/@xeroc/what-makes-the-bitusd-than-nubits

According to that article, all bitUSDs are actually borrowed from the network, and require 2x the collateral. Which does not make it practical to have bitUSD.

[Twipple]

I am thinking of converting my bitcoin into tether right now due to the high price. Anyone knows where I can find the ANN thread for them here on bitcointalk. Wanted to see some discussions before making the purchase and risking all my bitcoins with it.

[NavySeals]

Tether has faced tons of problems with American banks, then what happened? Its value downed to $0.90, after some time its value went above $1.00. What is the thing determining its price? They would say one tether is always one dollar...

[Twipple]

Tether has faced tons of problems with American banks, then what happened? Its value downed to $0.90, after some time its value went above $1.00. What is the thing determining its price? They would say one tether is always one dollar...

Isn't that the point though, to keep its value close to 1$, so in the future people can always rely on it to keep the value preserved. It is still averaging around 1$ as of today. I am curious to know as well, how are the swings decided, because somedays there is just no demand for it, and it can't crash so far down.

[fistfullofbtc]

it actually went to 1.08 but could have gone higher someone mentioned 1.13. at the last big crash the price was high, when bitcoin pumps it dropped a bit, you start to see a pattern.

[Twipple]

it actually went to 1.08 but could have gone higher someone mentioned 1.13. at the last big crash the price was high, when bitcoin pumps it dropped a bit, you start to see a pattern.

It has never gone to 1.13 from what I have seen on the price graph. The maximum it has touches seems to be 1.05 usd , and the lowest has been around 0.91 usd. Also instead of dropping, it actually seems to have gone up with bitcoin increasing. maybe because of the increase in investments when people want to leave bitcoin at such high prices.

[go4crypto]

I was thinking of using Tether as a dollar proxy in trading swings in BTC and others.
That should work better when most cryptos go up and down at the same time.
It has 100 million units and good volume. Should be fine for risking small amounts of
money for a few days between buying/selling other cryptos.