I struggle to avoid the knee jerk reaction to classify Tether as the Federal Reserve of BTC.
Can someone please explain how this either right or wrong?
Can someone please explain how this either right or wrong?
But now the US dollar isn’t redeemable for anything, so they can’t go bankrupt.
Should Tether be revealed as a fraud and the price collapse below that level again as a result, I'm not sure if there'd still be enough miners to keep the show going.
Nodes that add new blocks earn both new Bitcoin rewards (until ~21 million bitcoins are created) and transaction fees. If hash power drops from miners going out of business, then difficulty adjusts and competition for fees is reduced, reducing the cost of mining until there are miners again. When all Bitcoins are mined, nodes that add blocks are still compensated from transaction fees. They compete for transactions by offering lower fees, and in this way the transaction fee is determined by the market for Bitcoin transactions.
That might still create a period of instability where the network lacks hashing power, but it's not nearly as bad as I thought. And since the same number of transactions would be achieved with less hashing power, I guess the environment would gladly see Tether collapse :P
The "fraction" is unknown though, with unwillingness to provide details and a vague assertions from someone that it's "fully backed". But, you know, you have to take his word for it.
You can't do this with Tether. A country's own economic reports and extensive external analysis by others can validate the financial state of a country & its fiat currency. With Tether, you have to take their word for it.
And loans? Doesn't that contradict their entire premise-- Mint 1 Tether and sell it for $1 so it's always fully backed. Loans shouldn't be necessary. Loans could be called in the second Tether shows weakness, which would further destabilize it.
And lets face it: If it's not actually fully backed $1 for $USDT then there's zero guarantee that it can't start floating against other coins or currencies. It's only worth $1 if you can find someone willing to give you $1 for $1 USDT. People claim if it loses value then Tether will simply buy up enough to drive the price back to the $1 peg. Buy it with what though? Their assets, the money backing it! which means it's then backed by even less! The only way a strategy of Tether buying the price back up to the $ peg can work at all is if Tether has more assets backing it that strictly necessary.
As for other assets backing it, they'll go up & down in value too. Even if it's currently fully backed, without transparency those other assets backing it can go down in value and then all of a sudden it's not fully backed.
All of these concerns might be moot. Tether might be completely sound, rock solid & stable. But anyone who believes that is taking it on faith based on the word of people who are highly biased & highly interested in having $USDT owners believe it, true or not, and it is unfathomable to me at this point in crypto, where shitcoins & pump & dumps and ponzi schemes and all kinds of scams persist, that anyone would take something like this on faith.
That makes tether something very different than the federal reserve which can just conjure money and give it to the banks.