Gemini created an audited, 100% reserve stablecoin; no one uses it. This suggests that there is no genuine demand for stablecoins and that Tether has been entirely scam and hype driven.
Dollar amounts in a litigation complaint and headlines about "sued for $X million!" are not usually that meaningful; remember your Gell-Mann amnesia.
This suggests that there is no genuine demand for stablecoins
That just suggests that "audited" and "100% reserve" are not the most important features to people using stablecoins. What is more important is having a deep market on Binance, which is where most BTC <-> stablecoin trading happens.
Despite these terrible news articles, which are indeed reporting accurately that there are terrible flaws in Tether, you can still trade Tether for $1 right now. A hundred dollars worth of Tether is still more valuable than a hundred dollar payment made via a credit card.
That's just for interactions with the company behind Tether itself. That isn't how most people exchange their USDT. The most common way to get rid of USDT is to exchange it on Binance, where the market for Tether is very liquid, and the going rate as I write this is right around one dollar. Plenty of other exchanges besides Binance too. See:
> The most common way to get rid of USDT is to exchange it on Binance
Exchange it for what?
If you exchange it for a record entry for anything (whether dollars or Bitcoin) in a Binance (or affiliate's) account, you're exchanging one IOU for another. Given most USDT trades on Binance and its affiliated entities, this loops right back to the withdrawal problem.
A "stable" coin that cannot be readily redeemed and is not fully reserved is a Ponzi scheme with extra steps.
USDT is most commonly exchanged for Bitcoin. You can withdraw the Bitcoin from Binance to your own wallet, so you aren't really "exchanging one IOU for another".
There are plenty of valid criticisms of USDT. Saying that it is hard to exchange 1 USDT for a dollar's worth of Bitcoin that you control is not one of them.
> You can withdraw the Bitcoin from Binance to your own wallet, so you aren't really "exchanging one IOU for another"
Until it's in your wallet, it's an IOU. And Binance has had issues with Bitcoin withdrawals, too. (Not to mention, they seem to lose their cash and coins to hackers [1] and fraudsters once a quarter.)
There is no independent, trusted marketplace where USDT trades in material volumes. And we now know that Tether previously lied about its dollar reserves. Continuing to trust them is delusional at best.
> A "stable" coin that cannot be readily redeemed and is not fully reserved is a Ponzi scheme with extra steps.
Extra steps, and the delay they introduce, may be all a ponzi needs to sustain itself sufficiently to permit quiet exits. That the market will eventually be consistent is, alas, not the current manipulators' problem.
Exchange it for Bitcoin. What else would you do with it?
People here seem to misunderstand what USDT is used for. It's not to invest in.
It's used to trade against BTC at exchanges which do not have access to USD markets. The gambl^Wtraders there probably couldn't care less about how collaterized it is. The threat model is and has always been that Binance or Poloniex or whatever they're called disappears with your money, tethered or otherwise.
Well, yes. There are huge network effects for stablecoins.
Let's go for a more specific example. Let's say that you hold one bitcoin on Binance, and you believe the price of bitcoin will go down today. You would like to exchange your bitcoin for dollars, and then tomorrow, exchange your dollars back into bitcoin.
Ideally you would just use plain old US dollars. But since it's crypto, you can't. What you can have is a stablecoin.
So which stablecoin should you use? There are two costs to using a stablecoin.
Cost #1 is that when you exchange, you won't get the perfect rate. You'll have to pay some fee, and the precise exchange rate you get will depend on the liquidity of the market.
Cost #2 is the chance that this stablecoin collapses in value while you're using it.
For Tether, in my opinion cost #2 is high. All these dubious stories about the underpinning of Tether are true. That means the risk it collapses tomorrow are higher than the risks that other stablecoins collapse tomorrow.
However, cost #1 is probably lower for Tether than it is for any other stablecoin. Because there are more traders operating in Tether, you get a better exchange rate.
This is why Tether isn't just hype, it is providing real value to people through being the most popular stablecoin.
Would we be better off in a world where the most popular stablecoin also had a solid financial backing? Yeah, I think so. But that isn't the same as saying that Tether has no utility today.
Why not just use a reputable exchange, which actually lets you exchange your BTC into real dollars, as opposed to funny money dollars, like Coinbase?
I understand why a money launderer wants to trade on an exchange which does not let them withdraw USD. But why would a normie (who, at some point, wants USD) want to do so?
This specific example is why you wouldn't want to exchange your BTC into real dollars. The user doesn't want to withdraw fiat dollars, they just want to exchange Bitcoins into a dollar proxy, then exchange back. Sometimes the cost of a less-liquid exchange is higher than the cost of using stablecoins instead of dollars.
> Ideally you would just use plain old US dollars. But since it's crypto, you can't.
Because unbanked cryptocurrency exchanges are essentially in the business of money laundering. A service that facilitates illegal transactions has obvious value to any libertarian or criminal, but I’m not sure that counts as “providing real value to people.”
Maybe the most important feature is related to Tether's uses as a criminal money laundering vehicle? Maybe Tether's sketchiness is a feature, not a bug, at least to its users.
Well, clearly Tether will take your $1 and issue you USDT. The problem is that for the most part, you cannot get that dollar back for it.
100 units of USDT is worth $100 only if you can get someone to trade it to for that. For the moment, you actually cannot -- you have to trade it through BTC or one of the other crypto coins that are actually paired with USD first.
That is a San Francisco based exchange with USD deposits and withdrawals. There's been a couple times where tether has been under a dollar during times of high uncertainty (and I think relatively low liquidity of this trading pair), but generally you can trade tether for USD and withdraw here.
Interesting to see that it exists -- I know there was a great deal of controversy over the fact that Tether would not redeem them ever. The order book there is awfully thin for an asset worth the billions USDT is supposed to be though.
If can exchange USDT for BTC at the same rate that you can exchange USD for BTC, that's good enough to make 1-1 the going rate for USDT <-> USD. Yeah, it's inconvenient to exchange USDT into dollars, but the ability to easily exchange into dollars isn't the primary utility of stablecoins.
Admittedly, I believe Gemini released their stablecoin well after the end of the 2017 bull cryptocurrency market. It was much easier to get people to try your shitty new coin in 2017 than it is now, so demand for any new coin will be lower. I agree that Tether was a hype-driven scam, but I don't think the relative unpopularity of the Gemini stablecoin reveals that.
This is purely anecdotal but as a Gemini user I'd use their stable coin if it was accepted on any of the other exchanges I use. I'd actually prefer to use it to buy altcoins than to use a BTC/ALT pair.
Same here. If Gemini offered DAI I'd be more likely to purchase it but GUSD only has a small amount of 3rd party services using it. The only one I can think of is BlockFi right now.
It doesn't, exchange data is heavily manipulated in order to game certain resources like coinmarketcap, coingecko etc. I would agree tether is more but nowhere close to as described. Dividing by a factor of 10 wouldn't even be enough imo.
Most cryptocurrency activity occurs outside of the USA, is it any surprise that an American created stablecoin with severe risks due to its American ties is frowned upon by those trading cryptocurrencies? Avoiding the regulatory hell of Americans who think they control the entire planet is one of the primary purposes of stablecoins.
> Gemini created an audited, 100% reserve stablecoin; no one uses it. This suggests that there is no genuine demand for stablecoins
How then do you explain DAI?
It seems to me that people don't want an "audited, 100% reserve stablecoin", they want an algorithmic, decentralized stablecoin that can't be screwed up because somebody seized the "100% reserve."
Dollar amounts in a litigation complaint and headlines about "sued for $X million!" are not usually that meaningful; remember your Gell-Mann amnesia.