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Comment by Traster | Hacker News Reader

The thing I don't understand about the "Illegit" method is that it relies on people accepting USDT for BTC and then not cashing them out to real USD. Because if the company is printing USDT it wouldn't have the cash to pay the people trying to cash out USDT. So to allow this to happen you would need a people to be holding a huge amount of USDT.

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People do hold USDT. I hold some myself. If you are going to buy crypto again it saves the hassle and expense of converting into fiat money and back again.

The majority of exchanges can't actually hold fiat money due to regulatory issues.

Also I imagine some people are hoping to avoid the taxman by keeping it in crypto though that's legally not kosher.

Why USDT and not USDC or DAI? Don't you feel like holding USDT makes you complicit in whatever shit is going on?

Also, I would be very, very weary of using an centralized exchange that "can not hold fiat". With the layer-2 projects that are coming now (take a look at loopring or Stakenet), you can transact as much as you want, no gas fees and exchange fees are about the same as any CEX.

Because way more exchanges offer USDT trading. USDC / DAI are both fairly new, and aren't offered as trading pairs nearly as frequently.

Still, they do exist now. And again, if an exchange only offers USDT as on-ramp that should be a massive signal against its trustworthiness.

I somewhat agree, but it's also a chicken and the egg problem - everyone uses USDT as the primary pair because everyone wants it, and everyone wants it because that's what every other exchange offers. Exchanges can offer another stablecoin, but it's likely to have very little volume.

Coinbase offers DAI, plus you can exchange DAI for any ERC20 token on a dex.

Right, and coinbase offers USDC as well. The problem is the long tail of exchanges overseas that only offer USDT.

But why should you care about these fringe exchanges when (a) you know they are not trustworthy and (b) there are decentralized alternatives where you can trade pretty much any token you'd like to hold?

If the problem that these exchanges only offer $LOCAL_CURRENCY <-> USDT as on-ramp, what's stopping you to:

   1. make the on-ramp via USDT
   2. buy ETH
   3. withdraw to your own wallet
   4. Trade on Uniswap/Curve/1inch/Loopring/Stakenet to anything you want; (Wrapped) BTC, USDC, DAI, any ERC20...

It's not that complicated, it eliminates your risk of holding USDT, these shady exchanges can still operate (at their own risk, not the users), it makes it super easy to identify exchanges with liquidity problems (the ones that get any excuse to not let you withdraw or make the fee way to high will surely indicate an issue with their liquidity) and - most importantly - reduces the amount of USDT in circulation.

What I am missing?

In what way is Tether not a fiat currency?

Ironically Tether, whose quantity appears to be determined by however much the small private entity that runs it decides to create, appears to be a much purer example of 'fiat' currency than most national currencies have been for most of the last half century (quantity determined in a decentralised manner by the balance of supply and demand for credit at a base interest rate a centralised body periodically updates to hit a [decentralised market-driven] fixed target rate of inflation)

Investopedia has:

>Fiat money is a government-issued currency that isn't backed by a commodity such as gold.

Tether fails the government-issued bit.

In what meaningful way is Tether not a fiat currency?

It is meaningful, because a large part of crypto culture seems to be based around hand-waving and selling you an underdog no-big-government empower-the-people story

The not government issued bit would become pretty meaningful if they get shut down or collapse. They are more like IOU notes for fiat currency - Tether owes you one US$.

You can’t redeem Tether — that’s a core part of the fraud, they have “banking issues” and had them for years. You can sell it on an exchange but the Tether organisation have prevented any redemption of USD from USDT for years. Anybody turning USDT into USD is selling their USDT.

Though when you sell your USDT for euro or whatever on Kraken say, the tether org must step in and buy to keep the price at US$1. So they effectively redem if not directly.

When is tether org involved in this?

From your example the only thing that happened is that now you hold x euros and Kraken holds x amount of USDT.

Unless Kraken goes to Tether org and asks "hey I got these USDTs, please give me the USD" no redemption has occurred.

That some people can in effect transact USDT for fiat via other mechanisms (like your example above) says nothing about Tether org backing or reserves.

Until you go to Tether org with your USDT's and ask them for USD you won't know if they have the reserves.

The reason tether stays at $1 is because the tether org or their delegates buy or sell to keep it there. They have to or the whole thing would become untethered as it were.

Plenty of companies redeem USDT for USD. I myself worked at a company that redeemed billions of dollars. The FUD on HN is approaching delusional levels.

https://tether.to/faqs/

> Unfortunately, Tether has decided to stop serving U.S. individual and corporate customers altogether. As of January 1, 2018, no issuance or redeeming services will be available to these users. Exceptions to these provisions may be made by Tether, in its sole discretion, for entities that are: Established or organized outside of the United States or its territorial or insular possessions; and, Eligible Contract Participants pursuant to U.S. law.

> An Eligible Contract Participant includes a corporation that has total assets exceeding $10,000,000 and is incorporated in a jurisdiction outside of the United States or its territories or insular possessions. This will be the principal basis upon which we will continue to do business with selected U.S. persons.

Basically, it looks like they only provide on and off ramps for large clients outside the US. Given their history, I am betting they might not want to reveal where they store their assets, and don't want to deal with US regulators (but not sure this is working).

Yes, I worked at a company that had an entity outside the US that minted and redeemed tethers. This is how it works.

So as source for the claim that you "can't redeem tether", you are linking to something that says you can redeem tether?

When did I say I was providing a source for not being able to redeem tether? I'm just linking to information that I found useful when forming an opinion on the matter.

> something that says you can redeem tether

Tether, in its sole discretion, may choose to redeem tether, as long as you're a corporation with over 10m USDT incorporated outside the US.

I'd say that's not an ironclad guarantee that you can redeem tether.

Tell you what: you give me $100, I'll give you back a cooldude coupon. I have sole discretion as to whether I'll redeem this coupon when you hand it back to me.

Question: Would you say you can redeem this coupon? It's possible I might decide to give you back your money, after all.

And what does the company do with those USDT? If the money printing theory is correct, companies like yours would be the ones counteracting any sell-pressure on USDT. If the theory is not correct, companies like yours would see an at least equal buy-side demand for USDT, bringing real USD into the system.

I mean, does the company hold (increasingly?) large USDT positions on their balance sheet (and would therefore be the ones in the hole if Tether loses the peg), or is the company able to get actual dollars out of Tether inc. in exchange for those tokens?

I worked at Circle https://www.theblockcrypto.com/post/48857/former-head-of-cir...

That article was published in December 2019, when $4B of Tether had been issued in total, and covers an unspecified earlier period.

Are you sure that the $20B of Tether issued since then have an identical origin story?

So you can't trade USDT for USD at all (eg. third party exchange trades, or withdrawing from an USDT exchange directly), or is it only that you can't trade USDT for USD by going through Tether Limited?

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