Is tether even a Ponzi scheme? My understanding is that returns are 0. And it's "pegged" to dollar, so you can't even make any money by buying it...
Ponzi scheme would mean that some investors were getting returns...
Ponzi scheme would mean that some investors were getting returns...
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Let's say I decide to make NerdBucks. I offer to sell you n NerdBucks for n dollars, 1-to-1, and tell you I will always buy those NerdBucks back at the same price. This is how NerdBucks get "pegged" to a dollar -- if someone will always buy the currency for a given rate, it will then always be worth at least that much.
Now, you might say, "Okay, what's from stopping you from selling a billion NerdBucks, and when people try to sell them back to you, you just refuse?" Well, normally nothing (outside of litigation, but that is a rabbit hole I'm not going to talk about here). In theory, though, I could have a bank account that I publish the amount of inside it, to show you I am prepared to buy every single NerdBuck back in a worst-case scenario.
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Going back to Tether: The issuing body of Tether has suggested they are holding reserves of USD equivalent to USDT in circulation. If you look at some of the other articles linked in this thread [0] you can find deep-dives that suggest they are lying, and in fact have been using USDT as a way to print money.
They are relying on the hope that more people will buy USDT than come calling to cash in. That is fundamentally the same hope that a Ponzi scheme relies on.
[0]:https://medium.com/@bitfinexed/bitfinex-and-tether-is-unaudi...
It's fun watching the crypto folks re-learn 100 years of hard lessons about unregulated finance.
I'm in general just against using Ponzi scheme to describe things that are not systems where previous investors are promised and paid profits with later investors money.
BTC is bubble or mania. But not really Ponzi. Tether is even less so, it's carnival token...
Here's a good write up of the recent disclosures and the bag of shit that is Tether's reserves: https://www.mymoneyblog.com/tether-stablecoin-risk.html
"Instead of 100% risk-free, short-term, liquid assets, Tether is less than 7% risk-free, short-term, liquid assets. Commercial paper? Backed by whom exactly? Fiduciary account? At which remote offshore bank owned by a third-party? They could be pointing to a half-eaten sandwich and calling it collateral."