Tether (and most crypto) seems like someone copied Ponzi's original scheme 1:1. Put in some money, transfer it to another format (Tether to other crypto, with Ponzi it was stamps), then eventually pull out loads of cash. Some people will undeniably get rich off it. But it's not sustainable.
You can spend $1 USD to get 1 Tether that is "redeemable" (by trade, not through the Tether company) for exactly $1 USD. A Ponzi requires some kind of promised payout, no?
This is all elaborated in the article.
Now if, for some reason, too many people decide to withdrawal and cash out on their Tether, there's not a sufficient cash backing there. It'll completely collapse and people will be left with a bunch of Tether that's no more valuable than any other bunch of random sequences of 0s and 1s on the internet. This is no different from the original Ponzi scheme. Just replace crypto with stamps/international reply coupons and it's absolutely identical.
This distinction doesn't even make sense though. The Tethers aren't redeemable directly from the Tether company. People redeem Tether for USD by market transaction. As these Tethers are just USD IOUs, it doesn't seem to matter much whether they are fully backed by USD, as long as there is liquidity to buy and sell them for their full USD value as required.
The specific claim that was made by GP, and the claim that I see bandied around, is that Tether is a Ponzi scheme.
Tether doesn't appear to share any characteristics with a Ponzi scheme, which is why I am puzzled to see people so adament it is one.
The most important characteristic (IMO) is that there is no promise of a return. $100 of Tether will only ever be worth $100 maximum.
If anthing, Tether is basically operating as an unregulated bank. You're not calling banks Ponzis are you?
How exactly is X making a profit when they're just working as an intermediary? Why do they absolutely refuse to show their finances? How exactly are they getting the resources to do all this?
Now, am I talking about Ponzi or Tether?
They always use precise wording about their holdings “commercial paper”. I’m guessing it’s not US treasury bonds equivalents or they would say that explicitly
Could they come clean, will there be a bank/USDT run?
Depends of how much USDT real clients hold and how much USD they hold, and how likely it is that EVERYONE wants to convert USDT back to USD -- it would take a very catastrophic collapse of cryptos for that to happen.
USDT has intrinsic value for money laundering, so even if all other cryptos would go to 0, not everyone would want their USDT converted to cash.
While I don't like USDT, and I don't think that's the case --someone printing USDT could have already amassed a great fortune, and if he was benevolent enough, could probably redeem all USDT of all the real people holding USDT.
By what you describe, the crypto purchased with Tether would be the Ponzi... but that's not the subject of this article or my question on why people insist Tether is a Ponzi.
2. The appreciation of crypto generally. If Bitcoin offered to pay out interest based on how many invested, people would see it more transparently as a ponzi