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Comment by initplus | Hacker News Reader

Is it definitely backed? As far as I know there has never been satisfactory proof that USDT has ever been backed by anything.

Yes fractional reserve banking is a real thing, but real banks must publish audited financial statements so that outside observers can asses the banks financial position. From small local banks to national reserve banks, the financial statements are out in the open for depositors and borrowers to scrutinize. This isn't possible with Tether because the fiat side of their books are closed.

If everything is above board at Tether why not release the books? It's such an obvious PR win and would increase adoption of their currency.

They haven't done so because they know the books are cooked.

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NYAG, US DOJ and CFTC all found it was backed, from their own subpoenas. NYAG settlement with Tether forces them to keep updating disclosures.

Its 2/3rd backed by dollars and 1/3rd a mixture of commercial paper, which we don't have further information about. Rumor mill always swirls about that paper, but its probably not that controversial and would only be 33% of Tether. Likely would result in a liquidity crisis if more than 70-80% of Tether's were redeemed at once. Although I wonder if that's even possible now given how much USDT is locked in DeFi apps and liquidity pools and burned.

(Projects often lock assets in a liquidity pool share and then destroy their access to that share, to ensure to their community that there is always the ability to trade)

So Tether will probably continue working for partially the dumbest reasons.

Tethers can't be burned.

If anyone ever provably burns a tether, then the tether organisation will help 'recover' the tether to anyone holding keys to a previous address that held it, or just anyone with a reasonable story how they accidentally burned the tethers.

This is their policy since some big players accidentally sent tether to addresses on the wrong Blockchain...

Thats pretty interesting. I don't think that would work for Tether stuck in a liquidity pool share that was burned by being sent to a contract or burn address. Traders can still shift that tether around, but it cannot be unbounded. Be a hard case to prove.

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