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Thank you for this explanation!

I had tried to describe this effect recently when Trump lowered bank reserve requirements, urging traditional banks to buy stablecoins with the extra funds this gives them.

My comment was that it increased risk (less reserves), without any potential upside in new economic activity. Basically all the money would flow to the govt in the form of treasuries the stablecoin issuers buy.

As opposed to the banks, you know, lending money to businesses.

This is a much more optimal solution than blockchain.

I get a push notification if a wire comes in.

And if I send one I’m carful the details are correct, but I’m not completely doomed if I typo the account number.

Stablecoin issues are just waving their hands and saying “blockchain” to try to magic away that liability.

Otherwise they’re doing the exact same thing.

We need to trust those running the system.

Societies cannot function without trusted intermediaries, in finance and many other things.

If we are in a democracy then the government regulates such organisations and should punish those who do not comply.

Blockchain doesn’t scale as a replacement so the point is moot.

Why does it have to be decentralised (by which I assume you mean permissionlesss to join as a validator?)

The only reason for this - it would seem to me - is the ability to have nobody in control who can be subject to law enforcement.

If you need this kind of decentralisation blockchain, and all its inefficiency, is the only choice.

Societies should not require such things though. They need to have trustable institutions and intermediaries to function, in finance and many other areas.

There is a grain of truth in what you say, but your conclusions are off.

Tether started as a way to pump the Bitcoin price, under the guise of better facilitating payments on crypto exchanges. They’d issue Tethers out of nowhere and use it to buy BTC and wash trade.

It was so successful it got to the level many people thought of it as “as good as dollars”.

This led to massive demand for it outside of Bitcoin pumpers - with criminals, sanctions evaders, money launderers of all kinds. Your granny needs to buy tethers to send money to the scammer she’s on the phone to.

So yes I do think they’ve probably moved away from issuing unbacked tethers. But only because they’ve found another niche which is also extremely suspect.

There is nothing to commend these guys. It’s a massive scam.

Just because they ditch the proof-of-work doesn’t make it efficient.

The blockchain structure, the validation mechanism etc are still a very inefficient way to do general compute or database type functions.

“Post the collateral”

I’m fairly sure if you want a bank loan and are prepared to lodge cash in the bank to secure it they won’t need too much paperwork.

Usually people getting loans don’t have the funds in cash already. Defi is nothing like that its currency speculation at best.

Not unless you lie about what money you have and just print them out of thin air.

Not real audits by a major firm.

Just pinkie promises. David Gerard discussed a while back:

https://davidgerard.co.uk/blockchain/2021/03/30/tether-produ...

The same way it does in Excel.

You fire up Excel. Put some numbers in the boxes. Say those numbers are dollar bills you have under the bed.

Then you do SUM(A1:A10) to show your total funds. It has to be legit because Excel doesn’t lie right?

This is the company who have never produced a real audit despite years of saying they would?

If they are fully backed they’d get an audit. The fact they don’t should tell you all you need to know.

Only a fool would think Tether have never had an audit done out of fear it would prove they’re fully backed.

The mechanics are sort of different. It’s on a blockchain so a true “reverse” is not possible.

But the smart contracts they write look up a blacklist, which only they control. They can block, unblock or burn tokens.

To “reverse” something they could burn those tokens, and then just issue more and send the new ones to the original address.

So yeah it’s like PayPal or whatever. Except with blockchain thrown in so they can say the rules don’t apply to them.

Not really.

The “solution” for decentralisation - proof of work - makes the system a lot more expensive (think: higher fees) than a centralised database.

Tether has been reluctant in many cases to freeze addresses reported to it. At least historically it would not do so if the coins didn’t belong to its direct customers (mostly the large exchanges), rather than individuals who got them from their customers and did crime.

https://archive.ph/6nvkc

The other major issue is it’s easy to get the stablecoins, move them around, cash them out, and by the time Tether freezes them the criminals have already been paid (in dollars, which is what they want really).

Good news! They’re back!

Do you the police should have zero power to set up checkpoints, or search cars even with a warrant?

Indeed. Blockchains are for breaking the law.

I think it would be wholly better, in democracies, if we changed laws we didn’t like than tried to create technology to evade them.

Pretty sure they didn’t that’s why we brought in anti money-laundering laws.

Yep. And the White House will let them now.

Isn’t the advantage of Stablecoins just that you can avoid regulation when it comes to payments, especially across borders?

Otherwise why not just use normal digital payments? I fail to see why a blockchain is needed to log the transactions.

Exactly this.

Which isn’t really “vibe coding” as it’s been promoted, i.e. a way for non-programmers to just copy and paste their way to fully working software systems.

It’s a very powerful tool but needs to be used by someone with the expertise to find the flaws.

Right but if you are going to run and operate server infrastructure for yourself you need to know about that stuff.

You saying the average admin is gonna have no issue setting up their MX records but “won’t even know” what a reverse DNS entry is?

Not really sure I get why that would be a factor

Sure.

It might be a tool in the box. But it’s still cat and mouse.

In my place we quickly concluded the scrapers have tons of compute and the “proof-of-work” aspect was meaningless to them. It’s simply the “response from site changed, need to change our scraping code” aspect that helps.

I do kind of wonder if it benefits Wikipedia for them to allow so much on commons.

I get it’s hard to distinguish between pornography and something that might have educational merit at the edges, and have a workable policy.

But still I can’t help but think this is not really helping.

Yeah it’s sort of like all the apps that would refuse to run on a jailbroken iPhone.

Basically on such a system you can potentially manipulate the process. Here that would probably be to install the credentials of someone else on the device.

So they want a locked down OS environment where user does not have root privileges and software has to be verified (in this case by Google) to be installed.