You’re not wrong, but you’re missing a few things here. The initial promise of crypto was to enable peer-to-peer transactions that do not require trust in any third party. But as the cryptocurrency sphere developed, it became very useful to have a crypto-ized fiat currency reference that exchanges could trade just like normal crypto. So, these Tether folks came along and said “We are releasing a special smart contracts, where each token is backed 1:1 with dollars”. Do I trust them? Hell no. But I do have to acknowledge there there have been events over the years that stressed their ability to keep that 1:1 peg, and it hasn’t failed yet. So, while their assets are not sufficiently certified by a reputable third party, they have developed a reputation over time that they seem to know what they are doing. (And so much of the Crypto economy relies on Tether that if we’re to ever implode, the entire $4 trillion Crypto market cap could evaporate. Still, it hasn’t happened yet).
Not all stablecoins are so lucky. TerraUSD was an “algorithmic stablecoin”, which aimed to maintain a $1 price using arbitrage wih other crypto assets. That famously fell apart. Should that have been “allowed” to happen in hfe first place? Maybe not, but a key feature of crypto is that it is distributed and the Terra folks didn’t need to ask anyone’s permission before doing it.
If we’re going to have these things to begin with, it would make sense to introduce some regulations to make sure that these things are really fully backed and redeemable. But these regulations can’t be too punitive or arbitrary: otherwise, the capital will flee to countries that aren’t as punitive, where they can do business in a truly permissionless fashion. The Biden administration seemed hell bent on regulating crypto out of existence, which is a big reason why the crypto world threw a shitload of money at Trump.
The Biden administration seemed hell bent on regulating crypto out of existence, which is a big reason why the crypto world threw a shitload of money at Trump.
Actual dollars can’t be traded as easily on crypto exchanges, it’s as simple as that. USDT (Tether) is traded just like any other token riding on top of a blockchain. If you wanted to hold USDT and didn’t trust the exchange, you can withdraw it to a wallet you control, just like any other token. (Most crypto nerds don’t hold USDT, though, they use it to trade between tokens which they then store in their wallets.)
If an exchange tries to keep it’s own dollar-denominated accounts, then their customers need to trust them to not run off with those deposits. It would also subject that exchange to some amount of US oversight, particularly if they also want to participate in the US banking system and let customers deposit and withdraw via ACH.
You’re not wrong, but you’re missing a few things here. The initial promise of crypto was to enable peer-to-peer transactions that do not require trust in any third party. But as the cryptocurrency sphere developed, it became very useful to have a crypto-ized fiat currency reference that exchanges could trade just like normal crypto. So, these Tether folks came along and said “We are releasing a special smart contracts, where each token is backed 1:1 with dollars”. Do I trust them? Hell no. But I do have to acknowledge there there have been events over the years that stressed their ability to keep that 1:1 peg, and it hasn’t failed yet. So, while their assets are not sufficiently certified by a reputable third party, they have developed a reputation over time that they seem to know what they are doing. (And so much of the Crypto economy relies on Tether that if we’re to ever implode, the entire $4 trillion Crypto market cap could evaporate. Still, it hasn’t happened yet).
Not all stablecoins are so lucky. TerraUSD was an “algorithmic stablecoin”, which aimed to maintain a $1 price using arbitrage wih other crypto assets. That famously fell apart. Should that have been “allowed” to happen in hfe first place? Maybe not, but a key feature of crypto is that it is distributed and the Terra folks didn’t need to ask anyone’s permission before doing it.
If we’re going to have these things to begin with, it would make sense to introduce some regulations to make sure that these things are really fully backed and redeemable. But these regulations can’t be too punitive or arbitrary: otherwise, the capital will flee to countries that aren’t as punitive, where they can do business in a truly permissionless fashion. The Biden administration seemed hell bent on regulating crypto out of existence, which is a big reason why the crypto world threw a shitload of money at Trump.
The fraudsters back the fraudster.
No shit.
That’s the thing about crypto, though: they don’t need your permission (or anyone else’s) to do crypto things.
Fraudsters do fraudster things fraudulently, yes.
But what if they aren’t being a fraud? It turns out they can be frauds, or not, and your opinion on whether they are frauds doesn’t matter.
My opinion on fraudsters and their victims doesn’t matter. Nor does my sympathy, because I have none.
Good! Now consider the fact that you could be wrong, and not everyone involved in crypto is a fraud.
No, there are victims too.
All very wonderful and informative. Now tell me, what’s the reason to use a dollar-linked stablecoin instead of just using the dollar?
Actual dollars can’t be traded as easily on crypto exchanges, it’s as simple as that. USDT (Tether) is traded just like any other token riding on top of a blockchain. If you wanted to hold USDT and didn’t trust the exchange, you can withdraw it to a wallet you control, just like any other token. (Most crypto nerds don’t hold USDT, though, they use it to trade between tokens which they then store in their wallets.)
If an exchange tries to keep it’s own dollar-denominated accounts, then their customers need to trust them to not run off with those deposits. It would also subject that exchange to some amount of US oversight, particularly if they also want to participate in the US banking system and let customers deposit and withdraw via ACH.