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The Significance of Tether



 



"As I thought more about the giant volcano of crypto bullshit erupting at Crypto Bahamas, I realized that Tether was its molten core. Each scheme depended on exchanges like FTX to enable investors to buy and sell their tokens. And those exchanges in turn counted on Tether as a crucial connection to real US dollars. Without Tether, it was possible this entire economy would never have developed."  

Zeke Faux, NUMBER GO UP, p. 135.

Well, perhaps that is an overstatement.  Someone else would have come up with something similar had the founders of Tether -- Brock Pierce, Reeve Collins, and Craig Sellars -- all been busy on quite different paths. Somebody would have created coins that stayed close in value to the US dollar, while otherwise bearing the technological features of the cryptos, otherwise very volatile against the dollar. 

Still: Faux's book is largely a tale of how the Tether coin was built on a lie -- that there was a one-to-one relationship between every Tether coin (USDT) anyone owned and a real US dollar in some bank account under the control of the sponsoring entity, Tether Ltd. That bank turned out to be difficult to find.  As the mask fell off in the spring of 2022, Tether Ltd. had increasing difficulty keeping the value of USDT at a 1:1 with the value of USD.  

This was evident behind the scenes of the big Crypto Bahamas 2022 event, in April of that year. 

On Thursday, May 12, 2022 USDT fell to just $0.95 against USD.  Gasp! Horrors! Smelling salts! It is unlikely that you, dear reader, noticed this among the pressing items of news of that time: war in Ukraine, wildfires in New Mexico, the leak of the Dobbs opinion of the US Supreme Court,  Musk's acquisition of Twitter, a Somali civil war, and other stuff. 

But this loss of 1/20th of what was supposed to be its predetermined value was a gut kick to Tether Ltd. and, in its reverberations, to the broader crypto ecosystem. Tether did not continue that drop.It recovered dollar parity. But the rest of the crypto world still seems wobbly.  

Happy Thanksgiving. 



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  1. Paul D. Van PeltNovember 24, 2023 at 8:29 AM

    Am reminded of an old saying---right up there with Murphy's Laws: every man has a scheme that will not work.

    ReplyDelete
  2. Paul D. Van PeltNovember 26, 2023 at 5:20 PM

    Another memory. Years ago, I learned of a currency form, on the Isle of Yap---in the South Pacific, I think. Yaplanders used large stone rings that must have required an amount of labor to craft., thereby adding value to an otherwise useless task. The stone *coins* had no intrinsic value, but the work needed to craft them; community recognition of their *worth*; and shared cultural recognition gave them extrinsic value. Additionally, size and mass made them hard to steal! Much less complicated than crypto currency. Complexity was not a problem, there and then. I wonder how many Yaplanders now have smartphones?

    ReplyDelete

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