It took Liberty Reserve 7 years and 17 countries cooperating to get nuked from orbit.
Tether was founded as Realcoin in 2014 by a group including former child star and accused sex offender Brock Pierce, so while it’s technically just rounding the 7 year mark, it didn’t begin in earnest until it was taken over by Bitfinex towards 2015 and didn’t become majorly problematic until 2016/2017 according to the NYAG findings. [1]
Given the vastly larger scope here, I suspect we’re going to be dealing with them for a few more years as the wheels of Justice spool up.
For anyone wanting to learn more I highly recommend Bennett Tomlins write up. [2]
Bitcoin effectively is the reason I stopped leaving breadcrumbs for Twitter researchers in the future. I read his research and see forum posts from idiots we use to laugh at on irc, but I myself participated in the pirate@40 ponzi, as other people did - maybe 47 poor souls if memory serves.
What a lot people can’t seem to grasp about 2012 is Bitcoin miners were flush with Bitcoin and no place to spend it, no place to invest or divest it. So you are bored it’s a nascent market you browse the forum it’s all one big joke anyways- until it’s not anymore. But you are looking for something to do with Bitcoin and you have to possibilities: bitcointalk or #bitcoin-otc of freenode
One of these requires a registered gpg to trade, one is a dang website
So flush with bitcoins We were running Perl pool hopping proxy scripts to game block rewards and jump to deepbit last minute pre next block - boosting profits by 25%. Trendon Shavers aka The Jimmy Buffer PonziMan also ran a mining meta pool gpumax.com where we could buy gpu shares, say 10 million shares of hash power from your 10 buddies running 10 rigs stuffed full of gpus and then you point that at one of the two Bitcoin mining pools that were left paying a Proportional payout scheme instead of PPLNS (pay per last n shares) and take most of the whole pool rewards in a flurry of blocks blocks blocks… kinda like satoshidice except fun - maximizing ROI and exploiting Bitcoin mining pool payouts was kinda neat for awhile
I normally don’t do this, but the comments and citations have me feeling nostalgic and I do enjoy reading u/arcticbull
Getting downvoted by people who weren't there, didn't understand the original community or how it worked, that or they just don't believe you. The community was small, I sold you a laptop at one point in it.
It really was all a game in the early days, then it blew up.
Hi Joe . The Laptop that the UPS truck ran over that I bought for $100 in Bitcoin in 2013 still works.
I always get downvoted here because I don’t cite sources :-)
The over the counter chat and trade seemed to end around the first big ATH blow up of 2017. The prices got too high and the conversation ended, my friend.
Can you explain how the proportional payout is broken? It is not immediately obvious to me how the pool hopping worked. Of course I accept it was broken, I've just never seen an explanation of now. Any explanation of PPLN lasts the historic perspective.
Early on Bitcoin mining pools payed proportional to mining hashpower. Not PPLNS, not PPS, just proportional.
Bithopper would basically jump to, or jump away from deepbit( the largest proportional payout pool) on long rounds, long 10 minute blocks.
Deepbit and Bitcoin.lc were basically the only two proportional pools you could overwhelm with hashpower, take block rewards from the pool, and damn anyone’s shares or how long they mined there for how many blocks.
Others could and should be able to speak to pool hopping but this is why the pools pay the way they do - we exploited the payouts early
But how exactly do you short stablecoins? You can't and even if you did the game is heavily rigged against you.
If you remember in the movie, Cohodes got his ass handed to him as banks margin called him out of his position and that's in a regulated market. These guys own their market and the exchange on which it originates. There's no way to even verify if they received dollars for every tether issued and by some miracle the yield on USDT is incredible. You'd be losing 4-5% a year guaranteed holding a short position.
That 100% payout will be in crypto, whose value in USD terms is going to tank if Tether implodes. And that's assuming the lending platform in question survives the carnage.
That's nonsense. When something as big as Tether falls the entire sector is going to fall apart. Everyone will run for the exits, USDC holders as well. I would not coount on Coinbase having enough real money to cover USDC redemptions. https://www.bloomberg.com/news/articles/2021-08-11/coinbase-...
Would you gamble your entire investment on that? If Tether collapses, there will be major outflows from all stablecoins, and we'll find out which ones have been swimming naked.
Circle [0] and Coinbase [1] have recently reported that they are shifting their USDC reserves fully into short-term liquid assets. Given that both Circle and Coinbase are US-regulated, and given the attention being paid to stablecoins specifically by US regulators right now, USDC is probably the safest on-chain asset that currently exists (assuming that you consider USD itself to be a safe asset to hold).
Domiciled is probably a better term than "regulated" for USDC. To quote their homepage disclosures box:
> Digital asset markets and exchanges are not regulated with the same controls or customer protections available with other forms of financial products and are subject to an evolving regulatory environment. Digital assets do not typically have legal tender status and are not covered by deposit protection insurance.
They're regulated as money transmitters like Venmo, and depending on the state, that can mean as little as "pay us a few thousand dollars and we'll ignore you." This regulatory framework was created as a way of side-stepping the more onerous regulations that apply to real depository institutions. Thats why they were able to invest the backing in ... whatever before the SEC came knocking.
> that can mean as little as "pay us a few thousand dollars and we'll ignore you."
This is simply not the case. Most, if not all, state money transfer regulations mandate financial reporting to the state, and place limitations on the permissible investments that a licensed entity may hold as backing for customer obligations held in trust. Any failure to comply will result in fines and/or loss of the license (which effectively results in the closure of the money transmission business).
A number of states (California and New York among them) also conduct on-site examinations of licensees' businesses (paid for by the licensed entity). As someone who was has served as a senior executive at a company that undergoes these examinations regularly, I can assure you that they tend to be rigorous and all-encompassing.
> This regulatory framework was created as a way of side-stepping the more onerous regulations that apply to real depository institutions.
This regulatory framework was not created as a way of sidestepping anything. It was created as a way to proactively regulate money transmission.
Money transmitters are not depository institutions; they serve a different, more narrow economic function, and existing regulations are properly tailored to that economic function. In practice that means that money transmitters are required to maintain 100% reserves backing any and all customer obligations, they must hold their reserves only in certain permissible investments (i.e. government debt and bank deposits), and they are required to obtain surety bonds to further insure those obligations.
Venmo, PayPal, Western Union, Money Gram and dozens of other companies are all subject to these requirements, and there has never been any instance that I am aware of where this regulatory arrangement has resulted in consumer funds being lost, in the twenty years since this regulatory regime began to be fully implemented after passage of the USA PATRIOT Act.
Furthermore, I am not seeing what the material difference is between the outstanding obligation represented by USDC and the outstanding obligation represented by a PayPal or a Venmo account. The fact that the law treats them the same is entirely appropriate.
Tether is a problem precisely because it is unlicensed and has thus far illegally evaded these regulations. The fact that Tether is operating illegally in the US should not impugn its competitors that are in fact operating legally.
I would. I'd wager Tether's collapse would cause inflows to other stablecoins. It's also worth noting that smart contract based stablecoins, such as DAI, are incapable of being under-collateralized.
Knowing pretty much zero about DAI (and honestly, not too interested to spend any time to learn), this still sounds incredible. Does that incapability hold even if prices of whatever underlying assets are not continuous? Like, at one point of time the asset is trading at 100 dollars, and at the very next moment it trades at 1, with no possibility for anyone to trade at 50 at any point in between?
I very much assume not. If you think that is laughably stupid to assume that prices would not be continuous, well, you are in good company, even some Economics Nobelists have fallen on that trap. And lost billions. In that case you may want to spend some time researching what comes up when you search for LTCM.
From where? USDT will be worth exactly $0 so some 80% of all trading volume in crypto will evaporate instantly, and so will probably 80% of its dollar equivalents.
Very easy to do on FTX or aave for basically as much size as you'd like. Yes, it costs 4-5% a year to short. If it blows up in the next few years you'd make a killing though.
Why do you think that? They treat USDT as any other coin, has no special status in the system. FTX is very well capitalized. Can you show me even napkin math that shows FTX going under if USDT blows up in a realistic scenario? (Going from $1 to $0 instantly isn't realistic.)
Why isn't going from $1 to $0 not realistic? Tether is completely centralized and has the ability to prevent token transfers on all major networks it operates on. They regularly add to their blacklist, much more often than other stablecoins. Were it seized by the DOJ, they could simply freeze all transfers subject to proof of AML/KYC and source of funds analysis. That would nuke the market for them immediately.
I believe FTX has some 10+ billion USDT on hand. That'll put a serious hole in their balance sheet. Not to mention whatever would happen to their futures insurance fund when the collateral evaporates. I'm trying to find my source for their balance sheet size, will follow up.
It's not realistic instantly. Even Madoff's victims got a recovery eventually. From OP we know at least 25% of tether's reserves is in a bank in cash. If it was seized I could see the market heading to 50-75c or so, there will be lots of people that want to gamble on an eventual recovery.
I'm very skeptical that FTX has 10B USDT on the balance sheet. OP here says Sam has billions of tether, which makes sense but is not enough to blow them up, and is likely in Alameda being as he says it's for trading, not in FTX.
(Of course it's possible that FTX has 10B in USDT deposits, but that belongs to their customers who would be very sad if it nuked but doesn't directly hurt FTX.)
Futures insurance fund may be an issue, yes, especially in scenarios where it shifts very rapidly. If you have math on a plausible scenario and total losses across the major markets I'd be interested in seeing it. But you'd have to be looking at several billion in losses or at over 1B directly attributable to FTX for them to go bust - they've raised over a billion and make 350M/year per recent Forbes article, so that's a lot of capital.
There is USDT lending available. Even more, there is decentralized collateralized lending available.
If someone wanted to short USDT there are plenty of opportunities to do so. (And there might be a lot of people doing so, specially now that the shadyness is being reported on some of the more reputable traditional newspapers)
You can only do that at exchanges that are seriously exposed to systemic Tether risk and will also collapse if USDT goes down. So even if you're right, you won't get paid on USDT/USD swaps. Shorting USDT at Bitfinex is like shorting Caesars chips at Caesars. News flash: if Caesars goes bankrupt just which cashier do you think is gonna give you which dollars?
At this moment you can deposit defi borrowed usdt into Coinbase pro, swap it for usdc there, and then swap the usdc back to USD and withdraw to your bank account. Then if tether collapses you'd be able to pay back the borrowed usdt for pennies on the dollar.
The first step (borrowing usdt on a defi platform) needs you to collateralize that loan with some other form of cryptocurrency. You are forced to have exposure to crypto to make the trade that shorts it.
Have you ever seen the bit in a show (or, hell, been caught by a street hustler) where someone asks for help breaking a large bill, and then after a few rounds of confusion and money being handed back and forth walks away with everything?
> by a group including former child star and accused sex offender
This makes your argument seem conspiracy-theory-esque, despite your links having some quality information. That quote is more akin to clickbait than it is a valid point in your argument.
Every other crypto investment seems to be run by someone with past criminal convictions, accusations of sexual misconduct, or shady past. I have somehow been able to avoid all of this in my own career without much effort.
It speaks volumes that this is the kind of characters interested in this space.
Tether was founded as Realcoin in 2014 by a group including former child star and accused sex offender Brock Pierce, so while it’s technically just rounding the 7 year mark, it didn’t begin in earnest until it was taken over by Bitfinex towards 2015 and didn’t become majorly problematic until 2016/2017 according to the NYAG findings. [1]
Given the vastly larger scope here, I suspect we’re going to be dealing with them for a few more years as the wheels of Justice spool up.
For anyone wanting to learn more I highly recommend Bennett Tomlins write up. [2]
[1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
[2] https://bennettftomlin.com/2020/12/08/an-introduction-to-the...