Crypto Mystery: Where’s the $69 Billion Backing the Stablecoin Tether?

submitted by Drewski from (bloomberg.com)

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[–]Drewski[S] 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (0 children)

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[–]Anman 1 insightful - 2 fun1 insightful - 1 fun2 insightful - 2 fun -  (8 children)

I think the word "backing" needs to be looked at closely here. First, digital currencies are backed by nothing. Their value is only determined by hype. Second, they are looking at a currency that is backed by nothing, to back a currency that has nothing backing it. Its fiat-ception. Go and watch The Big Short on how to make money out of money that is based on nothing.

[–]CreditKnifeMan 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (7 children)

Their value is only determined by hype.

The value is based on proof of work.

Fiat can be typed into existence.

[–]Anman 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (6 children)

The only thing that is based off proof or work is a favour you owe to some one. A digital filp of 1 and/or 0s is backed by air. If the power goes out, what value is your one or zero? You might argue that its an IOU, but again IOUs are backed by a physical contract that requires an exchange of something. Such as an IOU for a piece of gold or silver. You know. Gold backed currency.

[–]CreditKnifeMan 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (5 children)

The only thing that is based off proof or work is a favour you owe to some one.

Proof of work has nothing to do with debt.

Crypto is a departure from the existing debt-based system of money.

Crypto is a form of digital scarcity, and is analogous to a newly invented/mined digital material.
If it's a useful digital material, or other people want it, then it will have value to people.

Gold backed currency is better than fiat reserve notes, but it can still be counterfeited...

Or printed without increasing the quantity of gold reserves backing the currency, which is the 'legal' version of counterfeiting.

[–]Anman 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (4 children)

If it's a useful digital material, or other people want it, then it will have value to people.

In short, its value is determined entirely by nothing physical and just demand. You know, like fiat. Its value exists, because people believe it has value. It can not be traded for anything, other than other peoples perceived value of it. Just, like, fiat. Supply X nothing = nothing. Demand x nothing = nothing.

[–]CreditKnifeMan 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (3 children)

In short, its value is determined entirely by nothing physical and just demand.

This applies to everything.

Nobody buys sand in the desert, but fresh water is sometimes priceless.

No one dies of thirst at a spring fed lake on a mountain top. But you'll need sand for concrete if you want to pour a structural foundation for a modern home.

You can't eat money, etc.

[–]Anman 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (2 children)

Sorry, sand is exported from deserts to all over the world. Some sand is more valuable than others and has a higher price. Obviously this also applies to water. Billion dollar bottled water industry is a good place to start.

You can't eat money, it has no value (unless it is backed), and if the institution that manages it collapses, it's only good for wiping your ass with or for kids playing in. Recent modern history has many examples of this. A cow on the other hand, always has value and always has use and doesnt require any external organisation to determine its value.

[–]CreditKnifeMan 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (1 child)

Sorry, sand is exported from deserts to all over the world.

You're missing the point.

No one pays for sand if they live in the desert.

I agree with the rest of your comment.

[–]Anman 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (0 children)

You sure about that? People still pay for dirt and they live on it. What is worth more, a calf or a cow? What is worth more, a plain calf, or a butchered calf?

People all over the world live right next to salt water, but still pay for salt and water.

You could say that this is value added costs. Cleaning sand so it is pure for construction, processing it into glass, moving truck loads from one spot to your back door because you do not have the time to do it yourself, even though your village is surrounded by it. Sand, even if you live around it, is not free. It costs time. And time is always money.