Tether has a blockchain so you can see for yourself how much was stolen. Also, they blacklisted the hacker's address^.

The @bitfinexed narrative is so flaky, especially the chart "proving" that Tether issuance pumps BTC. I could post a similar chart showing that my trips to Costco pump BTC.

There are legitimate concerns around Bitfinex and Tether^^ but the FUD has gotten out of hand.

Things to keep in mind if you disagree:

1) There is increased demand for Tether mostly from exchanges other than Bitfinex. They aren't even the largest holder of Tether by a long shot. This explains increased issuance as much as any conspiracy.

2) There are no widespread complaints about being able to withdraw from Bitfinex

3) There is no premium on BTC price on Bitfinex as there would be if there were problems withdrawing in things other than BTC, a la Mt. Gox.

All this being said -- all this would go away if they would prove they had the funds backing Tether.

^https://twitter.com/petertoddbtc/status/932862730415017984

^^Mostly, IMO, around 1) making themselves a target for FinCEN, 2) the market not pricing a proper risk premium into Tether

> I could post a similar chart showing that my trips to Costco pump BTC.

Obligatory mention: http://www.tylervigen.com/spurious-correlations

Baffling how you think that's relevant here.

A relevant analogy would be a correlation between "trips to Costco and dollars spent at Costco". Do more trips to Costco definitely cause more dollars to be spent there? Maybe, maybe not, but there is strong reason to believe so.

It’s relevance is in how clearly it illustrates the ease of being able to correlate two unrelated things, but despite this fact many people repeatedly try to use correlation to imply causation.

> Tether has a blockchain

How can they create new tether on demand if it's backed by a blockchain? Do they control all the mining?

It is not really on its own blockchain. Tether exists on top of the bitcoin blockchain through the OMNI layer protocol. I discovered this the hard way by trying to transfer some Tether once and it was taking forever and I researched why. Bitcoin itself is very slow due to congestion from the silly 1 mb blocksize limit and 10 minute blocks.

Something like that.

Stupid, right? Why don't they just use a Postgres database?

Because then we wouldn't have a known number of issued coins as well as the full set of holders of those coins? Nor would we be able to trustlessly send them anywhere?

> Nor would we be able to trustlessly send them anywhere?

That’s not the case anyway, since Tether can retroactively refuse to honor tokens that were allegedly stolen. What if the attacker had traded his 30m Tether-USD in exchange for bitcoins? Then the seller of these bitcoins would be left holding the bag, because the central party that is Tether refuses to honor these obligations.

Tether can never be trustless, because it’s credit. Some party needs to redeem tether tokens for USD, and if that party refuses to do so then your money is gone.

people who hold Tether trust the Tether system that is enough to keep the peg to the dollar for now, but I have doubts the peg holds

I don't understand your point. Are you saying Postgres is not capable of storing a list of accounts numbers with balances?

Also, how is something "trustless" if all the miners and validators are run by the same person?

Because the cryptocurrency set is more easily impressed by a "blockchain" than a "database". E.g. this nonsense: http://www.ibtimes.com/un-will-use-blockchain-ids-fight-chil...

Amazing.

/r/bitfinex has quite a lot of people claiming both ways. The people having problems withdrawing say support is non-existent.

This is why I qualified with "widespread". All the exchanges have poor support, and all of them have haters. It wasn't long ago that even seemingly knowledgeable people were urging people to get out of Poloniex because they were about to be the next Gox. Nothing yet, in fact they've gotten better likely because the exodus of many traders eased the support and scaling burden. Again, I don't mean to defend any exchange in particular, it is still the wild west and I'm sure a lot of shady stuff goes on. There's just a lot about the Bitfinex narrative that doesn't make a lot of sense, and it seems mostly because one guy has built a successful brand around beating his drum the loudest.

> It wasn't long ago that even seemingly knowledgeable people were urging people to get out of Poloniex because they were about to be the next Gox. Nothing yet, in fact they've gotten better likely because the exodus of many traders eased the support and scaling burden.

I have no idea what the truth is there, but this sounds a lot like "people said Y2K would be a big deal and spent millions fixing code and then nothing happened!"

We also have some proof of this belief now. Wells Fargo stopped Wires to Tether on March 30, 2017 and Taiwanese banks stopped all international wires from Tether on April 18, 2017.

Tether has since issued 600 mill new tokens.

Source: https://tether.to/announcement/

I noticed that NYT wrote "Since then, it has moved between a series of banks in other countries, without telling customers where the exchange’s money is stored." but afaik there is zero evidence that there was any bank that interacted with Bitfinex after Wells Fargo dropped them.

But the comment above suggests that Taiwanese banks worked with them after Wells Fargo. Is it sloppy research on NYT's part or is BFX's claim unverifiable?

NP@NYT summarized a long-standing Twitter discussion - he's put in little to no independent work on the story.

Tether has claimed to have audited bank statements from the start. To date, they've never performed a real audit from an internationally recognized auditor.

In Sep '17, Tether paid for Friedman to state that they had ~$350m in USD in certain bank accounts. The bank names and locations were blacked out. If you know how to read audit statements, Friedman bent over backwards to make sure they're not culpable for fraud (whereas normally their function is to rubber-stamp for authenticity). Over the past two months, Tether has issued another $300m in USDT while transparency remains opaque

> If you know how to read audit statements, Friedman bent over backwards to make sure they're not culpable for fraud (whereas normally their function is to rubber-stamp for authenticity).

Can you expand on this?

Auditors sell trust. If an auditor says that the company has $XX in their bank, you're more likely to believe the company. If an auditor is found to lie, you get Arthur Anderson. In a full audit, the auditor bears the risk of fraud, and they get paid for assuming that risk.

In the note (not a formal audit, but literally just a letter) they gave Tether, Friedman consistently uses language like this:

- "We have not performed any procedures or make any conclusion for activity prior to or subsequent to September 15, 2017."

[note: audits are usually for periods of time, not snapshots at a certain point in time]

- "Screenshots from the Client of the balances in each Tether address purportedly controlled by the Client".

- "FLLP ... makes no representations about the Client's ability to access funds from the accounts or whether the funds are committed for purposes other than token redemptions."

Basically, Tether is representing to the world and their clients that Friedman has rubber-stamped the USDT-USD relationship Tether claims. On their website, Tether claimed their bank balances are audited (they're not), and Friedman happens to be an auditor who sent them a letter.

Friedman is saying that "all we know is that Tether had matching funds attributed to their names in certain banks on a certain date."

Tether could very well just have placed those funds in there temporarily, or have a side-letter with these unnamed banks to move funds in and out of the account for a snapshot in exchange for a fee, or have an arrangement via which they've borrowed using the funds as collateral. These are scenarios that either a full audit or a regulatory body would protect against.

-

Note: looks like Tether took down all references to their past audit issues from their website, but they forgot to remove the Friedman letter: https://tether.to/wp-content/uploads/2017/09/Final-Tether-Co....

Very interesting, thank you

Although you're right that if tethers are not backed by anything they'd inflate BTC, keep in mind this is likely an extremely small effect, because a lot of the inbound also occurred throughout time, and at any given time, the vast majority of trading and volume was outside of any trade involving tethers. It should be well below single digit % - a lot less than the daily volatility, hence any influence on BTC price is negligible unless I am missing something (which is entirely possible, I'm new to this stuff).

The Tether liability is about the same size as MtGox was, in dollar terms, when things started to unravel. That wasn’t a small effect.

In order to equate those, you would have to

1. either divide it by the market cap then and now

2. or divide it by the size of the order book(s) then and now

The first should give you a longer term view of the effect (I'd guess maybe a month?), the second a short-term view of it (within hours).

The first is rediculous. Market cap is meaningless, especially in bitcoin where it isn’t even known well how much coin is accessible, and velocity of those coins in circulation is so low and order books so thin by comparison.

The effect is exactly comparable to how much value will disappear. That’s how many lives will be affected, people disillusioned, etc.

I honestly don’t know what you’re trying to argue in the last paragraph.

You're right, market cap is not the best indicator. But the point is that it's not an equivalent comparison, and that point stands.

Let's do some math:

In Feb 2014, ~12,400,000 BTC had been mined. In the case of BTC, that's not really equivalent to "being in circulation", as many of those were probably forever lost in various unrecoverable wallets, but we'll pretend it was 12.4 million anyway(^1). 850,000 BTC ($450 mil) were stolen in the MTGOX day parade. That equated to nearly 7% of BTC in circulation.

This whole Tether thing, though also valued at around $500 mil, is not equivalent.

$500 mil right now is 61,000 BTC. There are currently 16,700,000 BTC in circulation. Making the Tether stuff only equate to 0.3% of all Bitcoin. I'm assuming that is what OP meant, and they are right - 7% is very different from 0.3%.

[1] - this actually makes my estimates more conservative than they could be, because I can almost guarantee that the BTC mined from 2014-2017 are more accessible than BTC mined from 2009-2014.

> $500 mil right now is 61,000 BTC. There are currently 16,700,000 BTC in circulation. Making the Tether stuff only equate to 0.3% of all Bitcoin.

That's also not the correct way to look at it. The price hasn't been a constant $8200 during the issuance of those tethers, it was lower earlier. So way more than 61,000 BTC could have been bought with that money.

Besides, to figure out what effect tether has had on the price you need to factor in liquidity, not the total supply of BTC. If the real value of tethers is much lower than their nominal value (because they are not actually backed by dollars), and they were used to take a significant percent of BTC off the market, then the price of BTC is significantly higher than it ought to be.

> The price hasn't been a constant $8200 during the issuance of those tethers, it was lower earlier.

The same holds for the bitcoins bought with dollars at Mtgox.

But to end the discussion:

  Dec 31, 2013: Marketcap 10  bn, Vol 34 mn
  Today       : Marketcap 240 bn, Vol  8 bn

So 600 mn had a much bigger impact (20x daily volume back then) than they'd have today (0.075x daily volume).

What exactly do you mean by "take a significant percent of BTC off the market"?

If this is some sort of Ponzi/exit scheme like many people are thinking, and all that BTC is effectively stolen by Bitfinex, I'm sure they'll spend it eventually. It's not like they're taking Bitcoin, giving people Tether, and then burning the Bitcoin.

> The first is rediculous

So you're saying the same amount of money in 2013 will have the same impact today? I don't think so, market cap is a proxy for this. It's not a good one but it is one.

> The effect is exactly comparable to how much value will disappear.

Yes but it will be shouldered by many more coins and many more dollars.

> I honestly don’t know what you’re trying to argue in the last paragraph.

You can compare the 600 mn mtgox impact using either of the two proxies, liquidity will give you a view of what will happen in the short-term, market cap will give you a glimpse of what will happen after the initial shockwave went through the orderbooks.

PS: It's "ridiculous" not rediculous.

yep: the Tethers are being used for margin lending, so a small amount of Tether can drive the price up quite a ways. Particularly with wash trading, spoof orders, tape-painting and other such shenanigans that are (rightly) banned on proper securities exchanges, but are de rigeur in Bitcoinland.

> I believe this tactic has been using by Yahoo and others in announcing the number of stolen accounts as well.

"We lost personal information of 57M users, but no credit card leaked and we paid the hackers to delete it"

You might want to get more info. Not a single dollar was stolen. Their “blockchain” was hacked. It can distrube them but not bankrupt them. The USD will be always on their bank accounts if they are holding full reserves.