Tether has a very powerful place in the crypto ecosystem - it is the most widely used stablecoin. It was revealed in a court filing that it was not fully backed, it was like 70%, because governments seized some of the funds (according to Tether). This broke a fundamental promise Tether made - that all USDT was fully backed 1 for 1 with USD in bank accounts.

To remedy this, Tether now states USDT is backed 1 for 1 with cash and cash equivalents. For example, Tether released an "IOU" coin called UNUS SED LEO (LEO)[0] that trades at the amount of USD missing. Therefore Tether states it is now fully backed.

The veneer of sketchiness is actually preferable to a lot of crypto traders, who live in fear of various governments. This is why USDC is not as popular as USDT - many traders prefer a "vaguely sketchy" coin that is less likely to have their funds frozen by court order.

All that said, I worked at a company (Circle) that redeemed and minted billions of dollars of Tether back in 2017 / 2018. Tether serves big trade desks and is extremely popular in Asia, while USDC has become more popular in DeFi and is bigger in the west. Tether is not a giant ponzi scheme - it really has assets, and huge desks regularly mint and redeem billions of dollars.

[0] https://coinmarketcap.com/currencies/unus-sed-leo/

Tether’s total supply didn’t exceed 2B at any point in 2017 or 2018 and it certainly didn’t fluctuate by anywhere close to that, particularly on the down side, during that period. I think either your dates are wrong or you’ve vastly overstated how much Tether Circle “redeemed” (please explain exactly the redemption process you used) over that period.

https://www.theblockcrypto.com/post/48857/former-head-of-cir... I worked with Dan. Circle Trade was the second biggest desk back then after Cumberland.

You don’t do all billions at once, that was in total.

Yes, I recognized the language from that article/interview. It did not explain how Tether was redeemed by Circle. That interview did not cover in any detail how much Tether was redeemed or how Tether was wiring millions or billions of USD to Circle. I want to be very clear here that selling USDT is not the same as redeeming it directly with Tether themselves.

You are asking for the actual nuts and bolts? Everything is accomplished over telegram in the crypto space, including OTC trades. Circle had entities throughout the world and offshore bank accounts with those entities. You would ping Tether on telegram and say you want to swap USD for USDT or vice versa and wire transfer details would happen. It isn’t rocket science. I don’t know the exact amount but we had pretty transparent internal disclosure of the business and what each unit made in profit / loss, and what he said rang true for me. Circle Trade did something like $25 billion in OTC trades in 2018.

In other words, you were trading Tether OTC for cash and other assets, not redeeming it: https://tether.to/redeem-tethers-to-bank-account/

There's earlier (from 2018) Tether criticism:

http://www.tetherreport.com/

https://tonyarcieri.com/the-tether-conundrum

This one is my favorite summary of the Tether story: https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/