The failure spoken of is clearly the breach of the promise (and associated changing of literature) to back each by one USD.

However I'm very interested in the idea of shorting a "stable"coin. Who would possibly enter into this contract for an asset that has an upside of zero and a (potential, long-term, depending on your bearishness) downside of 100%?

In any case, with the strong likelihood Tether themselves are effectively shorting it by selling it unsecured by any real assets it would be a tough market to get in on.

Which is why I asked what they meant by failure specifically.

You have to borrow it to short it, so there's a 1-3% APY cost associated with shorting it. You have to calculate the tradeoff of the likelihood of it going to 0 within the next couple of years vs the cost of borrowing USDT to short it.

Say you short 1M$ worth of Tether, it goes belly up within 4 years, it cost you like ~40k$ to short it, but your upside is 1M$. If it never actually fails because the market is irrational or by some miracle Tether was doing the right thing, then your cost depends on when you close your position. It's a relatively cheap way of making lots of money depending on your conviction on Tether's likelihood to fail.

I bookmarked this comment from a few months ago on how one might make such a trade: https://news.ycombinator.com/item?id=26174690

Nobody that's ripping on tether in here is going to short it lol, they're not that confident in their own words.