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So it is digital cash without the backing of a government and no stability.
You mean the same governments that manipulate their currency's value?
Or in the case of the USA, a government that is spending so much that they're basically insolvent?
Correct response
You're not wrong, but why is not having the backing of a government a bad thing?
A currency backed by a government has a very high chance of being able to be used at any time with a mostly stable value. Sure, if the government collapses it can become worthless, but on a worldwide scale that is far, far less likely and you will most likely know if it is headed that way ahead of time.
Governments add a bit of stability for currency used as currency and not as speculation.
Tether is an interesting experiment here. They are traded as smart contract tokens on top of various blockchains. They don't really have any intrinsic value, other than Tether LTD saying "every Tether is 100% backed by currency reserves", and releasing unsatisfactory "audits" now and then. It's main utility is that it provides foreign exchanges with a way to trade in something that is like Dollars without opening them up to the regulation that comes with trading actual dollars. It's market cap is currently in excess of $180 B.
But, USDT has been around, in one form or another, since 2015. And while other "innovative" crypto products have crashed and burned, Tether has been able to keep its peg and has never failed to meet redemptions. Furthermore, it doesn't need to be a scam. It's whole point is to always be worth one currency unit, so all they have to do is invest that currency in safe conventional investments and they can literally make billions of dollars with very little overhead. The most obvious answer is that they are not a scam.
I still don't really trust them, but I have used them on exchanges, always making sure to trade through Tether to something I can redeem on a US exchange for actual dollars. But, I have to acknowledge they have lasted longer than most crypto entities. I wish they would get a complete audit together, but at some point their reputation for having lasted so long needs to be worth something?
Madoff's scheme lasted for 30 years or more, surely that means it's worth something?
He managed to keep it up until all of a sudden he couldn't. Madoff was undone when he had to produce 440 million that he didn't have.
Meanwhile, Tether was able to meet billions on withdrawals, several times. After Terra collapsed, I seem to recall they saw $15B in redemptions, but I can't find any reputable links on that. If Tether was a scam, shouldn't it have failed a long time ago?
People outside of crypto don't realize how massive Tether is, and how much money it has under management. As much as the crypto bros dislike Central Banks, Tether has turned into one. If Tether were to ever implode, it would take most Crypto businesses with it.
https://www.reuters.com/commentary/breakingviews/stablecoin-giant-is-cryptos-fragile-foundation-2026-02-20/
Not necessarily. They can fail whenever and it seems they're piling into more unstable assets like bitcoin vs treasury assets.
I wouldn't trust it personally but that's just me.
Because a currency without a stable backing is completely volatile. Sure the value of normal currencies fluctuate, but apart from a few hyperinflation edge cases that's at most a few percent each month.
Small cryptocurrencies fluctuate sometimes hundreds of percent each month and even the big coins can swing +-20% every few weeks. The only somewhat stable coins are the ones directly tied to real world currencies.
Having a currency that fluctuates this heavily in value creates the exact same problems as the ever changing US tarrifs did. There simply is no wax to reliably price goods and services for more than a few days. You essentially have to barter each trade.
There's a bunch of different cryptocurrencies and a bunch of different government-backed fiat currencies, all with different ranges of stability. Even stuff like gold isn't actually "stable", the price varies. Pick whichever range of stability suits your needs. You could use a stabletoken that's pegged to something else - US dollars are popular.