[lambda]

> Why creating Tethers from thin air is now a cause of concern?

If you are claiming they are backed by USD, and you are creating them out of thin air, then that's a scam.

Other coins are only valued based on how the market values them. There is no fraud there; you are not claiming that you will redeem them for something else, they just represent themselves and are valued based on how useful people find that particular kind of cryptocurrency, plus hype.

MtGox was also a scam by the end, since they were trading on their exchange bitcoins and USD that they didn't actually have for people to cash out.

[dTal]

>MtGox was also a scam by the end, since they were trading on their exchange bitcoins and USD that they didn't actually have for people to cash out.

Heh. When a bitcoin exchange does it, it's a "scam". When a bank does it, it's "fractional reserve".

[ufo]

Banks that use fractional reserve should still have balanced assets and liabilities. It is just that some of their money is tied up in loans to be paid back instead of liquid cash. If everyone the bank loaned money to paid back there would be enough cash to allow all the customers to fully withdraw their accounts.

Bitfinex, on the other hand, is just outright insolvent.

[dTal]

Ah, so there is a difference. Thank you for clarifying.

I wish I had phrased my post as a question - as a statement it seems rather unpopular...

[ufo]

You would be surprised how often other people use that exact argument but as a statement they say full of conviction instead of a question :) That might be the source of the confusion here.

[tptacek]

It also helps that banks are insured federally.

[danharaj]

Banks don't pretend that they're not fractional reserve.

[kevingadd]

Fractional reserve is also regulated and deposits are insured up to a certain amount, so it's definitely not comparable to printing imaginary USDT - even if fractional reserve banking has many well-known issues.

[hapnin]

That regulation didn't work so well 10 years ago. Regulation is for us, not the big dogs.

[jnwatson]

It worked fine. I don’t know what you’re talking about.

[hapnin]

Americans got screwed and no banking executives went to jail. It didn't work.

It's one of the reasons Bitcoin was created, per the first transaction in the blockchain.