[JamesBarney]

> Has anyone figured out how to verify the backing on a blockchain? If that was possible Tether's fraud would have been exposed sooner.

And this is always the problem with block chain. You can't cryptographically verify real life things that people care about like how much money is in someone's bank account.

[panarky]

> real life things that people care about like how much money is in someone's bank account

How is a ledger entry in a bank's computer more "real" than a ledger entry in a public blockchain.

Funny how blockchain discussions proceed in endless circles when people believe without evidence that familiar money is in any way "real" instead of an imaginary social construct, while blockchain money is somehow fake, fraudulent or unreal.

Let's guess the next argument in the endless circle: (a) money is backed by the military, (b) money is backed by tax payments, (c) money is backed by debt, or (d) tulips.

[JamesBarney]

I'm not arguing it's more real, I'm arguing you can't cryptographically guarantee how many dollars some entity owns. In this context real life mean off block chain information. Basically the block chain can only verify whats on the blockchain. It can't make any guarantees about off block chain things except that someone with a possession of a certain private key said something at some time.

[panarky]

Sure, a blockchain provides cryptographic consensus about assets on the blockchain, but it can't control things that are not on the blockchain.

Things like legal contracts in a filing cabinet, bank databases, gold bars in a vault, or how many coins I say are in my pocket.

For all those things, the blockchain can act as a database, but you need to trust someone that the entries in the database correspond to these other things that the database is supposedly tracking.

[JamesBarney]

Which is the entire issue the op asked about, can you verify a party has enough dollars to back a stablecoin on the blockchain.

[macspoofing]

>And this is always the problem with block chain. You can't cryptographically verify real life things that people care about like how much money is in someone's bank account.

There are a lot of problems with applying blockchain to solve real problems. This one is not one of the problems. What this is is people using the blockchain for things it was not designed to do.

[bb88]

I'm not necessarily pro-crypto, but a regulated and audited blockchain would be fine in the banking context. That's mostly because the bank itself is regulated and audited. The "trustchain" goes all the way back to the government.

With Tether, the trustchain ends at Tether. And even if you could audit Tether somehow, there's nothing stopping them from creating another stable coin and use the same currency they have in both coins.