[repomies691]

I'm not advocating for tether. But it is not a ponzi scheme. And I think that most of the users understand what tether is - they are not excepting returns, they also understand that it is unregulated vehicle where the backing can disappear any time if the issuers get into trouble. I would guess biggest use-case is moving fiat between exchanges without having compliance issues, which you would have with banks.

[gamblor956]

Correct, Tether is not a ponzi scheme, because a ponzi scheme is a specific type of scam vehicle in which earlier investors are paid their "profits" out of the investments made by later investors.

In Tether, only the original investors get profits, which they get form everyone else investing in Tether, so this is an entirely different type of scam.

[BubRoss]

It does fill a need, and no one expects returns from it, but it most likely is fractionally reserved by btc. This means that if the price of btc drops too low and too many people cash out then it's over, because each tether cashed out will mean more and more btc are required.

[jacobush]

That's optimistic. I think it's mostly reserved with nothing.

[BubRoss]

I think it is fractionally reserved with bitfenix's btc deposits. A while back you could see their master address, which hundreds of millions of USD worth of btc.

[vkou]

It's not fractionally reserved. Fractionally reserved banking implies that only a fraction of the reserve is in liquid cash (And that the remainder exists as independently audited, but not immediately liquid investments, backed by an insurance policy.)

Tether has never been independently audited, whatever non-liquid reserves/investments they have are not backed by an insurance policy. It is not a fractional reserve. It's a con artist's idea of "Hey, I can just open a bank, take 80% of the deposit money, do 'things' with it, and claim I am running a fractional reserve."

[nighthawk24]

It's a tether scheme?

The scheme to create a token that is supposedly worth $1 to buy BTC and other coins off exchanges and then selling those coins for real USD.

For anyone interested in the origins of Tether, look up Bitfinex hack.