[meirelles]

silly question, being USDT "only" 80B, why does it matter if it collapses? considering cryptos market cap is more than 1T, and 100B's wipeouts routine, sometimes during crypto winters (where we observe -80% across the board) or collapses such as Luna recently (>50B? no idea)

Of course, panic would happen, but still. I think people would move on, forget, and continue believing whatever they want to

just curious to read counterarguments

[phphphphp]

Market cap is not the sum of all injected capital, it’s the total supply multiplied by the most recent value of a unit. For example, if you paint 2 paintings and sell them to me for $100 each, and then I sell 1 of them for $1000 to a third-party, the market cap of your paintings is $2000 ($1000 x 2 paintings) despite there only being $1100 dollars spent.

It’s plausible that there’s less than $80bn of USD in the crypto market and so tether could well represent every single dollar available. I don’t know if I’d argue that is the case, but it’s certainly plausible — and so it’s easy to see how a collapsing tether could take down the entire market, or at least, represent a far greater threat than the ~5% it represents in market cap numbers.

[meirelles]

Even though the actual figure is unknown it still a fair argument, thanks

[lupire]

People need tether to avoid going all the way off chain when they sell.

[Tao332]

Genuinely curious: why do people need that?

[ceejayoz]

Going off-chain means transferring actual money, which means large transactions get reported, which means authorities get wind of unpaid taxes.

[throwaway92394]

De-fi doesn't _technically_ need it but it's highly preferable.

Let's say you want to actively trade ETH against the USD. If you think ETH will go down the you want to sell it. Now if it's in a non-custodial wallet that you control, you would need to send it to an exchange, sell it, then hold USD on the exchange (were you have no control of it and they can seize it for fraud investigations, etc. - basically your money is held by a 3rd party).

Instead you can "sell" your ETH by trading it for a stablecoin pegged to the dollar. This way the only risk is the contract for the trade (which can be publically audited) and your money stays in your control.

Or if you wanted to accept cryptocurrency as payment but still only wanted the USD because of it's stability - you could accept that (this isn't very common as gas fees are rather high).

tl;dr - With exchanges a 3rd party has your money and a IOU. Coinbase has already said user crypto could be at risk in the case of bankrupcy. De-Fi removes this risk while still allowing you to trade against the USD.

disclaimer - Whether you want to do this might be a different question, just giving the reason for wanting a stablecoin.

edit: For those saying taxes - the US IRS still counts this as a sale and it's still taxed the same as an exchange trade - other countries might differ. Given the KYC/AML requirements and lack of general public knowledge about anonymity of crypto - I think sooner then later we'll see a crackdown.

[HideousKojima]

Taxes