Best guess it doesn't really need a real executable peg since it provides such a convenient tax shelter to avoid realizing crypto gains. It's useful enough people are willing to ignore the issues and since it's backing isn't immediately examinable it gets to stay alive. On chain algorithmic pegs are vulnerable because their backing is immediately visible where Tether was able to just fake backing long enough to get deeply integrated into the crypto markets.
In most developed nations, capital gains tax applies even against "like-for-like" trades. The swap between crypto types triggers a capital gain event and resets your cost basis. So people using USDT to move funds between exchanges without paying taxes on their gains are probably asking for trouble.
USDT _IS_ a useful tool to facilitate quick movement of funds between exchanges without the delays and expense of the conventional financial system, though.
I'm not an accountant, and I'm not your accountant. Not financial advice.
I also fully believe Bitfinex is likely to be manipulating USDT. It is the only way it makes sense. But check this out, here's why you should not wish too hard on its failure:
It is too big to fail because a lot of BTC would lose value over night, the entire plug would be pulled out of the industry due to the loss of confidence. Predatory and uninformed legislation would happen while the price and negotiating power is low, and in this time, that is when you really see the blood hit the floor with regard to scams, theft, crime, etc.
Regardless of your position on USDT, you should pray this never happens.
Edit: For the critics of cryptocurrencies responding below, allow me to make this response -- I didn't have anything to do with subprime mortgages, along with most of USA, however we all paid dearly for that mistake. As the comingling of cryptocurrency and traditional markets become increasingly intertwined, what makes you think that the ancillary effects of a crypto crash wouldn't effect you in some way?
All of crypto barely uses more power (120 TWh) than a single hydroelectric dam produces (111 TWh.) The "bad for the environment" is a meaningless talking point used by people that are jealous they didn't "get in on it" early enough.
Oh, it only requires ALL the energy from by far the largest and most environmentally destructive hydroelectric dam on the planet? One that accounts for 10% of China's energy use? Oh, that's nothing at all then! /s
How do guys like you keep a straight face saying things like this? This is an utterly insane amount of power. And putting into context the utility these crypto services are providing to most people (very little), it's even more insane. How much power would we be using if everyone actually started using PoW crypto for useful transactions regularly?
And it's not just electricity, it's high-end silicon too.
Cryptocurrencies is the first example of an algorithmic cancer IMO. (I cell that's tricking its host into thinking it's useful, but which mainly replicates and takes over resources as much as it can regardless of the utility the cells have to the host.)
Those numbers --- lower than numbers you can get from Google, but sure --- appear to say the same thing as "all of crypto uses barely more power than any but the top 28 energy-consuming countries in the world". Do let me know if I got the math wrong there!
Now you know that most most countries barely use any power! A single dam could power them! This is why the "crypto uses more power than X country" is a meaningless talking point.
The list includes Sweden, Norway, Argentina, the Netherlands, the UAE, the Philippines, Finland, Belgium, Pakistan, Austria, the Czech Republic, Israel, Switzerland, and Singapore, among (obviously) many others. I don't think that statistic was the mic drop you thought it was.
But sure, let's give them all 111TWh hydroelectric dams.
The Site C damn in British Columbia (5.1TWh) has been under construction since 2015 with a 2025 completion forecast. Estimated cost: $12.3 billion (USD).
>>> So let's use the article's figure of 140 TWh of power used per year. Let's compare that to domestic energy usage by country https://yearbook.enerdata.net/electricity/electricity-domest.... That's more than Argentina and about half of what the UK uses.
>> Bitcoin would be the 27th most energy using country: ahead of Argentina (30), Sweden (29), and Ukraine (28); just below and about to overtake Malaysia (26), and below Egypt (25) and Poland (24).
> A big chunk of our economy in Argentina is transforming sunlight into soybeans. So we should add it. Just imagine that we covered all the Pampa with solar panels and then use that energy to ... illuminate hydroponic soy.
> So with an additional energy of 36.5TWh, we jump from 132.7TWh to 169.2TWh that is more than the value of Poland 168.8TWh. (But other countries may want to add their solar->plants power too.)
The single largest hydropower dam in the fucking world could power them... I really don't think you know the scale of the power generation you are eluding to here, energy is a currency for development, there is nothing being developed in the real world with the amount of power that crypto uses. Absolutely nothing.
Compare the real-world value of economies powered by the energy consumption of crypto and let me know if you think that crypto is creating more value for humanity than these countries, I'd love to hear your arguments on that.
> The Hoover Dam generates, on average, about 4 billion kilowatt-hours (4 TWh) of hydroelectric power each year for use in Nevada, Arizona, and California - enough to serve 1.3 million people.
Edit: Looks like the "single hydroelectric plant" is the Three Gorges. Hot dam, that really puts Hoover to shame.
> The Three Gorges Dam has been the world's largest power station in terms of installed capacity (22,500 MW) since 2012 (10% of China's electricity).
111TWh is well beyond a typical hydroelectric dam output (most are an order of magnitude lower storage and generation). As an example, the very sizable Australian Snowy Hydro 2.0 upon completion is estimated to have storage for 350GWh (the Australian national energy market is ~190TWh). The original Snowy Hydro (9 stations) has annual energy production of ~5GWh.
> all the idiots who participated losing their shirts would really be a wonderfully great outcome.
Very harsh.
I can see no ethical way that they can keep their shirts (unethical is sell to greater fool). I do not think this is a "...great outcome". Wonderful or otrherwise
It is yet another repeat of the age old lesson: There is no magic.
I'm convinced that's what NFTs were partially invented and pushed to do. Hot new shiny thing to bring new money in to let the original crypto group cash out.
NFTs are a concept no different than Rai stones used by Micronesians for centuries, or any other property deeds style exchange. Hating on them is absurd - it's just another concept/financial construct.
Except that you basically have a photograph to the deed of your house. The deed to your house is not normally considered a bearer certificate, so if you lose it, the property tax office can issue you another one.
In fact, your possession of the deed doesn't really entitle you to anything. While you assume that law enforcement would accept it as proof, they do not have to, and ultimately judges and the county registration system decides who owns what. And it's not even all that straightforward in some cases.
NFTs typically don't even entitle you to copy the content you "own" - DEFINITELY not to re-license it, for any popular crypto market. If you are not the original buyer (i.e. if you bought your monkey NFT from someone else, not from the original issuer), they may well not entitle you to anything at all, since you do not have any kind of contract with the original issuer.
Ah, "too big to fail"? Remind me, what about this whole cryptocurrency experiment is working the way its proponents claimed?
> plug would be pulled out of the industry due to the loss of confidence.
Sounds great!
> Predatory and uninformed legislation would happen while the price and negotiating power is low, and in this time, that is when you really see the blood hit the floor with regard to scams, theft, crime, etc.
I don't wish scams on anyone, but perhaps it's time we got this all over with, yeah? Seems like it's going to hurt more people in the long run.
> what makes you think that the ancillary effects of a crypto crash wouldn't effect you in some way?
That it's not that intertwined yet. And such a crash would likely prevent a lot of such going forward, which is arguably very good news for the longer term.
The scenario you describe is how I justify my stance as long btc/eth, but holding neither. When USDT pops, it will leave a huge vacuum in behind, and cause a lot of harm to the latest wave of crypto adopters (2017-on).
Like your analogy to subprime mortgages, this crisis will precipitate serious regulation that probably won't quite go far enough, which is the final stage of institutionalization cryptocurrency has been missing. From that crater, it can only improve in terms of mass adoption. I'll be a holder again in the year 1, post-USDT.
