Comment by codedokode
13 hours ago
Probably not everyone knows, but USDT has a "black list", and admins can prevent any address holding USDT from spending. The black list is implemented in USDT contract.
So USDT is not truly decentralized and your money can be frozen for any reason or no reason at all.
So USDT is a great amazing decentralized censorship-free drop in replacement to USD except:
- much more awkward to use
- more liable to hacks
- deposits are not insured
- fewer legal protections
- doesn’t pay interest (or not easily anyway)
- and as I find out, bannable by a central institution with lower legal oversight than the Fed
I’ll keep a mental note of this.
I have said this many times, and will probably have to say it many more: Stablecoins are nothing but a face-saving measure for the US government.
It is politically impossible to go back on KYC/AML measures in the traditional financial system, even if some of them were perhaps a bit too ill-advised. It's much easier to say "this is shiny new tech, very different from that old tech over there; we support innovation so we won't impose KYC requirements on it", even if there's no logical reason to do that.
As it stands, stablecoins let you make a keypair in the privacy of your own home (or your own agent sandbox, as it were) and immediately start transacting. They're allowed-by-default instead of blocked-by-default, with the US government still able to block you if they have a specific reason. No traditional bank I know of, in any country, works like this. This is a valuable capability to have, technologically, even if there's no technical reason why a Postgres database and a REST API couldn't provide the same service, but faster and more easily.
> It is politically impossible to go back on KYC/AML measures in the traditional financial system
It’s politically irrelevant more than impossible. Most Americans simple aren’t visibly encumbered by KYC/AML enough to make it a priority.
> They're allowed-by-default instead of blocked-by-default
So were banks in the wildcat era.
Suddenly, physical Gold in a safe at home looks fairly decentralized and censorship-proof
Until you need to move or share it. That's why monero XMR is the only serious fungible and decentralized cryptocurrency
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That technically true for any coin where miners are organized enough, see the ethereum fork where bad contract made wrong people lose money so they forked entire chain to get the money back
Look into the history of USDT. It's creation was dodgy to say the least.
Over time I believe it's founders did start backing it with Treasuries so now it must turn a nice profit for them.
You missed out that it is run by crooks closely associated with SBF and shady banks like Deltec
https://dailycoin.com/sbf-tether-deltec-secretly-colluding/
Also, it's not decentralised, they just unilaterally froze 2 billion in funds.
if its bannable by a centralized place please explain how it is decentral? i thought that was the kind of controls a decentral system was specifically designed against. is that understanding of mine flawed?
Your thinking is not flawed. It's just not decentralized.
Decentralized cryptocurrency is an ideal from early 2008's from the Bitcoin supporters. It's not the reality of cryptocurrency in general.
Cryptocurrencies are full of contraditory ideas between the founding ideology and the actual usage.
> bannable by a central institution with lower legal oversight than the Fed
It’s way easier to take a company to court than any government entity.
But the company can just turn around and say, soz we don’t have your deposit. We invested it in Labubu dolls and they crashed in values. Also we lost them. Next time, DYOR.
If a bank collapses, you get your money back from the Fed, no questions asked.
> great amazing decentralized censorship-free drop in replacement
It's not and never supposed to be and everybody who uses it in any significant amount knows that. Don't mistake a cryptotoken with a cryptocurrency.
I love monero but then you have the problem that very few exchanges support it and if you need to convert big amounts of it in common currency it gets quite hard to do compared to eth/btc
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USDT is created by a super shady company and is not at all decentralized or censorship-free. You could have made the argument for Bitcoin (and still can to a certain level) but most cryptos that propped up after that or stablecoins do not follow the hacker philosophy and more the banker one. Ironic that the whole crypto movement got co-opted by the likes of JPM which it seeked to replace.
Recently I tried to donate to a project using their preferred crypto payment processor flow, which purported to support "Coinbase Wallet" integration. So thinking that was just like, Coinbase, I said "sure why not" thinking it'd save me the effort of copy/pasting long strings back and forth.
Turns out, Coinbase "Wallet" is a completely separate thing from Coinbase, and long story short, ultimately ended up accidentally converting some spare ETH I transfered into some kind of garbage Binance "wrapped" Litecoin. Which had zero indication/warnings in the app other than a like 4 pixel Binance logo superimposed on the 16 pixel Litecoin logo that it wasn't the real thing.
Once I gave up on this Wallet experiment I ended up needing Gemini to walk me through all the Binance "gas" nonsense to finally manage to swap into a real coin I could transfer out (like 80% of what I started with after subtracting gas fees and miscellaneous leftover change I was stuck with). And while transferring I had to avoid like a dozen alternative networks consisting of seemingly random strings and a scary red banner saying "yo don't fuck this up".
My first red flag should have been that Coinbase Wallet's Play Store name literally advertised betting on prediction apps. Second red flag was while looking for "Litecoin" in the list of coins, there were literally about 5000 different spam/meme coins with dozens of near identical clones that were all name squatting on top of each other.
As someone who came of age in the Crypto 1.0 "Bitcoin is for buying drugs" era the entire exercise was utterly baffling and somehow significantly less usable than crypto was a decade ago for actual payments. I guess for a young person looking to illegally gamble their paychecks at some unlicensed offshore prediction market it provides some utility I'm missing but man, the experience just made the post-Web 3.0 crypto scene look .... grim.
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Tether isn’t decentralized or censorship free in any way
No one ever said USDT was decentralized.
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Tether's entire business model, providing an almost-unregulated USD cryptocurrency, relies on them not arbitrarily banning people. They don't do it frequently or without thought. You're far less likely to get banned from USDT than just about any non-cryptocurrency financial institution.
> Tether's entire business model, providing an almost-unregulated USD cryptocurrency, relies on them not arbitrarily banning people
No, their entire business model relies on bank/CC providers don't ban them. Somehow, they treat all crypto related transactions as iffy but USDT, bought to buy crypto, got under much less scrutiny. The entire problem their solver was that new users couldn't move cash to exchanges fast enough to join bull runs.
You can say the same for many other industries:
> almost-unregulated except when the authority say no.
Yeah, until Trump (or whoever is president at the time) tells them to.
What will they do when the alternative is broken bones?
Turns out that there are quite good reasons to have a centralised currency after all. Who would’ve known.
Isn't the centralization the reason they got stolen? It was Binance that was hacked, not the blockchain technology.
Individuals get hacked and their bitcoins taken so often that it doesn't make the news.
By the way, it wasn't just Binance that got hacked. Several other exchanges were hit too.
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Well in traditional banking you essentially have the ability to reverse
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yeah the issue is if you built it they will co opt it
All systems can be bent, broken, or subverted.
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Turns out the reason crypto was invented isn't "decentralization" at all, it was nerds feeling left out and wanting their own financial instrument grift.
You mean the smart nerds
For the less economical-savvy ones it was like Beanie Babies or Tulips (with predictable consequences)
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Yes, but there are more good reasons to have it be decentralized.
Well sure, but the average consumer needs and/or wants some protections, safeguards and insurances. If my bank gets hacked or even if I get skimmed it's considered their fault and I'll get my money back.
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Arguably any fiat-collateralised stablecoin is ipso facto centralised and trusted (someone needs to 1) issue the coins only against fiat collateral and then 2) hold onto that collateral reliably and 3) return it upon presentation of the coin), and at step 3 they can always say "no, we won't give it to you".
Your point has nothing to do with fiat.
It applies equally well to a fiduciary coin with a promise that 1 gcoin = 1g of gold or whatever.
Indeed.
However, it does not necessarily apply to algorithmic stable coins (Terra) or crypto-backed overcollateralised coins (DAI). That's why I said "fiat-backed".
Why couldn't a privacy focus coined, like Monero, be a stablecoin?
You don't need to see where the coins are and move to promise $1 of going for every coin.
Probably the founders/employees of the company issuing/redeeming the token would be arrested very quickly. Tornado Cash people got arrested for much less.
How are you guaranteeing that your private stablecoin will keep its $1 value?
How are you bootstrapping a network to validate private transactions without the promise of potential gains in coin value as its popularity takes off?
Who makes that promise? That's who you are ultimately trusting.
Decentralized is a great concept but it’s 99.9% rug pulls and you can’t get any safety unless you centralize. As an investor there is no way to protect yourself because the rug pulls are several orders of magnitude more sophisticated than most people’s understanding.
> As an investor there is no way to protect yourself
Why? BTC is pretty stable longterm and nobody is going to touch your cold wallet. Anything that has an owner or legal entity is not decentralized, subject to either rug pull or censorship and shouldn't be touched, sounds very easy.
Everything that promises you any return is a scam in crypto, simple as that.
The U.S. government is the largest beneficiary of this service. More than $2.1 billion in USDT connected to or requested by U.S. authorities out of over $4.4 billion in total illicit USDT freezes globally.
It's tethered to the USD. It seems expected that the government in charge of USD is doing the most blacklisting.
If they baked in a function to freeze USDT, why not also add a function revert a transaction flagged as part of a hack?
Because they own and control their own smart contracts but do not own the network that the contracts are deployed to.
Plus, freezing funds and waiting for US law enforcement to weigh in rather than being the proverbial judge, jury and executioner is now likely to keep you on the right side of said law enforcement.
> Because they own and control their own smart contracts but do not own the network that the contracts are deployed to.
I assume they call a method on the contract to freeze the coins (with some superuser kind of signature), so they could easily write a method that moves the coins back, too. This should be similar in terms of gas costs.
The law enforcement theory seems more likely, yeah.
I lost ~20,000 USDT by accident once and the CTO just sent me some freshly printed ones. That was many years ago though.
Anyone can refuse any bitcoin, too. But that's not implemented in the contract, just by how much real money people want to give you for bitcoin.
A shame that they can and do so here but happily facilitate transfers or scam victims, human trafficking and sexual abuse including of minors.
Did they ever show proof that they actually hold $1 for every tether? This was big a few years ago but never heard anything about it since. (I could Google it but others here probably want to know)
So when tether is blacklisted, is it reissued?
The financial system has evolved over 5000+ years and is like an endless series of Chesterton's Fences at this point. Here we find another: the ability for a regulator or a bank to freeze assets is once again proven to be a feature not a bug.
Managing a wallet where there is no recourse if your wallet is compromised is simply too difficult when even crypto exchanges get hacked and otherwise sophisticated people get compromised when taking cautious measures (eg [1]).
Crypto really is and always was a race to the rug pull.
[1]: https://www.straitstimes.com/singapore/about-3-5-million-los...
You know what isn't a Chesterton's fence? Payment processors being able to dictate what I can or can't spend my money on.
This by itself is a reason to push for more crypto acceptance, in my eyes.
I must live a very vanilla, sheltered life because I’ve never bought anything and wondered if a payment processor would object to it.
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Yeah but what if I hacked that money fair and square? Why should anyone have the right to block my hard earned not-cash?
Frozen assets are still a wallet with no recourse.