I have a feeling that the friction is very directional.There are lots and lots of stories about individuals losing money in bitcoin and tether, this is one way they do it.

There could also be 3 pennies of friction in getting the money into or out of Tether.

&gt; Possibly they’re using their fiat dollars to redeem tethers at a discount?Doesn’t Coinmarketcap use exchanges’ self-reported data? What prevents Bitfinex from wash trading at $1?

Tether’s market cap has been going down on coinmarketcap.comPossibly they’re using their fiat dollars to redeem tethers at a discount? (Or to try and enforce the peg)?

So Tether seems to have been hanging out at about 0.97 lately ... isn&#x27;t that a massive problem? If anyone really believe they were worth 1.00 USD we&#x27;d be vacuuming up those 3 pennies.

No, it isn&#x27;t. Cryptocurrencies in this aspect are the same as the fiat money you and I use today.The problem was everyone deciding to brand Bitcoin as an investment vehicle instead of as a currency.Cryptocurrencies are money. The benefits are immediately realizable. If I gave you $5 in exchange for a service worth more than $10, promising that due to market forces that $5 would soon have the buying power of $10, you would laugh in my face and demand the $10 immediately, not later. Yet somehow we decided this was OK to do with crypto.It has to do with a lack of knowledge, partially due to world governments initially being hostile towards crypto and then indifferent.Were this technology correctly introduced to society by trusted parties with regulated information, we wouldn&#x27;t be having this conversation about whether or not cryptocurrency is flawed due to an inherent volatility that comes with low market adoption.

&gt; This doesn&#x27;t seem like an inherent flaw in crypocurrenciesUnregulated financial markets don’t work. You’re selling something intangible whose benefits are inherently only realisable after an indeterminable amount of time. That encourages fraud. This is a core and fundamental failure of cryptocurrencies.

&gt; anything that deals in USD has to deal with U.S. lawThe act of holding a US dollar bill in your hand doesn&#x27;t bring you under the jurisdiction of the US government.

Wait, what&#x27;s entirely unregulated about it, if there&#x27;s a criminal probe? There aren&#x27;t criminal probes on something that&#x27;s unregulated; well, at least anything that deals in USD has to deal with U.S. law, regardless of tax haven locale in the world. And Tether claimed to be a USD peg, which means they claimed to own USD, and as an institution that deals in USD they&#x27;re subject to laws.

USD isn&#x27;t decentralized or permissionless so regulation should be possible on that side. And the fact that you can&#x27;t redeem USDT shows that it&#x27;s kind of working.

I’d argue that by virtue of being totally decentralized and permissionless, an unregulated secondary market is impossible to prevent and therefore an inherent feature &#x2F; flaw of cryptocurrency. It’s not a necessary step to adoption, it’s just impossible to stop. It’s also what makes cryptocurrency very difficult to use for anything.

&gt; To that end, I agree with your basic point: you need an interface to the outside word that has similar properties to the core model. At least, trustless, transparent, auditable. Probably anonymous as well.Which is impossible because at some point the entire thing needs to interface with humans and human processes -- neither of which is infallible. The entire premise of Bitcoin, Ethereum and &quot;Code Is Law&quot; is broken at the core. They all try to get rid of &quot;trust&quot; by replacing it with computer code but at some point you need to interact with meatspace and meatspace is not logical, and not at all trustful.In other words, trying to make everything trustless is futile because at the end of the day, you eventually have to trust other people.

If you don&#x27;t need fiat, however, a decentralized exchange using a transparent smart contract is ideal (e.g., IDEX).

It&#x27;s a flaw in all current cryptocurrencies that they suffer from an opaque, trust-based exchange infrastructure.I&#x27;d argue that it&#x27;s inherent in the sense that none of them factored that into their model. As such, I&#x27;d argue that the models are inherently flawed because a trustless core is fundamentally compromised if you only have a trustful interface to the rest of the world.To that end, I agree with your basic point: you need an interface to the outside word that has similar properties to the core model. At least, trustless, transparent, auditable. Probably anonymous as well.

How do you define &quot;1$ USD peg&quot;? As of right now, the price of DAI is $0.98, 2% off its &quot;peg&quot;. Asking as a serious question, since I see this statement a lot.

There&#x27;s a decentralized peg to USD called DAI which is backed by ETH as collateral. It&#x27;s maintained the 1$ USD peg throughout the entire crypto bear market. MakerDAO is quite impressive, and I hope to see it absorb the liquidity away from tether.

This is a valid point were it not for the fact that being structurally designed to thwart regulation (by obscuring the link between account and account holder) is the main difference between cryptocurrency and ordinary digital cash, and is a major - if not the principal value proposition of the technology.

Whether this is a flaw or not depends on whether tethers are backed 1:1 by USD deposits as advertised. If so there&#x27;s not much wrong apart from maybe money laundering. If not it&#x27;s fraud in most people&#x27;s books.

&gt;entirely unregulated secondary marketBitcoin to USD exchanges are incredibly regulated. AML&#x2F;KYC&#x2F;SAR are all required by many governments.

This doesn&#x27;t seem like an inherent flaw in crypocurrencies as much as a feature of an entirely unregulated secondary market (BTC to USD).Obvious counterpoint: a viable secondary market is a necessary step to adoption of a cryptocurrency.

Agreed. It will be fun to see who has gone fractional.

As we&#x27;ve seen many times in the past, when the price falls, so do the scammers - this will be interesting.

Frankly I&#x27;m surprised Tether hasn&#x27;t gone nuclear already.

Cryptocurrency can be and do everything as the definition depends on what you are trying to sell in the moment

Cryptocurrencies can be centrally controlled.

In a world where I get to unilaterally set the rules, the line would be when one person or company is the only entity that can officially bless the mechanism that is tasked with approving and verifying transactions. As far as I know Ripple Inc, a for profit company, owns, runs, and controls all the nodes that approve XRP transactions.I dont really see how XRP is really any different than Paypal. If they can ban me, stop me from sending my tokens to whoever I want, or reverse my transaction I don&#x27;t feel as though im getting any of crypto&#x27;s benefits.Not sure if thats general thinking, but it is at least mine.

I don&#x27;t think stablecoins are true cryptocurrencies no. Ripple is absolutely not.IOTA has said you should consider a transaction confirmed if their centrally controlled coordinator has accepted it. So no it&#x27;s not a cryptocurrency as they should be decentralized.

IOTA is moving towards an open source coordinator (released today on github), and eventually coordicide (which is what it sounds like). It&#x27;s been the goal of the project from day one. Bitcoin had checkpoints when it started; the coordinator is analogous to checkpoints. Wouldn&#x27;t touch XRP with a ten foot pole, though.

Yes, if you can&#x27;t recognize XRP as the shitcoin it is, you really should get out of crypto. Maybe you can get lucky trading it, but it doesn&#x27;t offer anything useful.99% of coins are bewilderingly shitty.

So is USDC and XRP right? And MIOTA. Where do you suggest we draw the line? I’m curious what the general thinking is on this.

&quot;Shouldn&#x27;t&quot; is very different from &quot;can&#x27;t&quot;

Presumably they can&#x27;t mint new coins at will unless they can back them up with dollars?(This is of course assuming Tether is not an actual fraud, when all the evidence points that way)

Right, they can also destroy coins too.

Tether is very much not a cryptocurrency. It&#x27;s centrally controlled. They can freeze transactions and mint new coins at will.

In fairness, if I set up a bank which, by accident or by design, made it exceedingly easy to launder millions in cash relatively quickly, you can bet the DOJ would have a problem with that.Transporting millions in cash is risky (either you trust the courier with that and risk their life, or you do it yourself and risk yours), and doing so internationally is extremely challenging and&#x2F;or expensive. By contrast, doing it digitally is quite easy and fast.It feels a bit disingenuous to insist the two are the same.

Actually, we do see it.Along with Civil Asset forfeiture mentioned by others, there are also:* Know Your Customer laws,* mandatory Suspicious Action Reports of all transactions over a certain value,* anti-Smurfing or anti-Structuring laws that against structuring deposits to be under the threshold of SAR reports,* a whole host of foreign transaction laws* and plenty more...So yes, prosecution of use of cash is very alive and healthy with people getting prosecuted for all of these crimes related to use of cash. And this is before any prosecutions that establish direct use for terrorism or drug cartels.

Wait, isn&#x27;t that basically the basis for civil forfeiture? &quot;We don&#x27;t know why you would have this much cash, so prove it isn&#x27;t related to drugs&#x2F;laundering&quot;?

There&#x27;s no trail (or not an easy trail of evidence) to know for sure where cash payments went from and to, whereas blockchain provides that trail - you just need to figure out who owns or has claimed to own the wallet etc; having that as a resource would make conviction much easier, and magnitudes easier to find people involved. I don&#x27;t know how pleading ignorance would hold up depending on the role you played in any illegal activities.

You definitely see them prosecuting people who accept cash from cartels and terrorist cells or engineering financial entities explicitly to do so. Tether looks a whole whole lot like one of those.

That is an incorrect comparison. They punish those who use cash illegally, just like how they seek to punish those who use cryptocurrency illegally.

Cartels, terrorist cells, and other unsavory entities also use cash, but you don&#x27;t see the DOJ prosecuting everyone who has accepted cash as payment.

presumably it would foreshadow a regulatory crackdown

&gt; then anyone who has ever taken crypto to work on a project, anyone who handled the influx of cash to exchange it for crypto by selling Tether (which is all of the major exchanges), are headed for a storm of hurt.Why would all cryptocurrency transactions be tainted by this? Or are you saying that the value (relative to real money) would plummet?

Worked out fine for Citigroup as well.<a href="https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2018-11-16&#x2F;gett-is-said-to-court-buyers-as-ride-hailing-apps-battle-it-out" rel="nofollow">https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2018-11-16&#x2F;gett-is-s...</a>

Well not fine from a business perspective. The fines were larger than the money made from such activities. If HSBC were primarily a front for the cartels, it would have gone bankrupt.

It worked out fine for HSBC. AFAIK, nobody there went to jail for being the personal bankers to Mexican cartels.<a href="https:&#x2F;&#x2F;www.reuters.com&#x2F;article&#x2F;us-hsbc-probe&#x2F;hsbc-became-bank-to-drug-cartels-pays-big-for-lapses-idUSBRE8BA05M20121212" rel="nofollow">https:&#x2F;&#x2F;www.reuters.com&#x2F;article&#x2F;us-hsbc-probe&#x2F;hsbc-became-ba...</a>

&quot;DOJ has such a high conviction rate because they only prosecute cases they expect to win.&quot;Things like kingpin laws (continuing criminal enterprise) and RICO probably help the conviction rate.

&gt; If DOJ can show evidence of cartels, terrorist cells, and other unsavory entities laundering their money through bitcoin, ICOs, ethereum, altcoins and tether, then anyone who has ever taken crypto to work on a project, anyone who handled the influx of cash to exchange it for crypto by selling Tether (which is all of the major exchanges), are headed for a storm of hurt.Oh no, the cartels and terrorist cells would have to go back to conducting all their illegal activities in physical US dollars.&gt; We are no longer in SEC turf and DOJ has a conviction rate of 93% as of 2012DOJ has such a high conviction rate because they only prosecute cases they expect to win.

Eric Holder neutered the DOJ because he was too afraid to lose cases.The only reason their conviction rate is so high is because they don&#x27;t bother to prosecute the majority of crimes anymore. These days if you can pay an arbitrary fine, you can get away with pretty much any financial crime.. (laundering money for drug cartels, etc.)

People have used USD to fund crimes, but it would be ridiculous to say that unrelated restaurant owners would get in trouble for the mere act of accepting USD.The US has already given guidance on this. They have already stated that BTC and other cryptos are a commodity, and legal.The SEC itself disagrees with your absurd notion that anyone who even accept crypto as payment could be in trouble.

The terrorists in Syria were funded by US Governement, both by CIA and Armed forces.They didnt need bitcoin to do it.

From your link:&gt;f. People&#x2F;exchanges&#x2F;entities rarely use shell companies for legitimate purposes. And by rarely, I mean almost never.

Please don&#x27;t break the site guidelines, which ask you not to post flamebait.<a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;newsguidelines.html" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;newsguidelines.html</a>

Try living in a country with hyperinflation, and then the utility of $BTC becomes clear. Sure, it&#x27;s volatile, but anything is better than the Bolivar.

&gt;It’s literally the only valid use case for it.Use case: a currency with better inflation characteristics than even gold.

Bitcoin has never been anything but a money laundering scheme for drug dealers and tax cheats and various other criminals. It’s literally the only valid use case for it.

OOOOOOOOOOOOHHHHHHHHHHHHHHHHHH SHHHHHHHHHHHHHHHIIIIIIIIIIIIIIIIIITTTTTTTTTTTTTTTTTTTTT - watch out for your US Dollars y&#x27;all, I heard at least one physical paper $20 bill was used to buy an 8th of reefer in Rhode Island this one time... the Fed is winding up its operations as we speak...

If DOJ can show evidence of cartels, terrorist cells, and other unsavory entities laundering their money through bitcoin, ICOs, ethereum, altcoins and tether, then anyone who has ever taken crypto to work on a project, anyone who handled the influx of cash to exchange it for crypto by selling Tether (which is all of the major exchanges), are headed for a storm of hurt.We are no longer in SEC turf and DOJ has a conviction rate of 93% as of 2012, a trend which has been increasing. It&#x27;s one thing to argue against Howey Test or hide money from the Taxman. It&#x27;s a whole new level of shit storm to be accused of laundering money for terrorists and drug cartels.<a href="https:&#x2F;&#x2F;medium.com&#x2F;@justsomeperson&#x2F;uncovering-the-real-cartel-in-bitcoin-814427d00f54" rel="nofollow">https:&#x2F;&#x2F;medium.com&#x2F;@justsomeperson&#x2F;uncovering-the-real-carte...</a>

From January 30 of this year: <a href="https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2018-01-30&#x2F;crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc" rel="nofollow">https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2018-01-30&#x2F;crypto-ex...</a>

Isn&#x27;t this like, one year old news at this point?

If only someone had something about this a year ago...

Hilarious, on the bubble chart &quot;Why did the government let this happen&quot;, we are now at this point &quot;pls g-men step in and dont let this disaster happen&quot; and &quot;put those responsible behind bars&quot; etc.

There&#x27;s no compelling reason to conclude that any of the bubbles have been caused by fraud. I certainly agree that it&#x27;s possible, perhaps probable, but Gox&#x2F;Willy and Tether are mostly compelling narratives; when you dig down into the specifics, it&#x27;s hard to connect them to price action.These stories fit peoples&#x27; expectations for fraud in Bitcoin, they lust for scams and intrigue.The null hypotheses is boring but also quite plausible: bitcoin sees bubbles because price has been steadily rising and this eventually triggers positive-feedback cycles that cause the boom and bust. The insensitivity of Bitcoin price to news&#x2F;events supports this hypothesis: price is the news.The fraud narratives are more tea-leaf reading than actual analysis. Just dive into the Willy bot oeuvre if you&#x27;d like a sense of that.

I&#x27;m almost certain it is being manipulated, so glad an actual investigation is happening. Many people have been duped into crypto.

Do you think a market that is easily manipulated would ever not be?

Yes, the underlying idea has always been sound enough to attract large investment without manipulation. Even if the legal and ethical true price is under $1000, that&#x27;s still more natural growth than, say, an additional 20x added on by manipulation.

If this is true, will there have been any major rise of Bitcoin that hasn&#x27;t been caused by illegal &amp; unethical manipulation? Serious question.

as good a shoe in as anything elsebetter than the electricity tax angle anyway

Bitcoin-Rigging Criminal Probe Focused on Tie to Tether