Supported cryptocurrencies:
BTC BTC
BCH Bitcoin Cash
NANO NANO
0.0003 BCH
EnglishHow do stablecoins like Tether make money and operate?

On March due to COVID-19 breakout, and the uncertainty on the global economy, there was a huge crash on the BTC price, $10K -> $4K As you can see on the chart since then, there was a huge spike on new fresh tethers. About $16 billion newly freshly mint that definitely supported it and drove it again past 10K. So how does their business plan work? Is there a bank that actually holds $20.000.000.000 in cash reserves + assets? How do they profit from the issuance of a stablecoin? (Do they offer it with interest on exchanges?) Are investors from our the world depositing in a bank account? Same questions stand for the others too like USDX, USDC, USDS

serenity75 1 month ago
    Tags:
  • Tether
  • Btc
  • Marketcap
  • Price
  • Exchange
question_image


Zulki 1 month ago
The stablecoin makes money for its creators mostly.
All in all due to regulations and laws which as we can see prove to be inefficient at the end of the day, the free market tries to find the way around all the laws and regulations that interfere with the free market activity.

So stablecoin helps in cases where the usage of other derivatives are considered to be against the laws and regulations.
In other words in theory it should not be so effective.
In theory, it shouldn’t.
In practice, the most popular stablecoins practise fractional reserve banking - i.e. each unit of stablecoin X is not backed by 1 dollar (assuming that 1 unit of X == 1 usd, say) - and its creators work from the assumption, much like banks do, that not everyone will come seeking dollars for their stablecoin at the same time.
serenity75 1 month ago
I know how Tether works. I want a good answer regarding the points A,B and C.
Jose 1 month ago
Hello Serenity,

Very good question, i had the same question some months ago, after some researched i understand that this stablecoin makes money thanks to the fees paid for the transactions also because they are commonly use as a trading pair (btc/usdt, eth/usdt), specially from centralized exchanges such as: binance, kraken among others.
serenity75 1 month ago
Yep, it is a bit weird.
Ahmet 1 month ago
Tether, which has become an indispensable option in daily transactions and trading, can be exchanged for one-to-one with the US dollar. Hong Kong-based Tether Limited is thought to hold USD as much as USDT in circulation. In other words, the company acts as a trusted third party. Tether was first produced on the Omni protocol. Omni, a versatile platform used for a number of digital assets and currencies fixed on the Bitcoin blockchain, also appears as a layer in the Bitcoin infrastructure. However, when the transaction fees and transaction times of the Bitcoin blockchain did not meet the demand for Tether over time, Tether company started to produce and distribute USDT on Ethereum, Tron, EOS and other blockchains.
Amber 1 month ago
Very true. Although I do not think that it is "thought" to hold as much USD as USDT is in circulation. I do think that it's a known fact....
Amber 1 month ago
Very true. Although I do not think that it is "thought" to hold as much USD as USDT is in circulation. I do think that it's a known fact....
serenity75 1 month ago
I know how Tether works. I want a good answer regarding the points A,B and C.
Gracious Interests 1 month ago
Tether makes use of smart contracts to help establish value.

A "Smart Contract" is an automated command, an algorithm, which performs (a) function(s) when certain parameters are being met.

The value of Tether is being established through an underlying asset. A combination of coins, stocks, bonds, Crypto,... The Smart Contracts keep track of distribution and the amount in circulation of the Tether Token and adjusts either the production of additional Tether or buys-in, or sells-off, additional assets in order to achieve a stable price (in the case of Tether it will be to simulate the value of ! USD$).

Tether assets are being held in both private reserves as well as by an external broker.
Audits are being performed regularly in order to give assurance of being up to code.
The reserves are regularly updates in tandem with the amount of Tether being brought in circulation.
serenity75 1 month ago
Audits aren't 100% and in the past there was a statement for something like a 75% back per $1.
How do they make a profit with Tether? Do they pump and dump for real cash?
Gracious Interests 1 month ago Correct
Through the same use of the Smart Contracts and underlying assets.
Each time people make use, or buy, Tether will that amount of money be added to their reserves.

The money reserve can be used to buy other underlying assets which give passive returns of which they can make profit.

Most demand they receive is from Exchanges, such as Binance, where fiat money cannot be used to trade. They get other tokens and coins in exchange which in turn are also used to make profit.
serenity75 4 weeks ago
I get that part. What is unproven is the 100% audit. Proof of reserves...Anyways, closing this one.
Tom Lutzenberger 1 month ago
They don't make money for investors. Tether was not intended to be an investment play. It was intended to be a clearing account cash tool. It might offer nominal interest like USDC does at 0.15% but that's simply to get people to park their money so that it can be used by the system administrators versus the investor, similar to how banks use your basic savings account to cash flow their operations. In non-banking worlds this would be known as a Ponzi scheme of sorts.
serenity75 4 weeks ago
This isn't about investors, anyways...
Lord Arthur 4 weeks ago
https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.jumpstartmag.com/stablecoins-and-how-they-work/%23:~:text%3DThe%2520mechanism%2520behind%2520Tether%2520is,the%2520exchange%2520at%2520any%2520time.&ved=2ahUKEwjf_ezlgODtAhUUsXEKHWeMDeoQFjABegQIAhAE&usg=AOvVaw39BCb3ZJGNPns9GGqSz8kO

This one 💯