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Comparing Tether to a Bank: Stop

Why Coiners Compare Tether to a Bank (Positively)

  1. Fiat currency is, generally, inflationary. Paper money is designed to be immediately used, not saved. There’s a reason for this: the government, corporations, and private businesses don’t want you to hold your cash as long as humanly possible — they want you to spend your money. That isn’t inherently bad. The goal with inflation is to force people to risk some of their cash on a slew of different assets: stocks, bonds, loans, commodities, education, property, and personal property (cars, desks, work-related goods). Hopefully, this provides you with a continuous source of income, making your money, “work for you,” while simultaneously hedging against a complete failure of a single sector of the market. But coiners prefer, “deflationary currency.” Deflationary currency limits the ability of holders to acquire loans, limits spending, and limits risk — this, also, isn’t inherently bad. Coiners tend to believe we live in a world of over-indulgent consumerism, with risks taken by banks (in loaning out inflationary currency) being too intense and too wide-reaching.
  2. There is a limited supply* of Bitcoins that will ever be mined. There is unlimited amount of dollars that can enter the market, because the Federal Reserve controls the printing press and decides when there’s enough dollars. This means that Bitcoin is “scarce,” while dollars are, “supply driven.” (* There is a limited supply of Bitcoin that will ever exist — 21 million — as of right now. Nothing is stopping this limit from one day being changed if there’s popular agreement.)
  3. Banks in the US were required, at least until recently, to hold 10% of their depositors cash in reserves. This is called, “Fractional Reserve Banking.” 10% isn’t much, but banks tend to follow through with this rule, and unless there’s some sort of catastrophe, it works. Tether promised 100% backing, then proclaimed it was 74% backed. This is still a 64% better ratio than banks.
100% backed by traditional currency transforms into…
74% backed by…???

Sounds Like Tether is a Bank Now, Bro

  • promises made
  • regulations

The Difference Between Tether and a Bank

  • 100% backed by traditional currency
  • all funds in a ““full reserve”” bank account
  • frequent audits/attestations
  • No insurance policies, all losses are your own
  • 10% backed with currency
  • only audited/attested (in a public manner) if publicly traded
  • FDIC insured up to $250k

TL; DR

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Coinmonks (http://coinmonks.io/) is a non-profit Crypto Educational Publication. Follow us on Twitter @coinmonks and Our other project —  https://coincodecap.com, Email  — gaurav@coincodecap.com

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