Caldwell appears to have been trustworthy. As of writing no Casascius coins have ever been flawed or compromised - by all appearances Mr. At the time it was reasonable to assume stealing the value contained in the coins wasn’t worth the risk of legal consequences. Caldwell was able to push past this limitation partially by being transparent about his identity but also by minting coins when Bitcoin’s price was much lower. If he kept copies of the private keys or made a mistake when recording them it would invalidate the security of the coin. There is one flaw with this otherwise elegant trust model - you don’t need to trust the person you are transacting with, but you both need to trust the creator of Casascius coins, Mike Caldwell. Then at some point when someone wants to convert the physical cash back into digital, they can ‘redeem’ the coins by peeling off the tamper-proof sticker and claiming the private key within. Coins can then be traded from person to person without needing to interact with the Bitcoin network directly. Casascius coins were the first ‘physical bitcoin’ - behind the holographic tamper-proof stickers are private keys that control the corresponding amount of bitcoin. If you’ve ever read any story in the mainstream media that talks about Bitcoin, chances are the accompanying picture featured coins like the ones above: Casascius coins. Since Bitfinex and Tether are the same company that’s a bit like the briefcase of IOUs in Dumb and Dumber. According to their lawyer the remaining $0.27 was “backed” by liabilities to Bitfinex. They are currently being sued by the NYAG, they had ~$880M of their reserves frozen by the US when their bank was accused of money laundering, and they admitted to only having $0.73 per Tether in actual cash reserves. Wikipedia has a good run down of all the shady dealings if you’re interested or there is a more detailed and also a more lurid/speculative history here. That is not one of the services that Tether offers.Īs you probably guessed Tether the company does not always entirely live up to their own promises. You might be wondering how you turn your USDT back into USD and the answer is you do not. You in turn promise not to commit any money laundering or evade any banking regulations, even though technically the platform allows you to do any of those things. They promise not to lose your money, not to print unbacked Tether tokens and not to freeze or confiscate your accounts, even though technically the platform allows them to do any of those things. Tether gives you the same number of Tether tokens (USDT). The way Tether works is surprisingly simple! You give your dollars (USD) to Tether Limited. Tether was created by Tether Limited, which is essentially a branch of the exchange Bitfinex, although they worked hard to hide that fact until the Paradise Papers leaked.
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