Freedom technology maximalism. Running: Orange Label, Beefcoin, Hood Mining, Words, Guns.Team.
Publisher at Bitcoin Magazine.

The Horses In The Stables

After 3 years at Bitcoin Magazine I still struggle in articulating how dollars are created1 and “Why is it so difficult to understand?”. It is designed complex precisely so you won’t be able to understand it. It is a boring topic, something you couldn’t possible be interested in, and so complex that only economists can discuss it. How could you possible have an opinion on the matter? If the people knew how bad they were getting screwed by the government(bankers), there would be a revolution. But we(Americans) enjoy great benefit from the US Dollar as it is the least shitty of all fiat money2. The big question that keeps me up at night is how the state intends on implementing a CBDC in the US and what that means to individual liberty.

Based on the track record of the US Government, the intention of the digital dollar will be one that extends the states power and limits individual freedoms. There is a 0% chance the digital dollar will yield an inch of power. You can bet the entire house on this.

While the Fed has not clarified on the exact path they will go with the digital dollar, they have been testing the waters. In January 2021, the Federal Reserve released a paper titled “Preconditions for a General-Purpose Central Bank Digital Currency” that what it would take to launch a US CBDC. This paper concluded that a ton of work, legal framework, US citizen sentiment, and many other conditions would need to be met in order to launch a CBDC in the US. The big problem with the Fed launching a CBDC is the Federal Reserve System itself. By centralizing money creation and lending with the Fed, this would destroy all banking in the US. The Fed system is built on fractional reserves and money creation at the bank level. A CBDC would nuke these functions, and all parties would deal directly with the Federal Reserve.

So the Fed System would not function with a CBDC, but stablecoins… this is a win win for the banking class. Stablecoins are the same thing as CBDC, all the bad things like surveillance etc. except operated by the private sector. We are seeing some politicians vocally against CBDC’s one moment and are cheerleading for stablecoins the next moment. The thing is that these are the same thing under different ownership. One is an actual state run money, the other a proxy.

What Is A Stablecoin

Stablecoins are a continuation and next generation of the Federal Reserve system. Think if you could make all the dollars payment rails instantaneous and tokenized so they can flow anywhere. But wait, there’s more! Now add complete surveillance on all purchases + potential of adding other metadata, smart contracts like expiring funds, and complete censorship of wallets or funds! Sounds like a digital panopticon3 hellscape, am I right?

This technological innovation is king making new bankers, the stablecoin issuers, and the NY Banking Cartel is not cool with giving up power to Silicon Valley grays.

Stablecoins are pegged to US Dollars in value and are usually backed by something like US Treasuries. For that reason, stablecoins supply has grown very rapidly as demand for dollars is real. Tokenized dollars allows dollars to flow of the slow expensive rails of the Fed system and now they can flow “freely” on shitcoin blockchains.

The market demand for stables make them big buyers of US Treasuries. This is absolute gold to the federal reserve system and US Treaury. A new buyer is in town and they mean business. The thing is that issuing and operating a stablecoin is extremely lucrative. Think about all the US Treasuries yield stablecoin issuers earn, just for having them on the balance sheet for the dollar peg. Essentially, stablecoins make the issuers a ton of money, grant the state a proxy cbdc, and extend the dollar hegemony into the global South. That is the story.

The Horses In The Race

Since 2019, several stablecoins have come and gone, but there are (2) horses in the race, Tether and USDC. Since 2018, the total supply of issued stablecoins was around $2b and today hovers greater than $120b.

Stablecoins Supply

What we are seeing playout is something like this… USDC is highly regulated here in the US and the state, bankers, and Coinbase have bent the knee or formed an allegiance to Circle(USDC parent company). Once you get outside the US jurisdiction, the king is Tether. All the same assurances, but on a non US global scale. The biggest red flags to me are just some hard to swallow pills, here goes. While USDC has not formally announced any partnerships with US surveillance agnecies, they are partnered with BlackRock4 and BNY Mellon5. On the other side of the coin (no pun intended) is Tether who recently announced via a letter to the US Senate a partnership with the Secret Service and the FBI6

USDC

USD Coin (USDC) is a stablecoin that is pegged to the United States dollar. It operates on various blockchains and is designed to maintain a stable value, with each USDC token theoretically equivalent to one U.S. dollar. The primary purpose of USDC is to combine the stability and wide acceptance of the dollar with the technological advantages of a digital currency.

Key points about USDC include:

  1. Ownership and Creation: USDC was co-founded by Circle and Coinbase through the CENTRE consortium. Circle is a peer-to-peer payments technology company, while Coinbase is a well-known cryptocurrency exchange platform. CENTRE, which oversees the development and governance of USDC, is a joint venture between these two companies.
  2. Backing and Stability: USDC is a fiat-collateralized stablecoin, meaning each USDC token is backed by one U.S. dollar held in reserve. The reserves are a mix of cash and short-duration U.S. Treasury bonds. This backing is intended to ensure that USDC maintains a stable value relative to the U.S. dollar.
  3. Transparency and Regulation: To maintain trust and transparency, the USDC reserve holdings are regularly audited and published. This is to ensure that for every USDC in circulation, there is an equivalent amount of U.S. dollars in reserve.
  4. Usage: USDC is widely used in the cryptocurrency ecosystem for various purposes, including trading, lending, and remittances. Its stability compared to other cryptocurrencies makes it a popular choice for transactions where volatility is a concern.
  5. Technical Infrastructure: USDC operates on several blockchain platforms, including Ethereum, Algorand, Solana, and Stellar, among others. This multi-chain presence allows for a broader use case and accessibility across different blockchain ecosystems.

In summary, USDC is a stablecoin backed by the U.S. dollar, co-founded by Circle and Coinbase through the CENTRE consortium, offering a stable and transparent digital currency option within the broader cryptocurrency market.

Tether

Tether (USDT) is a type of cryptocurrency known as a stablecoin. Its value is intended to be more stable than other cryptocurrencies because it is pegged to the U.S. dollar. Tether aims to combine the unrestricted nature of cryptocurrencies — which can be sent between users without a trusted third-party intermediary — with the stable value of the US dollar.

Key aspects of Tether include:

  1. Ownership: Tether is owned and operated by Tether Limited, which is in turn controlled by the owners of the Bitfinex cryptocurrency exchange. Bitfinex is one of the largest and most controversial crypto exchanges globally. Tether Limited and Bitfinex are both operated by iFinex Inc., a company registered in the British Virgin Islands and headquartered in Hong Kong.
  2. Backing and Stability: Tether claims that each USDT token is backed by one U.S. dollar held in reserve. This backing is meant to ensure that Tether maintains a value close to one U.S. dollar. However, the composition of Tether’s reserves has been a subject of scrutiny and debate. In the past, Tether has revealed that its reserves include not just cash but also loans and other assets, which has raised concerns about the true value and stability of USDT.
  3. Controversies and Legal Issues: Tether has been embroiled in several controversies, particularly concerning the transparency and management of its reserves. The company has faced legal challenges and investigations into whether it has the assets to back all the Tether in circulation.
  4. Usage: Despite these controversies, Tether remains one of the most widely used stablecoins in the cryptocurrency market, largely due to its widespread integration across various crypto exchanges and platforms. It’s commonly used for trading and as a means to store value or hedge against the volatility of other cryptocurrencies.
  5. Blockchain Technology: Initially issued on the Bitcoin blockchain via the Omni Layer protocol, Tether has since transitioned to other blockchains, including Ethereum, Tron, and EOS, making it a multi-platform digital asset.

In summary, Tether is a stablecoin pegged to the U.S. dollar, operated by Tether Limited, which is affiliated with the Bitfinex exchange. Despite its wide use in the cryptocurrency market, Tether has faced significant scrutiny regarding the management and transparency of its reserves.

USDC and Tether stats prepared by ChatGPT

FOOTNOTES
  1. The truth is that the monetary system is very very complex by design. You are gaslit if you try to understand it, it is boring by design so you are not interested. All that they want you to know is that you need and want dollars, and if you try to go around this system they will fuck you up. ↩︎
  2. It is reamarkable that fiat money is a thing…
    Fiat money is a type of currency that is not backed by a physical commodity, like gold or silver. Instead, its value is derived from the trust and confidence of the people who use it. The worth of fiat money is not determined by the material it is made of, but rather by the stability and credibility of the government that issues it. ↩︎
  3. A panopticon is a round prison where a guard can sit in the middle and observe all the inmates. Link ↩︎
  4. Deepening Our Partnership with BlackRock link ↩︎
  5. Circle Selects BNY Mellon to Custody USDC Reserves link ↩︎
  6. Tether Reveals Partnerships With Secret Service, FBI in Letter to U.S. Senate link ↩︎
the stables