Quote from: udecker on February 06, 2015, 03:26:33 AM

Quote from: mortified on February 06, 2015, 02:49:13 AM

Quote from: udecker on February 06, 2015, 01:07:17 AM

Quote from: mortified on January 20, 2015, 06:29:33 AM

A pegged asset like Tether would be a good item for regulators to look at. Since it is more than just payment processing it should be treated like cash. One way to limit it's use is to allow limited licenses for its issuance in some arbitrary proportion to the m-zero money supply. Then there is no reason to track it afterward, just like cash. Regulators can inflate its issuance with Keynesian alacrity.

This type of money supply manipulation would not be accepted by the community (tethers are backed assets, not pegged assets).

The tether creation/destruction events are recorded on the blockchain, for starters. In order to retain the trust of the community, the amount of tethers in circulation could never be bigger than the number of dollars in the reserve. If the number of tethers on the blockchain exceeded the number of dollars in the reserve (entering fractional reserve territory), the entire premise of the token, and the trust of the community would be lost.

Craig

A Tether doesn't need to be accepted by a community, it only needs to be licensed and provide liquidity. It doesn't matter if they are fractional reserve any more than your bank account. Any entity licensed for them will be insured with as much assurance as your government can demand.

Id be concerned with the moral hazard of having the ability to extend the fractional reserve beyond the probability of a bank run, just because one could. Are you saying that this isnt a legitimate concern?

I'm saying this fundamental technology will create spinoff technologies. They will be be exploited for good or ill depending on your optics. Moral hazards are sociological. Colored Coin instruments like Tether will be a panacea and a Pandora's Box. A bank run in this case would not be cashing out for fiat, but abandoning fiat for Bitcoin. Tether is a transitional instrument for people with motion sickness.