I know Tether and Bitcoin are hard to understand for people who haven't spent 10 years looking at fraud in the face. Here's a more down-to-earth explanation.
Imagine Bitcoin is houses in the desert. The promoter advertised the spot as the New New York, where all the hedge funds
and the banks and the really important people will want to be. A lot of people bought in, but the vision never became real - hedge funds and banks stayed in New York. Nonetheless, the price of the houses rose for some reason.
As the price rose, more people bought in, ignoring the
fact that the promoter's vision didn't materialise. Surely there are other reasons for why the price is going up, other very important corporations who will want to set camp there.
Seeing prices go up, the promoter built more houses. People snapped them up as well.
The problem with those houses that kept going up in value, is that nobody wanted to actually live there, so you could collect no rent, but their upkeep was still running at 2-4% per year. So you had to hope that there would be enough of new buyers so that their new money would
pay for the upkeep of older houses.
This worked as long as people were buying houses with real money. But then these sophisticated real estate magnates moved in and explained that they should be able to buy houses with their own money, which they said was backed by real money.
This was weird, and a lot of people were worried about them in the beginning, but the magnates were buying a lot of houses with their own money, which made prices go up. And a lot of people said that their money was as good as real money... so why not trust them, in the end?
After the prices of all homes had gone wayyyy up, the real estate magnates revealed the truth: their money wasn't really backed, but don't worry! They owned a lot of houses that they had bought with this money, so the houses were backing the money they used to buy those houses.
All the other house owners had a choice: either they told the magnates to GTFO and see the prices of their own houses go down 95%, or accept the new rule of law that the money of the magnates was good. Unsurprisingly, everyone agreed to play along.
The problem was, that the money
of the magnates wasn't good to pay for the upkeep, and so the house owners started to take out loans to pay for upkeep. They couldn't collect rent because nobody wanted to live in the middle of the desert, & they didn't want to sell their houses because their price kept going up.
So the people went into debt to pay for upkeep, while the magnates kept printing their money to buy new houses which made the price of all houses go up, making everyone happy.
Then one day, some house owner needed to actually sell a house he owned in the desert for real money.
His daughter was getting married, and he wanted to pay for the wedding.
The real estate magnates came to see him, and said, "why are you selling? it's going up!". The man said, "I need real money to pay for my daughter's wedding".
To which the magnates answered, "don't sell, your
daughter will thank you in ten years when you're a billionaire".
The man replied, "but she wants to get married in a month, I need the money".
The magnates conferred, and made a proposal: they'd buy the man's house with their own money, AND offer him a 15% interest afterwards.
The man said, "wow amazing, can I cash out your money for real money?", to which the magnates replied, "but you'd be forfeiting the 15% interest, why would you do that?"
The man then said, "but can I cash out the interest", to which the magnates replied, "have you ever heard of
COMPOUND INTEREST? Why would you forfeit the interest on your interest? Seriously, do you understand ANYTHING about finance?"
The man thought it over, again and again, and agreed. He went to see his daughter, and said to her, "sweetie I'm sorry, but I can't pay for your wedding."
"I must remain invested or risk not becoming very rich in the future by owning this house in the middle of the desert that nobody wants."
His daughter burst out in tears, and the man had no choice. He sold his house for real money.
And the whole desert Ponzi scheme collapsed.

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Trolly🐴 McTrollface 🌷🥀💩

Trolly🐴 McTrollface 🌷🥀💩 Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @Tr0llyTr0llFace

2 May
It looks like the majority of crypto is OK now with USDTs being backed by crypto and not something tangible.
The emerging consensus is "USDTs are so well collateralised after the bull run that there's zero risk. And, if Bitcoin falls, they can always print and pump it back up."
The minority of insiders see the writing on the wall, and are playing along while frantically trying to cash out behind the scenes (example: Coinbase).
But the majority actually believe this nonsense, and are confidently displaying their utter lack of understanding of finance.
The price of crypto today isn't priced in USD, it's priced in USDT, because nobody's trying to cash out into the real world. It 's true that USDTs are overcollateralised today.
However, if more than a few people try to cash out in USD, crypto will start being priced in USD.
Read 11 tweets
18 Mar
Anyone who claims that Bitcoin can be a "global settlement layer" doesn't understand Bitcoin.
As is, Bitcoin can be "hacked" by someone who controls a lot of hashpower; by "hacked" I mean that person could cancel the transactions he wants, provided that they're not too old.
This is known as a "51% attack", and the principle is that you perform a big transaction (wire 10,000 BTC to an exchange, sell them & cash out), and use your own hashpower to build an alternative string of blocks, starting with the one containing the block with your transaction.
Once you've cashed out your transaction, you start propagating the blocks you've calculated in secret. If your string of blocks is longer than the string of blocks that has been produced organically by the network in the time it took you to cash out, your "hack" was successful.
Read 11 tweets
15 Mar
Chainalysis is doing a tremendous job in convincing everyone crypto isn't being used by criminals.
Their "less than 1% of crypto transactions are criminal" claim has been relayed thousands of times in the crypto & mainstream media.
Of course, this claim is weapons-grade bullshit.
First, their numbers are based on "proprietary methodology". You basically need to trust a company 100% focused on crypto that crypto is legit.
Second, when they say that "x% of transfers are criminal", what they actually mean is "we managed to flag x% of transfers as criminal".
Chainalysis doesn't say what total percentage of transfers they manage to classify. So if they flag 1% as criminal but only manage to classify 2% of all transfers, that's really, really bad.
As a point of reference, in 2019 they classified $20B of transfers as "criminal" - ...
Read 4 tweets
10 Mar
A lot of people, some of them extremely smart and knowledgeable in fields other than finance, believe that there isn’t much difference between Bitcoin and stocks or any other financial asset as an investment because “you need someone to buy it from you” in both cases. A thread.
When you buy a stock, the reasoning goes, you do it because you expect you’ll sell it to someone else at a higher price. It’s exactly the same as for Bitcoin. Hence, it’s the same game, right?
Obviously not.
A stock is a share of ownership of a company. This company has assets.
This company has people working hard to generate profits that compound to its assets. Think of your stocks as a claim on a percentage of a bag in which the company’s employees are putting the money they earned for the company every quarter. The bag gets bigger and more valuable.
Read 11 tweets
9 Mar
I woke up early this morning & stumbled upon Seetee's "letter to shareholders" and oh boy is it an alphabet soup of nonsensical Bitcoin memes.
To quote Wolfgang Pauli, "it's not even wrong"
I guess Nic Carter must have had a strong influence over whoever wrote it.
Let's dive in.
TL;DR: "I've watched Bitcoin go up tenfold in a year and that gave me confidence that it's very valuable so I jumped in".
Of the 19 advisors that were consulted, only one, Mike Green, is a critic, and also the only one who understands finance and doesn't have a vested interest.
Let's start with the "Bitcoin is like the early Internet" meme. The letter references Tim Berners Lee - maybe they should have talked to him. Since Tim said 6 years ago that Bitcoin was getting ahead of itself, the number of daily transactions has barely gone up threefold.
Read 20 tweets
8 Mar
The meme of Bitcoin as a hedge against inflation and central bank money printing is stupid and perfectly tailored to stick in the brains of financially illiterate bagholders.
First, it seems intuitive that inflation should push Bitcoin up, as everything goes up with inflation.
Except Bitcoin isn't bacon or milk, it's a financial construct. Not all assets go up with inflation. Bonds go down with inflation as interest rates rise. Stocks can go down with inflation if input costs exceed the company's pricing power.
Bitcoin's input costs would rise.
Bitcoin costs money to exist - it needs ASICs and electricity, and those will definitely go up with inflation. Of course miners are free to reduce the hash power to counter-balance that, but then the security of the network will decline, so how is that good for the price?
Read 8 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!