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
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
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.
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 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
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.
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
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 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
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."
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.
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
