The missing axiom is simply an accepted axiom that the money being put into circulation by the central authorities should be so handled as to maintain, over long terms of time, a stable value.~John Nash, Ideal Money
In previous articles I created and expounded on the concept of Cryptoexchangea in order to bring about a different understanding for the usefulness of the Tether project. The idea of Cryptoexchangea allows for a useful observation of a phenomenon of bitcoin price discovery based on the emergence of a decentralized set of exchanges.
By creating the perspective that highlights Cryptoexchangea we are able to view the emerging environment as a free banking realm (although there are external regulations and governments that might affect the nature and cosmos related laws of the internal universe).
It is arguable that Cryptoexchangea is perfectly free from extra-universal control (ie the real world governments), however, it would be difficult to argue that the space shouldn’t remain as free as possible in a rurantian sense (ie everyone should want this).
In order to function optimally and in a more decentralized fashion a digital currency Tether is used as a standard unit of account for Cryptoexchangea. Since it is (claimed to be) backed perfectly 1 to 1 with USD sand USDs are already implicitly have an externally agreed to value, Tether functions as a perfectly “native to Cryptoexchangea” unit of account for those that believe in it and want to use.
It is exchanges that otherwise have no option for customers to exchange into fiat that would want a digital fiat. This allows security and safely for exchanges that couldn’t otherwise exist on this level.
There is an argument however that Tether does not prove its claim that each USDT is backed by a USD in a traditional bank account. Efficient market hypothesis would suggest the markets would run on a currency that doesn’t live up to its claim of perfect solvency. This creates a sort of cat paradox. The markets are supposed to reflect the underlying truth of the token, however, imagine a scenario where not a single bit of information about a fractional Tether reserve leaked out. How could the markets reflect information that they don’t have?
This is why the concept of a free market in the crypto exchange world is so important.
We COULD suggest that if information DID leak then USDT, on a free market, would return to the issuer or the price would be reflect this dishonesty on the various exchanges. We can imagine a scenario where all exchanges created their own Tether and offered digitally backed USDT. If each exchange’s USDT were randomly airdropped among each exchange, and were otherwise equal (other than the origin stamped on the token), if one exchange’s USD coffers were empty, we should expect their USDT to eventually migrate towards them and thus be rendered useless to them. This is course provided there was SOME leaking of relevant information to the markets.
What is significant about this point is that if other USDT existed on the markets then there wouldn’t necessary be needed the tokens issued by Tether today. If competition arose these would serve the same purpose to all the exchanges that truly intend to be honest about bitcoin’s price discovery. And of course there could be many different fiat tethers that provide honest 1 to 1 digital fiat tokens.
From this sense we could see the usefulness of government sponsored digital fiat tokens which are then themselves free from the danger of government intervention (why would the government arrest themselves). Indeed many governments are preparing such programs and we can probably expect many government sponsored crypto fiat tokens to arise very soon.
For this it's interesting to consider the lifespan of Tether in regard to its usefulness as an internal Cryptoexchangea unit of account. A government sponsored version would be long term reliable from a regulatory perspective. In order to serve the long term viability of Cryptoexchangea and honesty of the entire realms price discover Tether really only needs to last as long as new competitors for digital crypto fiat arise…
Once that starts to happen it cannot be argued that Tether can crash the bitcoin and crypto-markets. Thus if we are inclined to believe that this evolution to include many different types of digital crypto-fiat will happen soon, it seems probable that bitcoin’s price reflects more so the honesty of its underlying value rather than a price bubble that might burst because of a future implication that Tethers real life bank account might be seized.
Tether can’t be propping up bitcoin’s price.