The Big Interview

Bitfinex’s Paolo Ardoino on Tether’s success and scrutiny

This week Tether became the third largest cryptocurrency by market cap with more than $10 billion in the stablecoin being issued since its inception.

Coin Rivet spoke to  Paolo Ardoino, Bitfinex CTO and notably the man at the helm of Tether’s development.

Ardoino’s role at Bitfinex and Tether is vast, ranging across the exchange’s matching engine and issuance of new Tethers, but one thing that sets him apart from other CTO’s in the industry is his forward-facing stance on social media.

“Crypto is a super technical industry. So I feel like having the CTO talking about innovation, development and talking about general Bitcoin and cryptocurrency related topics is a good thing.” He said.

“Bitfinex really cares about the innovation part, we are proving this by having developed more than 100 open source projects that are available now. Hence, it’s logical for me to be the public face of the company.”

Introduction to Bitcoin

Paolo, who got into coding at eight years old while growing up in a small town in Italy, reveals that his expansion into Bitcoin was natural as soon as he read the whitepaper.

“My coding career was about building scalable applications and networks, so in 2012 when I learned about Bitcoin that was a perfect fit because at the time I was working in finance.” He added.

“After reading the white paper, I fell in love as it was representing everything that I liked in terms of a resilient system and so on. Plus, it was a pure financial application that could create a real disruption in the financial industry.

“It was clear to me after working with banks and hedge funds that the system was broken. I’m not even talking about the fact that finance is centralised and an obscure industry for billions of people, I’m talking more about the ability of having people taking care of their own wealth. And this is why I wanted to contribute, even in a small way, to this financial revolution.”

Is mass adoption here?

With renowned macro investors like Paul Tudor Jones recently confessing to owning Bitcoin many believe that mass adoption is upon us, but Paolo disagrees.

“There is still a long way to go.” He asserted.

“Mass adoption is not here and will not be here for a few more years. The main issue is user experience, we have to do a lot of work on education and user experience. We are still using terms like OTC that people don’t understand.

“Everyone understands if you have a joint account with your wife and are required a signature to wire, but if we want to have mass adoption, we need to create tools that replicate the experience user are used to in their normal life.”

Tether’s rollercoaster ride to the top

Tether has been a hot topic in the cryptocurrency industry since it was created in 2014. It has been lamented by academics for its alleged role in the 2017 bull run while being hailed as a success by traders who utilise it as a tool to get in and out of the market.

And while it has attracted a heap of scrutiny over its perceived irregular banking arrangements and whether it is backed 1:1 by the Dollar, the fact remains that it is by far the largest stablecoin in circulation with a generous amount of demand.

“Things are moving really fast and it’s mind blowing seeing the inflow of cash and new requests for Tethers being issued.” Ardoino continued.

“Keep in mind that we created almost the entire field of the stablecoins back in 2014.

“We created the first product and the competition came only 2018. So for the entire bull run of 2017. The highest volatility moments there was only Tether available, so Tether had a really important first mover advantage.”

One thing that Tether has done differently to almost all stablecoins is its ability to remain versatile across a number of blockchains, which Ardoino believes has been key as it taps into a variety of different communities.

“It is also important to say that Tether worked really hard to maintain that badge.” He added. “It is astonishing that stablecoins are sticking to one single blockchain, that would be Ethereum for most of them. Tether realised that there are many blockchains, each blockchain has its own community. Usually these communities are fighting against each other, you can see that on social media.

“The common denominator across all the blockchains can be one stablecoin that unifies all these communities while providing the same experience and same issuance and redemption across all blockchains.

“We have seen the Tron community really picking up on Tether, we have seen Liquid pushing hard to have issuing Tether and now we are seeing exchanges like BTSE using it. If a community that is large enough asks us to issue Tether then we don’t have any reason not to.

“We want to create a fluid stablecoin across communities and across blockchains.”

Was Tether key to manipulating the price of Bitcoin in 2017?

Tether’s role in the 2017 bull market was immense, not because it was a factor in market manipulation like some claim but because it was the only stablecoin in circulation, meaning that traders could hold effective cash positions when Bitcoin began to correct from its $20,000 top.

This, however, is not the opinion of a group of academics from the University of Texas, who concluded that a “lone Bitcoin whale” used Tether to inflate the price of Bitcoin despite data suggesting a massive increase in retail participation.

 

“We work with regulators around the world and we presented data to many of them.”The Bitfinex CTO stated.

“When it comes to allegations of Bitfinex manipulating the market, we will present different studies [to prove there is no truth in these false and inflammatory allegations].

“We have seen support from the entire community. At one point one of the accusations from the University of Texas was that one single whale in Bitfinex caused the entire bull run.

“You don’t have to be a genius to understand that that’s a crazy allegation.”

Libra and CBDCs

Last year was often dubbed as the ‘year of the stablecoin’ with the likes of Facebook entering the frame with its proposed Libra project.

What followed Libra was discussions among central banks and governments who had finally warmed to the idea of issuing a digital currency, despite being critical of the asset class over the past decade.

The anticipation around Libra became a catalyst for a rally in the price of Bitcoin as it rose from $3,850 to $14,000 within a matter of months, but as regulatory fears began to surface the price of cryptocurrencies began to dwindle.

Ardoino believes that Libra will “have a hard time in order to succeed” and that it will have an even harder time than Tether, and although a CBDC will command a larger market cap than Tether he doesn’t see it as a threat.

He continued: “Of course you could see governments issue digital versions of their native currencies like Euro or Dollar, it is obvious that with the snap of a figure than can create a market cap that is larger than Tether. I believe that is fine and I don’t believe it will represent an issue for Tether. It will be a great demonstration that Tether was right and that people need them.

“I think Tether will remain more agile in the sense that we can keep our hedge on technical innovation. It isn’t just a stablecoin, it’s using DeFi, it’s looking at being launched on the Lightning Network.

“So although compared a national stablecoin we will hardly be able to compete in terms of market capitalisation, we will able to compete in more use cases and faster adoption to the evolution of technology.”

Bitfinex Pulse

Last week Coin Rivet reported on the launch of Bitfinex Pulse, a social platform that allows traders to share ideas and analysis.

While in its early days it could be compared to a Twitter feed with trading insights, Ardoino believes it will become the “backbone” of Bitfinex after drawing comparisons to Bloomberg’s model.

“In traditional finance you have experienced products like Bloomberg and Reuters that have integrated chat, integrated newsfeeds, they have many tools that are the backbone for the user experience.” He said.

“A trader can trade on a platform just fine, but they need newsfeeds, they will need to request quotes for OTC, they will need to share information and save information.

“Trading is not just about buying and selling, it’s being informed in real time about breaking news and reach other people. If you have a big OTC trade you need to liquidate as soon as possible. You want a fully integrated set of tools.

“We have been designing Bitfinex Pulse that is a social platform, but eventually it will become the real backbone of Bitfinex.”


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