There is ethereum, it processes transactions and people pay for the processing with "gas". Gas is ETH. ETH need to be mined and etc.
This could all happily work in a self-contained world, where there's no actual underlying assets reflected in BTC or ETH. But that's not "real" as in, gains/losses can't be turned into fiat currency, which is the government approved way to pay taxes and debts.
So now someone wants to be able to convert BTC/ETH/XYZ/ABC into USD (or AUD or CAD or etc "trusted" fiat currencies).
So the stablecoin is created, supposedly backed 1:1 with fiat USD. However, there's only vague assertions that this is correct and none of the bank regulation that ensures that banks actually are backed.
That stablecoin, Tether, is unaudited and no one actually knows what it holds. But for some reason, people "trust" it.
Now there's another "stablecoin" called Terra, which isn't backed by any assets in the real world. It's entirely "backed" by the fact that it can be converted "freely" into Lunas.
For an even more abtruse reason, people were "trusting" Terra.
Then the tide went out and Terra/Luna is actually naked.
Now that has focused attention on Tether and people are testing it. Because Tether has real assets, it can (for now) convert at 1:1. But it has artificial limitations on that conversion, limiting it to a minimum of USD100K.
So unless you have 100K of Tether, you're relying on finding some other buyer of it if you want to sell. People are desperate to sell, so the "price" of Tether is dropping relative to its USD peg.
Someone is buying that Tether on the market, accumulating at least 100K and then going to tether and converting to real USD.
But Tether have put a whole bunch of artificial time restrictions on that conversion, which means that the tide hasn't gone out yet.
When it does, either Tether does have 1:1 backing of all the Tether out there, in a way that can be easily liquidated so that it can pay out, or it won't, and the "peg" will collapse.
When that happens, anyone holding Tether is left holding the bag.
And that means anyone that had BTC "backed" by Tether is out of luck, so is anyone with ETH, or any of the other endless coins out there.
So the whole thing collapses, those that get out early and convert to fiat will be rich and everyone else screwed.
Gee, sounds like a standard bank run but with extra steps and without the Fed.
There are bitcoins. They get mined and etc.
There is ethereum, it processes transactions and people pay for the processing with "gas". Gas is ETH. ETH need to be mined and etc.
This could all happily work in a self-contained world, where there's no actual underlying assets reflected in BTC or ETH. But that's not "real" as in, gains/losses can't be turned into fiat currency, which is the government approved way to pay taxes and debts.
So now someone wants to be able to convert BTC/ETH/XYZ/ABC into USD (or AUD or CAD or etc "trusted" fiat currencies).
So the stablecoin is created, supposedly backed 1:1 with fiat USD. However, there's only vague assertions that this is correct and none of the bank regulation that ensures that banks actually are backed.
That stablecoin, Tether, is unaudited and no one actually knows what it holds. But for some reason, people "trust" it.
Now there's another "stablecoin" called Terra, which isn't backed by any assets in the real world. It's entirely "backed" by the fact that it can be converted "freely" into Lunas.
For an even more abtruse reason, people were "trusting" Terra.
Then the tide went out and Terra/Luna is actually naked.
Now that has focused attention on Tether and people are testing it. Because Tether has real assets, it can (for now) convert at 1:1. But it has artificial limitations on that conversion, limiting it to a minimum of USD100K.
So unless you have 100K of Tether, you're relying on finding some other buyer of it if you want to sell. People are desperate to sell, so the "price" of Tether is dropping relative to its USD peg.
Someone is buying that Tether on the market, accumulating at least 100K and then going to tether and converting to real USD.
But Tether have put a whole bunch of artificial time restrictions on that conversion, which means that the tide hasn't gone out yet.
When it does, either Tether does have 1:1 backing of all the Tether out there, in a way that can be easily liquidated so that it can pay out, or it won't, and the "peg" will collapse.
When that happens, anyone holding Tether is left holding the bag.
And that means anyone that had BTC "backed" by Tether is out of luck, so is anyone with ETH, or any of the other endless coins out there.
So the whole thing collapses, those that get out early and convert to fiat will be rich and everyone else screwed.
Gee, sounds like a standard bank run but with extra steps and without the Fed.