Long answer - The biggest flaw lies in the "advantages" section:
Unlike other Bitcoin arbitrage systems, Blackbird doesn't sell but actually short sells Bitcoin on the short exchange
The problem is only Bitfinex allows short selling. So, the example is an excellent case of cherry picking.
There are other issues with their strategy too.
This arbitrage exists because of the huge counterparty risk of exchanges
> Tethers are not money and are not monetary instruments. They are also not stored value or currency. There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money.
> We make no representations, warranties, or guarantees to you of any kind, including with respect to any right of redemption or exchange of Tethers for any property.
That doesn't make any sense. Those are absolutely outrageous terms of service for what Tether purports to be.
I thought the entire point of Tethers is that they're redeemable for USD on a 1-to-1 basis with a fixed exchange rate. That's exactly what the Tether FAQ says, but based on the actual ToS, I'd have to consider these statements to be absolute bullshit:
> Tether Platform currencies are 100% backed by actual fiat currency assets in our reserve account. Tethers are redeemable and exchangeable pursuant to Tether Limited’s terms of service. The conversion rate is 1 tether USD₮ equals 1 USD.
The FAQ says "Tethers are redeemable[] pursuant to Tether's terms of service" and the ToS says "There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money"
That is just fucking outrageous. I'm sorry, but it is.
I do not understand how or why anyone would use Tether without a contractual guarantee from the issuer to redeem each token for the underlying currency that it reserves. Without this, there's no reason for Tether to have a value.
I thought that the concept of Tether had sound technical merit -- essentially, a cryptocurrency with a fixed exchange rate backed by a full-reserve central bank for each currency -- but when offered with those legal terms, I have to consider it a scam. Under their ToS, money can flow into Tether but not out!
I can speculate about all sorts of reasons why they might have put up those ToS, but at the end of the day, it's a morally wrong contractual relationship for them to have with their customers. They should operate like a bank or otherwise with a guarantee that customers can convert Tether back to the reserve currency.
Edit: While doing some searches on this topic, I also found a news article about their questionable ToS, quoting this statement from the company:
> Our Terms of Service have been carefully picked apart by various malcontents and twisted to suggest that Tethers would not be redeemable for currency on some bizarre, malicious whim by Tether. That is untrue. https://cointelegraph.com/news/tether-really-isnt-a-scam-com...
Yeah, okay guys ... this interpretation is not carefully picking apart the ToS with malcontent. It's just a basic plain English reading of the ToS. I would stay away from Tether, and any company that responds in this way to completely reasonable criticisms.
[0] https://tether.to/wallet-service-and-platform-update/ [1] https://wallet.tether.to/transparency