Tether
Pioneering the way for stable cryptocurrencies.
Brief:
Tether (USDT) is an asset-based stablecoin. It was launched by the company: Tether Limited INC in 2014. Tether LTD is owned by iFinex INC, a Hong Kong-based company that also owns the Bitfinex cryptocurrency exchange. Tether is a stablecoin because it has an initial value of $ 1.00 which Tether maintains by assets reserves for each USDT issued.
Tether:
Key Takeaways:
Tether Limited is the issuer of USDT.
Tether Limited created its own technology to mint stablecoins on the blockchain.
USDT is an asset-based stablecoin.
All USDT is pegged at 1:1 with USD($) and is backed 100% by Tether reserves.
What is Tether Limited:
Tether Limited is a pioneering crypto-based company that uses a three-layer structure to issue stablecoins that are unique, secure and have high liquidity; most famously the cryptocurrency Tether token (USDT). Tether Limited originally proposed and materialized a way to build new currencies on the Bitcoin protocol. This is achieved by creating a second layer protocol into the mainnet blockchain, which can be integrated into other blockchains. The most notable are Omni Layer Protocol for the Bitcoin blockchain and ERC 20 for the Ethereum blockchain. Tether Limited uses this technology to create asset-backed stablecoins. These are the building blocks to developing the three-layer structure Tether Limited uses on each blockchain that has integrated Tether.
How Does Tether Work:
As stated above Tether Limited uses a three-layer structure on each blockchain that integrates with Tether. These layers consist of the following… (for this I will use the Omni Layer protocol on the Bitcoin blockchain as an example)
Layer 3: The Blockchain:
The Blockchain that Tether is operating on runs the algorithm and any additional qualities that the specific blockchain provides. The Bitcoin blockchain provides the best security and popularity to build the credibility of the coin. Another is the Ethereum blockchain which provides Defi capabilities.
Layer 2: The Protocol (Omni):
The protocol, put in place by Tether, to use their issued coins. The protocol creates and destroys coins when users are buying and selling. As well as trading all coins in circulation enabling users to buy, sell, trade and store securely and anonymously.
Layer 1: Tether Limited itself:
The business entity that manages the fiat deposits and withdrawals.
History:
In January 2012, J.R. Willett published a whitepaper which described the possibility of building new cryptocurrencies on top of the Bitcoin blockchain.
In 2012 this proposal materialized into Mastercoin. Which aimed to utilize new second-layer technology.
In July 2014, Realcoin was announced by co-founders Brock Pierce, Reeve Collins and Craig Sellar, who were members of Mastercoin. This start-up Realcoin used the same second layer technology and was called the Omni Layer Protocol.
On 6th October 2014, the first tokens were issued on the Bitcoin blockchain using the Omni Layer Protocol.
On 20th November 2014, CEO Reeve Collins renamed Realcoin “Tether”. It was also announced that Tether Limited was entering a private beta which supported a “tether token” for 3 currencies: USTether for USD, Yentether for Japanese Yen and EUROTether for the EURO. they are 100% backed by their original currencies.
January 2015, Bitfinex enabled trading of USDT on their platform.
From January 2017 to September 2018 the number of Tethers grew from $ 10 million to about $2.8 billion.
In early 2018, Tether accounts for 10% of the trading volume of Bitcoin.
In the summer of 2018, Tether accounts for 80% of the trading volume of Bitcoin.
In August 2018, more than $500 million Tethers were issued.
On 15 October 2018, the price of Tether briefly fell to $0.88 due to the perceived credit risk as traders on Bitfinex exchanged Tether for Bitcoin, driving up the price of Bitcoin.
In 2019, Tether surpassed Bitcoin in trading volume with the highest daily and monthly trading volume of any cryptocurrency on the market.
In August 2019, the number of Tether transactions on ERC 20 surpassed the number of transactions on Omni.
In October 2019, the market cap for Tether on ERC 20 also surpassed that on Omni as well.
Why use Tether:
Tether Limited issues an asset-backed stablecoin that benefits from the advantages of both blockchain technology and fiat currency. These advantages include:
USDT
As previously stated USDT and all other representative tokens are asset-based stablecoins. At the time of writing USDT is ranked 3rd on Coinmarket cap. USDT has gained this popularity through its unique qualities compared to other stablecoins. The main quality is that USDT exists on multiple blockchains most notably Bitcoin and Ethereum. Tether Limited is a crypto-based company that issues the cryptocurrency Tether token (USDT). USDT is a stablecoin that is pegged at a 1:1 to the USD ($). USDT achieves this position as a stablecoin by having reserves of assets for every USDT in circulation. This allows USDT to benefit from the simplicity and stability of a fiat currency and the transparency that blockchain technology offers; which offers the best of both worlds. This results in USDT pioneering the stablecoin model.
Other Representatives Coin:
Tether has other coins for some of the major currencies around the world:
USD---> USDT
EURO---> EURT
Peso---> MXNT
GBP ---> GBPT
Chinese Yuan---> CHNT
The asset that backs USDT and other representative tokens:
Cash, Cash equivalents, Short-term deposits and Commercial Paper.
Secured Loans.
Computer bonds, Funds and Precious Metals.
Other investments (including digital tokens).
These types of assets allow USDT to have one of the best liquidity rates for any cryptocurrency on the market. The diagram below illustrates the percentage of those assets used by Tether limited to back their stablecoins.
Bitcoin vs Ethereum.
USDT has had massive adoption on multiple blockchains including Bitcoin, Ethereum, Tron and many more… However, USDT can accredit most of its success to Bitcoin and Ethereum which makes sense as they are currently the most used blockchains. Tether found initial success on the Bitcoin network because it gave users security and during this time frame Bitcoin was in its bull market. However, there was a switch to Ethereum because of the Defi potential which allows users to have a passive income. This was shown in 2019 when the market cap for ERC 20 was at 10 billion compared to Omni which was at 1.3 billion. However, the downside to this is that the ERC 20 blockchain became saturated. This increased traffic is not good for a blockchain that famously is very busy.
Tether Controversies:
Tether Limited has faced a lot of controversies within and out of the crypto spaces during its existence. which includes allegations of price manipulations and issues involving liquidity and security
Tether was hacked in Nov 2017 and $31 million of USDT were stolen. Tether had to implement a hard fork to make the stolen funds untraceable and unusable.
Tether and Bitfinex are the defendants in 2 class-action lawsuits. Where the plaintiffs claim they use their USDT reserve to manipulate the price of Bitcoin during the bull run of Dec 2016.
New York Attorney General accused iFinex the parent company of Tether and Bitfinex of using their USDT to hide the loss of $850 million that went missing from the popular exchange. iFinex rejects the claim as “insubstantial” and “in bad faith”.
The biggest controversy that Tether has faced is the claim that its reserves are not actually adequate to cover the circulation of USDT tokens. Their reserves have never been officially audited. In March 2017, Tether Limited changed its long-standing statement that all USDT is backed by the same amount of cash; to say that all USDT are indeed 100% backed by cash and cash equivalents.
Where to buy Tether:
USDT and other representative tether coins are available to purchase on a multitude of Cryptocurrency Exchanges; including but not limited to Scallop Exchange. Remember these coins are stable coins so this means the price of these coins won’t fluctuate in price. However, if their fiat counterparts increase in value or decrease in value the number of goods and services that can be consumed changes. You can buy USDT on the Scallop exchange here:
https://www.scallop.exchange/en_US/newTrade/USDC_USDT
Conclusion:
Overall, Tether Limited has used pioneering technology and Assets to create a unique stablecoin in the crypto ecosystem. However, the number of controversies Tether has faced might make Tether the least desirable stablecoin to use especially with the potential that its assets are not adequate to cover the circulation. But in the face of this Tether has become the most popular stablecoin with the highest number of transactions and a huge market cap.
Disclaimer: The content on this website is for informational purposes only. You should not construe any such information as financial or other advice. Please do your research before making an investment decision.
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