What is Tether (USDT)?

Tether is the third largest cryptocurrency in the world by market value and is traded by the USDT symbol. One important feature that sets Tether apart from other familiar cryptocurrencies, such as Bitcoin, Ethereum and Dogecoin, is the fact that it is a special cryptocurrency called Stablecoin*. This makes it a more reliable and trusted choice unlike the other cryptocurrencies which can be used for speculative investments.

What is Stablecoin?

There are three different types of Stablecoins: Fiat (Commodity) Collateralized, Crypto Collateralized, and unsecured.

Stable Coins with Fiat Coverage

These stablecoins are associated with an asset such as the US dollar, whose value does not change much. Unlike other high-profile cryptocurrencies that are prone to sudden ups and downs, they are seen as a more reliable investment instrument as they try to establish stability with their price and have very little fluctuations. Stablecoins may depend on different types of coverage. Some of them might include precious metals such as gold or silver, as well as commodities such as oil. But today most of the money-backed Stabilcoins use dollar reserves. The goal of stablecoins with fiat coverage like Tether is to build the necessary bridge between currencies and cryptocurrencies and offer investors and users stability, transparency and minimal processing fees. As a sign of transparency, Tether has a section called "Proof of Funds" on its website, in which its resources are publicly shared. Additionally, this file provides detailed information about the risks that cryptocurrencies and digital tokens may pose. Tether is fixed over US dollar, that is why it is has USDT symbol in trading platforms. This means that it maintains 1-to-1 ratio with US dollar and that for each Tether traded, there is an equivalent amount of US dollars that is held as a reserve. However, Tether Ltd. does not guarantee the exchange or withdrawal of the Tether by real money - that is, Tether's cannot be exchanged for US dollars. In addition, according to a statement on its website on September 9, 2019, Tether announced the addition to US dollars, Chinese Yuan is also a supported currency with the launch of a new Stablecoin, CNHT.

Stablecoins With Crypto Collateral

In addition to foreign currencies such as dollars and euros, Stabilcoins can also depend on other cryptocurrencies. Since reserve cryptocurrency can also be subject to fluctuations, such stable currencies are "over-collateralized." This means more cryptocurrencies are protected for a fewer stabilcoins.

Stablecoins Without Collateral

Unsecured Stabilcoins do not use any reserves. They have a mechanism like the central bank's to keep the price stable. Stabilcoin transactions can be performed without a guarantee on an independent platform by applying special contracts just like the central bank issues banknotes. Best Stabilcoins Not all Stabil Coins are created equal. Here are the top Stablecoins today:

1. Tether (USDT)

Named after the US dollar, Tether is the most widely known stablecoin in the crypto world.

2. Real USD (TUSD)

True - Real USD (also represented as "TrueUSD") is 100% supported by USD and is one of the most liquid Stabilcoins on the market. True USD, the company behind TrustToken also has fixed currencies attached to other major currencies - TrueAUD, TrueGBP and TrueHKD, are some of theexamples.

3. Binance USD (BUSD)

Like Tether, the dollar-collateralized cryptocurrency of Binance, which is backed by the dollar.

When Did Tether Start?

Tether (USDT) was founded by Brock Pierce, Craig Sellars and Reeve Collins in July 2014. At first, it was commonly known as "Realcoin." Tether is one of the oldest Stabilcoins built on Mastercoin (Omni), a protocol layer for Bitcoin that introduced the concept of Stabilcoin to the world in 2012. It is the most commonly used choice as it was one of the first examples of the Stablecoin model.

Tether Controversies

If Tether's price suddenly goes up or down and the traders lose confidence in Tether, Bitcoin could crash hard. If that were to happen, with the words of Wired magazine, a "crypto version of the flood to the bank tellers in order to withdraw money." would happen. Bitcoin mining and Given the scale of crpyto use worldwide and the growing interest on crpto world, Tether could cause other currency exchanges and markets to collapse. Some investors and economists are concerned that there are not enough dollars in Tether's reserve. In May, Tether said that only a portion of his assets — 2.9% in total — were cash, while the majority were commercial bills, a type of unsecured short-term debt. According to JPMorgan, this puts Tether among the world's top 10 business paper owners. With more than $60 billion in tokens in circulation, Tether has more deposits than many US banks. A study claimed the buckle was used to support bitcoin during significant price drops at the 2017 rally. Nevertheless, it was claimed in November 2017 that Tether was hacked and suffered a loss of $31 million in coins. In April 2019, New York Attorney General Letitia James was charged with concealing the loss of $850 million in joint customers and corporate funds from investors of iFinex Inc., Tether Ltd.'s parent company and operator of the cryptocurrency exchange Bitfinex. Court filings show that these funds were given to a Panamanian agency, Crypto Capital Corp., without an agreement or contract, to address customers’ withdrawal requests. Bitfinex allegedly took at least $700m from Tether's cash reserves to cover the gap after the money went missing. Earlier this year, the New York attorney's office reached an agreement with Tether and Bitfinex.

The Disadvantages of Tether

We have mentioned that Tether is a frequently preferred cryptocurrency to be reliable and stable, but there are situations that can be seen as negative. Although Tether is a stable, independent and volatile currency, it could be said that it depends on many people and institutions. As in the case of Latita James, individuals and organizations with whom the company is involved can play a role in shaping the direction of the company. The company also reported that company has $1 in its vault for each Tether, but it was announced in 2018 that only 75 percent of the dollars were covered.This signaled that the company had some steps to take regarding transparency and professionalism. Finally, we know that another purpose of cryptocurrency is anonymity. If you want to buy or sell Tether, it's possible to do it by concealing your identity. However, if you want to buy or sell money on Tether's own website, the accounts you have created and are using must be verified and approved.

Tether mining

Unlike other cryptocurrencies, Tether does not have a mining system. So it's not possible to mine Tether. Tether company markets the cryptocurrencies according to the company's budget and makes each Tether $1.

Tether Frequently Asked Questions

What Is It Used For?

Tether is useful to crypto investors as it offers a way to avoid excessive volatility like the other cryptocurrencies. In addition, having USDT (as opposed to the US dollar) eliminates the delays in transaction costs and the execution of trade in the crypto market.

How to Buy

Tether tokens can be traded on popular cryptocurrency exchanges such as Binanace, CoinSpot, BitFinex and Kraken.

How does Tether stay at $1?

Although Tether has previously fallen below $1, this stabilcoin can remain valuable because it is fixed to a matching currency and 100% supported by Tether reserves.

How to create a Tether wallet

Each user must have a virtual wallet for transactions through Tether. You can use the addresses of these virtual wallets to trade and exchange Tether. You can store your Tether in your hardware wallet, desktop wallet and mobile wallet. The most common use cases are those made by Ledger and Trezor. While BitPay and Electrum are available as desktop wallets, mobile wallets are even more diverse. Trust Wallet, BRD, BitPay, and Mycelium are examples.

Who can use Tether?

Tether enables businesses to use currencies across multiple platforms including exchanges, payment processors, financial services, and ATMs.BTCTurk, Bitfinex, Kraken, Omni, Epay and more in the digital money ecosystem are some of the industry supporters. Individuals can also use platforms with tether token to perform transactions.

In which countries can Tether be used?

Tether commits to working safely and transparently while abiding by all governmental regulations. The use of the Tether platform by any person residing in the following regions is prohibited. Cuba; the People’s Democratic Republic of Korea (North Korea); Iran; Pakistan; Singapore; Syria; The Government of Venezuela; and Crimea. Verified Users' access to the Tether platform will be restricted in those restricted jurisdictions.

What Tether features are accessible to US residents?

Tether has decided to stop servicing its retail and corporate clients in the United States. As of January 1, 2018, these users are no longer offered any editing or exploitation services.

If you like this article, you may also like: Top 10 Winners and Losers of the Cryptocurrency Market