Tether (USDT) is the world’s first stable coin and is an open-source, peer-to-peer blockchain-based cryptocurrency whose tokens in circulation are backed by an equivalent amount of traditional fiat currencies (dollar, Euro, etc.) held in a selected bank account.
Tether tokens, Tether network’s native tokens, trade under the USDT symbol. Tether specifically belongs to a category of cryptocurrencies called fiat-collateralized stable coins that aim to keep crypto prices stable.
It was initially named Realcoin back in 2014, then rebranded to Tether. Its co-founders, Brock Pierce, Reeve Collins, and Craig Sellars, first launched the Omni Layer of the Bitcoin blockchain and began trading in 2015.
As it was initially based on the Omni Layer, Bitcoin blockchain’s transport protocol, the initial version of Tether is characterized by the inherent stability and security of the longest established blockchain network.
Tether (USDT) is one of the popular stable coins designed to hold a 1:1 value with US dollars. As a result, this token has undergone rising trading volumes and has improved liquidity over recent years.
USDT is beneficial in trading cryptocurrencies since it allows investors to avoid market volatility common to other cryptocurrencies. Stablecoins also removes the costs and delays of converting crypto to fiat currencies.
In 2017, Tether was launched on the Ethereum blockchain as an ERC20 token to accelerate adoption. Tether’s Ethereum ERC-20 is currently the most popular Tether token type.
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Tether is invented to be strictly tied to the value of the fiat currency that it stands for. For example, a US tether token is supposedly worth $1 at all times. However, in 2019, Tether revealed that it wasn’t 100% backed by fiat currency and that a US Tether token was collateralized closer to $0.75.
They published their balances in the Transparency section of their website. In addition, the company itself acts as a third-party overseer for the fiat currencies backing the Tether currencies.
Four Tether stable coin currencies
- USDT – a US dollar secured Tether coin
- EURT – a Euro secured Tether coin
- CNHT – a Chinese yuan secured Tether coin
- XAUT – a real-life gold secured Tether coin
Controversies
Tether hasn’t been without its fair share of issues. In 2017, Tether was reportedly hacked with $31 million worth of Tether tokens stolen. The following year, it hit another hurdle as the company never performed the necessary audit to ensure the real-world reserve is secured. They instead announced that they were parting ways with the audit firm, issuing a subpoena not long after. The company was then accused of transparency as investors worried if the coin’s reserves were enough.
Then in 2019, New York Attorney General Letitia James accused the parent company of Tether Ltd. and operator of cryptocurrency exchange Bitfinex, iFinex Inc., of covering up an 850 million dollar loss of client and corporate funds from investors. Bitfinex took around $700 million from Tether’s cash reserves to repay the gap after missing money. The company stated that the money was just seized and safeguarded. They denied any of the accusations in the court filings.
Conclusion
Stablecoins established a lot of convenience in the crypto trading world as they reduce the need for investors to convert multiple times between fiat currencies and cryptocurrencies. Tether is a familiar type of currency, making it one of the more recognizable names in the crypto space.
Despite the controversies both the currency and the company have been in (like the various questions about the validity of its reserves), Tether has still proven itself to be a secure and stable cryptocurrency; mainly because it is linked to the value of existing fiat currencies, meaning that it’s not subject it the market’s intense volatility.
Tether is massively popular and easy to buy on any crypto exchange, so if you’re looking to getting into the crypto space, this token could be an excellent place to start.