When someone says that cryptocurrency isn’t a viable form of investment due to its lack of support from national currencies, tell them that they’re wrong! That’s right, as it turns out there is in fact a cryptocurrency that is backed by the U.S. Dollar, called Tether. Each USDT asset is backed by a U.S. Dollar held in the reserves of the Tether Limited and can be redeemed through the Tether Platform. So, without further adieu, let’s go over everything there is to know about Tether.
This is not financial investment advice.
This article will explain Tether and its use cases.
So then, who exactly is Tether? Well, Tether is a blockchain-based cryptocurrency whose coins in circulation are backed by an equivalent amount of traditional fiat currencies, like the dollar, the euro or the Japanese yen, which are held in a designated bank account. Tether tokens, the native tokens of the Tether network, trade under the USDT symbol.
Tether belongs to a new breed of cryptocurrencies called stablecoins that aims to keep cryptocurrency valuations stable, as opposed to the wide swings observed in the prices of other popular cryptocurrencies like Bitcoin and Ethereum. Essentially, this would allow it to be used as a medium of exchange and a mode of storage of value, instead of being used as a medium of speculative investments.
Tether was launched as RealCoin in July 2014 and was rebranded as Tether in November by Tether Limited, the company responsible for maintaining the reserve amounts of fiat currency. It started trading in February of 2015 but was allegedly hacked with $31 million worth of Tether coins stolen in November 2017.
In January 2018, it hit another hurdle when the required audit to ensure that the real world reserve is maintained never actually took place. Instead, it announced it was parting ways with the audit firm. Moving forward, Tether continues to be listed on CoinMarketCap as one of the top coins in terms of market capitalization.
If you want to invest in Tether, there are actually several exchanges that trade on the USDT market. You can trade in the USDT market on one of the following exchanges:
These are the exchanges that hold some of the highest volumes for Tether trading, but you can look through all of them and trade on the exchange that you prefer.
Tether was specifically designed to build the necessary bridge between fiat currencies and cryptocurrencies and offer stability, transparency and minimal transaction charges to users. It is pegged against the US Dollar and maintains a 1-to-1 ratio with the US Dollar in terms of value. However, there’s no guarantee provided by Tether Ltd. for any right of redemption or exchange of Tethers for real money. All this means is that Tethers cannot be exchanged for actual US Dollars.
You may be wondering how all of this is made possible given Tether’s large market capitalization. Well, the blockchain verifies the USDT in circulation and the TUSD which is the total USDT in circulation at any time. This amount must equal the amount in the bank account used by Tether Limited to receive and send money to buyers or to pay tethers on the Tether platform. Resultantly, they have regular audits by specialists to check balances, deposits, withdrawals, and transfer reports.
In the Tether Proof of Reserves system, the amount of USDT in circulation can be checked on the Bitcoin blockchain by checking their wallet website, while the corresponding total amount of USD held in reserves is proved by publishing the bank balance and undergoing periodic audits by professionals.
There you have it, this was a brief introduction on what you need to know about USDT — Tether. From when it was founded to how it manages to keep one dollar in reserves to back each asset, Tether is one of many stablecoins that aims to keep cryptocurrency valuations stable as opposed to the wide swings observed in the prices of other popular cryptocurrencies. Moving forward, keep an eye out for Tether as it continues to legitimize itself as one of the more stable coins in the market, filling a niche where high volatility and fluctuations will not suffice. As with any cryptocurrency, always be sure to perform your own research and view each headline with a grain of salt.
What are some of your favorite stablecoins currently in the market?
Let us know why in the comments!