TetherUSDT

About Tether (USDT)

Tether is a stablecoin pegged to the U.S. dollar. It was the first digital currency to mirror the price of a fiat currency. The Hong Kong-based company behind USDT goes by the name Tether Limited Inc. It achieves USDT’s peg to the U.S. dollar by maintaining a reserve that’s equal in USD value to the number of circulating USDT tokens. The collateral to back USDT is held in a variety of fiat-denominated assets. Tether’s supply does not have a hard limit, meaning there is no maximum supply.

USDT was originally called Realcoin when Tether Limited launched it in 2014. It was built on the Bitcoin blockchain via the Omni platform. Realcoin was later changed to US Tether and eventually to USDT. The stablecoin was later upgraded to work on Ethereum, Tron, Algorand, EOS, Solana, Polygon, Avalanche, Tezos, Bitcoin Cash, and Omnia blockchains. The founders of Tether are Brock Pierce, Craig Stellars, and Reeve Collins.

Unlike other cryptocurrencies that fluctuate wildly, USDT is protected from such swings since it’s backed by the U.S. dollar, which is stable. As a result, investors may move their crypto assets into USDT during times of high volatility.

Price history

Tether is designed to always maintain a $1 value, but slight deviations of $0.01 and $0.02 are common, and typically last a short time. Nonetheless, there are some exceptions when the Tether price has wandered albeit too far from its peg. On March 2, 2015, USDT hit an all-time low of $0.57, recording a deviation of $0.43. On the other hand, a Tether ATH was reached in July 2018. It recorded a price of $1.32, veering off from its peg by $0.32. As a stablecoin, this is not desirable, which is why Tether strives to remain its value as close to $1 as possible.

Tether Limited does not provide issuance schedules ahead of time. Rather, it issues daily transparency reports detailing the total amount of USD in reserves vis a vis the total USDT amount in circulation.

How does Tether work?

When Tether Limited issues new USDT coins, it allocates the equivalent USD amount to its reserves which consist of cash and cash equivalents (money market funds and treasury bills, among others). It may also include receivables from the loans that Tether LTD gives to third parties. This peg ensures the stability of USDT.
Tether doesn’t have its own blockchain. Instead, it’s a second-layer token built on other blockchains like Ethereum. The blockchain networks permit the issuance and redemption of USDT tokens while providing security and settlement for the stablecoin.

FAQs

Is Tether safe?

Tether is as safe as the blockchain networks it’s built on. Its safety may also depend on its reserves. Tether could be considered safe to use as long as it remains sufficiently reserved to honor redemptions.

Is Tether coin a good investment?

Tether is not an investment. It is a safe haven asset that could potentially protect your crypto investment portfolio from losing value during a bear market or periods of high volatility.

How does Tether make money?

Tether Limited makes money by issuing its stablecoin as well as lending to other institutions. Also, there are fees paid on partner merchant platforms and crypto exchanges.

Related

Popular criticisms

Tether’s reserves have been controversial for a long time since there has always been some intransparency around what backs the stablecoin and where these reserves are held. Also, the company hasn’t carried out an audit, but this could change. In August 2022, Tether said it was planning to conduct a full audit in response to an article from The Wall Street Journal that said it had failed to deliver a thorough audit despite promising to do so in 2017.

Tether and crypto exchange Bitfinex — both owned by iFinex — settled a lawsuit in 2021 with the New York Attorney General (NYAG) for $18.5 million. The companies were in trouble for covering up a loss of $850 million. In its investigations, the NYAG’s office discovered that sometimes Tether did not hold any USD reserves. The lawsuit began in April 2019.

Critics say Tether operates like a loosely regulated bank that could devastate the entire crypto ecosystem. Their fear, uncertainty, and doubt (FUD) are based on the concern that Tether can’t fulfill millions of orders if everyone rushed to cash out to USD during a market downturn.

Comparisons to other projects

USDT is often compared to the second-largest stablecoin by market cap, USDC, which is more transparent regarding its reserves. Nevertheless, it is not as liquid as USDT. BUSD, the third-largest stablecoin by market cap, is also more transparent than USDT.

Development timelines

When it comes to development efforts, Tether is continuously striving to make its stablecoin available on more blockchains. There is also the effort of bringing USDT to the Lightning Network. Interestingly, real-world adoption is also pursued. According to recent news, USDT will become available at over 24,000 ATMs in Brazil.