Tether is one of the largest cryptocurrencies in the world, and it is currently increasing in popularity as the most traded cryptocurrency in the world. All this, despite the controversy that surrounds the cryptocurrency for being the subject of constant suspicions and accusations, since, despite its potential, Tether gives its word but does not offer guarantees.
These accusations are related, for example, to Tether’s inability to support its value, coming to recognize that it can only cover 74%.
The cryptocurrency market does not stop growing and increasing its usefulness, increasingly forming part of the transactions between companies and institutions. Therefore, we must know cryptocurrencies well to be able to use the information with solvency.
From Money Investors, we train people around the world so that they can cope with ease in the world of finance and investments, starting from a beginner level, or for those who want to obtain advanced knowledge.
In this article we will talk about the most popular stablecoin on the market, Tether, we hope it will be of great use to you.
Table of Contents
What is tether?
Tether is a stablecoin. This type of cryptocurrency actively works to keep its valuation stable through market mechanisms. Investors often use these types of currencies to protect themselves against the volatility of investments in cryptocurrencies.
Stablecoin are cryptocurrencies created to replicate the value of fiat currencies such as the dollar or the euro. These cryptocurrencies present minimal movements in price, and closely follow the value of the asset they emulate.
Unlike other cryptocurrencies such as Bitcoin, Ethereum, or other Altcoins, the concept of Tether is quite convenient, since it is linked to the value of the US dollar. Let’s go deeper.
Tether is a currency with a fiduciary guarantee, that is, being a stablecoin it is backed by assets such as the dollar. This currency was created to close cracks between fiat currencies and blockchain digital assets while offering low fees, stability, and transparency.
The coin was developed with 3 main goals:
- Create verification options.
- Enable national currency transfers.
- Stabilize Bitcoin.
Although tether is pegged to the dollar in a 1: 1 ratio, the company does not guarantee the right to exchange or exchange Tether for dollars. Also, it cannot be exchanged directly for fiat currency through the developer of Tether.
How does Tether work?
Tether Limited is based in Hong Kong. The company acts as a third party to back the assets of this cryptocurrency.
Each Tether that is issued to the market is backed by assets with a valuation of one US dollar. This cryptocurrency was initially issued within the Bitcoin blockchain, using the Omni Layer protocol. Today we can find this cryptocurrency on any chain that Tether supports.
Omni Layer is a decentralized exchange platform that allows us to trade tokens thanks to the implementation of smart contracts.
USDT can be used like any cryptocurrency or chain token when issued. Currently, this cryptocurrency supports different blockchains, such as, example, Bitcoin, Ethereum, EOS, Tron, OMG Network and Algorand.
Tether is attacked for comments referring, among others, to the support capacity of the coin. Some users believe that they do not have sufficient capacity to cover the value of the coin, however, the company maintains that, through the use of Proof of Reservations, at any time the reservation will be equal to or greater than the number of Tether in circulation.
The test booking (proof of reserve) tries to show the public that the criptomonedas retained in the reservoir coincides with balances users.
Tether history, who founded USDT?
Tether (USDT) was issued to the market on October 6, 2014 under the name “Realcoin” by Brock Pierce, Reeve Collins and Craig Sellars. The latter was a member of the Omni foundation, which allowed them to build Tether on top of the Omni protocol, allowing users to create and exchange smart contract-based cryptocurrencies within the Bitcoin blockchain.
The cryptocurrency Realcoin changed its name to Tether on November 20, 2014.
USDT has a controversial history that begins with its market launch. In January 2014, Bitfinex gave permission for the cryptocurrency to be traded on its platform. The volume of the cryptocurrency increased rapidly on the Blockchain network with dollar transactions moving through Taiwanese banks.
On April 18, 2017, US banks blocked international cryptocurrency transfers. Tether was accused of not really having reservations due to a lack of transparency. This exacerbated their situation when in 2017 they temporarily suspended the withdrawal of the cryptocurrency, causing great volatility for USDT holders.
From January 2017 to September 2018, Tether’s outstanding amount increased from $10 million to almost $2.8 billion. This was followed by a 2019 lawsuit by New York Attorney General Letitia James, who accused Bitgines and Tether of misappropriating reserves to cover a deficit worth $850 million.
Tether and Bitfines paid a fine of $18.5 million in 2021.
With all this, tether remains the center of speculation in the cryptocurrency and Blockchain markets. Many users doubt its stability and liquidity.
Why is Tether unique?
USDT has a legitimacy that few projects can match despite being challenged. It is widely accepted by many providers and protocols within the blockchain system as a payment method and medium of exchange. Due to its large reserves, Tether does not suffer from market risks like Black Swan events.
A Black Swan event is an event that comes by surprise and has a great socioeconomic impact.
Tether also enjoys the luxuries that other tokens possess, such as security and peer-to-peer trading, making it desirable for traders and users.
What gives value to Tether and how many cryptocurrencies are there in circulation?
Its role is to provide liquidity and hedge against market volatility, since, being a stablecoin, the cryptocurrency does not appreciate or depreciate. Its value is completely dependent on reserves, and as long as it maintains its 1: 1 ratio, Tether will be worth $1.
USDT has a supply of more than 40 billion tokens. This supply can increase or decrease depending on demand and market liquidity.
These tokens can be obtained in secondary markets or through exchanges.
Tether Security
The USDT token is issued on various blockchains such as the popular Bitcoin and Ethereum. Since it is hosted on Blockchains, security is handled by the nodes and miners who keep the networks secure through proof of work (PoW) or proof of stake (PoS). These platforms have regular audits to ensure that the code is up to date, ensuring that it meets the requirements of the current framework.
How to use Tether and which wallet should you choose?
Tether is a stablecoin that can be purchased on popular exchanges such as Kriptomat. This cryptocurrency can be exchanged for products at different providers or it can be used for exchanges with other cryptocurrencies. It can be used to lend, buy NFT and participate in ICOs.
NFT is a special type of token that represents something unique, and they cannot be easily exchanged as they are associated with certificates of authenticity.
ICO is a public bank that finances investment and liquidity operations of companies.
The type of wallet or digital wallet will depend on what you want to use the token for and the amount you want to store.
We have a post dedicated exclusively to digital wallets or wallets, so you can get to know them and know which one suits your preferences.
Conclusion
Tether it is one of the cryptocurrencies stable or stablecoin popular market while providing liquidity for transactions worth millions of dollars a day. Although surrounded by controversy, it serves as a safe haven for users of a highly volatile market and continues to be used by millions of users who want decentralized finance across regions, countries, and even continents.
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